21st Century Battlefield Dominance by yangxichun

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									               21st Century Battlefield Dominance
Remarks of Paul G. Kaminski, undersecretary of defense for acquisition and technology, to the American
 Defense Preparedness Association and Association of the U. S. Army Symposium, Redstone Arsenal,
                                        Huntsville, Ala., Jan. 16, 1996.

   Ladies and gentlemen, it's a great pleasure to be with you here at Redstone Arsenal this evening.
  Redstone and the U.S. Army Missile Command have a rich tradition of providing our country with the
winning edge. America will continue to rely on your innovation, skills and expertise to field land combat,
                     air defense and aviation missile systems that are second to none.

  From a missile defense planning perspective, this is a very important time for all of us. When I leave
Washington for a visit like this, I find that I benefit enormously from my interaction with all of you, so I plan
           to leave time for questions and answers. This type of interaction is important to me.

Last December, Gil Decker [assistant secretary of the Army for research, development and acquisition]
and I had the wonderful opportunity to be hosted by Maj. Gen. Jack Costello [commander, U.S. Army Air
    Defense Artillery Center and Fort Bliss, Texas] .... While we were there, we met with the soldiers
    operating our currently fielded air and missile defense systems like the Patriot, Avenger and the
  supporting Battlefield Management Command Control, Communications, Computer and Intelligence.

We also met with the soldiers preparing for and supporting equipment under development, systems like
the THAAD [Theater High-Altitude Air Defense] and JTAGS [Joint Tactical Ground Station]. It was a very
rewarding experience for me to see the equipment, to gain an understanding of how it is employed, but
 most of all to see our very capable soldiers, who are exploiting this equipment to its full potential. How
          blessed we are as a nation to attract and retain such able people in our armed forces!

As I visited MICOM [U.S. Army Missile Command] today -- for the first time ever -- I was left with a similar
impression -- how blessed we are as a nation to attract and retain the technical and management talent
                                               that I met today.

My experience at Fort Bliss and this afternoon at Redstone [U.S. Army Redstone Technical Test Center]
  is sobering for me, causing me to take very seriously the responsibilities I have in helping to chart a
course for the future of our missile defense programs. I have been involved in a total review of our missile
defense programs for a few months now. We are now putting the finishing touches on that review as we
prepare the FY [fiscal year] 1997 budget. Since that budget has not yet been finalized, I am not prepared
to discuss the final results of the review tonight. Instead, I am prepared to share with you my thoughts on
                      the objectives, approach and principles underlying this review.

 First, our objective was to seek a balance between what I would describe as the external and internal
components of our missile defense capability. For the external, we were trying to balance our investment
   in other priority programs, such as trucks, ships and fighter aircraft, with our BMD [ballistic missile
 defense] programs. The Joint Staff felt that we were spending too much at $3 billion per year on BMD.
Some believed that we should have a target ceiling of $2.5 billion or maybe even as low as $2 billion per
         year. We considered these targets during our review, but we were not driven by them.

For the internal balancing, we had three levels upon which we focused. The first level would be the pillars,
   which are active defense, passive defense, attack operations (which includes some of our external
                                         capabilities) and BMC4I.

 As we dropped to the second level, we focused on the capabilities and systems which comprise active
 defense. They consist of the lower-tier systems, the upper-tier systems, boost phase intercept and the
enabling BMC4I. As we dropped down one more level we took a more detailed look at specific missions
                          and the capability required to address those missions.

Our approach was to consider first the requirements and their priority while also reviewing the underlying
         acquisition strategy. To assist us in this task, we considered several elements such as:

Maturity -- We need to consider and account for the difference between well-defined systems and "view
   graph engineering." During our review, we considered the fact that the more mature the system or
 capability, the more apparent would be the known limitations. A more mature system would also have
                                         more reliable cost data.

 Executability -- Is this program executable? What are the risks, and are they prudent risks considering
                                the maturity and the urgency of the need?

  Critical Mass -- At what funding levels do we go below a critical mass, with output so low that we are
                                better off to make a termination decision?

   Stability -- How can we plan to obtain long-term stability in the program, to include consideration of
                           external influences which could effect its execution?

Competitive Forces -- How to make use of dissimilar as well as head-to-head competitive approaches for
      similar missions. This caused us to add the business strategy as an important consideration.

  As the conduct of our review progressed, the importance of BMC4I grew. That importance has been
reinforced by my visit here today. This is what I want to focus on in the remainder of my remarks tonight.

During the Cold War, our intelligence systems were cued to a relatively stable, predictable set of targets
  for exploitation. An example was obtaining intelligence on weapons systems being developed by our
 adversaries. Our national intelligence systems were not well-integrated with our combat forces. Today,
  we must cope with a more dynamic environment in which there is an expanded range of ambiguous,
                                          unpredictable threats.

    To counter the proliferation of weapons of mass destruction, increase the effectiveness of attack
 operations against enemy ballistic missile launchers and facilitate an improved cruise missile defense,
  our battle management and intelligence systems need to be considerably more robust and timely in
collecting multisource and continuous surveillance data as well as storing, processing, disseminating and
                             managing much larger quantities of information.
 The coming decades promise a quantum shift in the evolution of armed conflict. Our forces are being
 designed to achieve dominant battlefield awareness and combat superiority through the deployment of
           fully integrated intelligence systems and technologically superior weapons systems.

Dominant battlefield awareness is critical, but it is not the whole story. It is a necessary condition, but not
a sufficient condition to prevail on the 21st century battlefield. What one really needs is something I call
dominant battle cycle time. This is the ability to turn inside an adversary, to act before the adversary can

 A more stressing objective is to be able to act before the adversary's battlefield awareness system can
see you act. In addition to possessing a dominant battlefield awareness capability, achieving a dominant
  battle cycle time capability means one also must possess rapid planning tools, strong command and
                                   control systems, and superior mobility.

   As I envision the future, I see at least 10 enabling technologies and architectural concepts that are
 needed to build dominant battlefield cycle times. Many of these BMC4I technologies and concepts are
                           being deployed to better support our troops in Bosnia.

 The first key technology is to continue to build on advances in processing. Here a key issue will be the
 ability to do more on-board processing as well as to increase our capability to do off-board processing.
The general trend we have seen since the 1970s as a result of increasing the number of gates per chip
      by decreasing the minimum feature size of a chip device has been about a ten-thousandfold
                   improvement in capability while cost has been held nearly constant.

      These advances in processing are proceeding at a rate described by Moore's Law [computer
     microprocessor capability will double every 18 months]. ... We project that we will have another
  thousandfold improvement over the next 15 years at the rate of advance predicted by Moore's Law.

 I would wish to make two points here. One is that there is an enormous amount of improvement ahead
for us to make great strides in both on-board and off-board processing, and they are strides that will be
                                   needed to digest all the data collected.

 Second, we do see an end to the linear relationship predicted by Moore's Law. It is 10 or 15 years out.
That end was seen 20 or 25 years ago, and nothing has changed our forecast of it. At that time, we will
  be getting down to device sizes in which we are dealing with geometries that incorporate only a few
                                           hundred silicon atoms.

 So we will need to invent some new approach which may exploit different physical principles to make
smaller devices and continue making processing advances. This is an area in which we will need some
partnership involving government, universities and industry. As I said, it is still 10 to 15 years ahead, but it
 is something that in five years or so we will probably have to be researching in a more systematic way.

The next key technology area will employ advanced processing and has to do with the field of automatic
target recognition and other productivity enhancement tools for our image analysts. The ATR [automatic
target recognition] problem has been reported to be "solved" at least twice before in this decade. Not so.
 As we deal with the problem of sensory overload, we will have to do more and more automatically. We
   are investing on the order of $100 million per year in this area, but it is an area which can be better

ATR will be key for providing the cueing for the sequential collection approach I will describe later. While
    there is much to be done to help us extract information from data, I note that this audience is as
  experienced as any, having dealt for years with the problem of extracting useful information from air
 defense radars. As we become saturated with more and more data, this will be one of the most critical
pillars in the building blocks that I have been describing. The third, a key architectural concept, has to do
                         with indexing all collected information to common grids.

The idea is to be able to access all the data that we have collected and to have a built-in indexing system.
 One natural way to index is based upon the location where the information is collected, and we can do
               that with a three-dimensional position tag and also with a precise time tag.

 A common grid, in combination with a distributed and open architecture, gives us the ability later to go
 back and fuse information that was collected at previous times or to look at correlations of events. This
kind of index is essential to the development of very large, dynamic databases that we will be able to use
                                   to retrieve and correlate information.

A common grid would also give us the flexibility to do coherent processing after the fact. A grid that has a
fine position and timing capability -- positions on the order of feet, timing on the order of nanoseconds --
  would support after-the-fact processing using multiple sensor systems, to include those in space, on
                    manned or unmanned aerial vehicles, on ships or on the ground.

The fourth key concept has to do with the creation of distributed and open architectures. You may think of
this as "plug and play," in which a variety of collection systems can play together in a compatible way. A
   good example is our Joint Airborne SIGINT [signal intelligence] Architecture, or JASA. We want an
 architecture that can accommodate our large and small satellite collectors, unmanned aerial vehicles,
     unattended ground sensors and one which can accommodate and deal with HUMINT [human
  intelligence] and other intelligence sources. The sensor architecture has to be able to accommodate
      commercial collection systems and processing and do so in a distributed and open manner.

 The idea here is the informed, sequential tasking of our intelligence, surveillance and reconnaissance
 collection resources. You can think of this concept in terms of selecting the right spectral frequencies
              over the right area and resolution and doing this over the right period of time.

We are now planning to make tenfold improvements in multispectral sampling, through combinations of
radar, infrared and electro-optical wavelengths, while at the same time making a tenfold increase in the
  area of resolution of collection systems and then on top of this, making a tenfold improvement in the
  continuity of coverage, moving towards around-the-clock day-and-night coverage under all weather

       The problem is that if we make all these improvements simultaneously, we are looking at a
ten-times-ten-times-ten, or thousandfold increases in the data to be analyzed and processed for the user.
That is probably not something we can deal with. Neither could we probably afford the full combination of
                                             collection systems.

  So the idea is not to apply all the improvements simultaneously. The concept is to be able to operate
sequentially, to do some sampling with technologies that may in a sensible way pick the appropriate path
 in the appropriate spectral frequency band over the area of interest at the proper resolution and at the
        right time interval to produce information that can be suitably digested and acted upon. ...

Digital processing techniques, such as data compression, will be used to limit transmission bandwidth or
                     to provide on-line storage of data when we have limited storage.

Recently I visited CNN [Cable Network News], who is putting online their first digital video storage system,
and one of the keys is the compression technique they are using to minimize the storage required to have
   large video data bases on line. Data compression will be key to storing and transporting large data

 The extent to which we are able to store the data collected and to put the data into systematic indexed
data bases, indexed in the way I was describing earlier based upon position, time and other key features,
         will be the key to our ability to fuse data and intelligently query these large data bases.

     In the past, when our forces deployed, there were a number of critical items, such as food and
ammunition, on the critical deployment list. In the future, data bases will be on this critical deployment list.
We must put much energy into deciding what data bases to deploy with our forces as they move forward
  so they do not have to reach back to the CONUS [continental United States] unnecessarily. This will
                 require theater data bases of 10 to 100 or perhaps even 1,000 terabits.

      We need the ability to leverage off of commercial developments, and there is also some very
high-leverage work required here to develop something that I would describe as a mediator to be able to
  deal with the various disparate data bases that will be out there -- commercial, open and otherwise.

Here again, the commercial market is leading the way. Improvements in data storage are also following
the Moore's Law curve that I discussed earlier, and so we have about a thousand-fold improvement yet to
                                               go here as well.

The problem that we in the Department of Defense and the intelligence community face is that our total
storage requirements are on the order of 1015 [10 quadrillion] bits -- larger than the Library of Congress.
We have recently developed a new commercial digital video standard high-end device that stores about
                                             six gigabits per disk.

The problem is how to use that kind of a storage system. Given our requirements, we would need about a
million digital video disks. That is quite a large jukebox to put together. But if we consider a theater data
base of 10 to 100 terabits as I described earlier, a few thousand disks can do the job and we can put such
                                             a juke box together.
 The ninth technology area of interest is improved data dissemination. Here we are seeing great strides
with global broadcast systems that can give us hundredfold kinds of improvements in the bandwidth that
we can transmit to our forces. What is being developed commercially today is a static direct broadcast TV
              system where the receiver locations are known and the programming is fixed.

  For DoD and intelligence use, we will need a more dynamic system that can deal with users who are
moving in the field whose location isn't known a priori. Rather than fixed programs, we also need to allow
                    them to be able to interactively change their channel programming.

On the ground, we will need to make better use of the tremendous bandwidth already available through
 fiber optic transmission media. Wave division multiplexing is one area we are just beginning to exploit.

Earlier, I mentioned that many of these 10 enabling technologies were being used to enhance operations
        in Bosnia. Nowhere is this more evident than in the measures we're taking to improve the
 communications infrastructure to our forces across Europe and the Bosnia area of operations. We are
   doing this in two ways: first, using commercial TV satellite technology to provide a direct broadcast
communications capability; and secondly, by fielding a wide bandwidth, secure tactical internet through
    commercial business satellite transponders to allow for distributed collaborative planning among
                                deployed C2 [command and control] nodes.

 What this means to our forces is that everyone with the proper receive antenna, cryptologic equipment
 and authentication will have access to the same data as everyone else at the same time, reducing the
latency in timeliness of information to the lowest levels. But more importantly, the fielding of this capability
 will allow us to install and utilize, for this operation, some of the more advanced C4I capabilities being
 developed by the government and industry today for use in the Global Command and Control System.

   This leads me to the 10th enabling technology. Planning, analysis and training tools are needed to
provide us with the ability to move through the data bases I described so that we can fuse the collected
data to produce useful information and decide who needs that information and disseminate it to the right

We will also be able to use these tools to improve our sensor planning. They will help us decide the best
      path ahead to employ each particular collector system in an organized and responsive way.

We also need a set of tools to assist us in deciding what actions we want to take on the battlefield -- tools
that provide us the information to take decisive action and operate within the timelines of our adversaries.

 To summarize, I believe we will soon complete a review of BMD that will provide for the air and missile
defense systems needed to protect our forces -- whether it be forces on the move or local and wide-area
   defense of key staging areas and lodgments. Our task is to put in place the system of systems for
                                   achieving dominant battle cycle times.

 Along these lines, I feel that upgrades to BMC4I capabilities are a priority. I strongly support initiatives
  like the Army's Tactical Operations Center, designed to contribute to command and control in attack
                  operations as well as all other aspects of missile defense engagement.
    We have seen equally encouraging field demonstrations of the Navy's Cooperative Engagement
Capability, which has been deployed in TMD [theater missile defense] exercises with the [aircraft carrier
USS] Eisenhower battle group off the Atlantic coast and in the Mediterranean over the course of the past
                   12 months as part of the JTF-95 [joint task force] exercise activity.

  We must bring machine processing into this game. While the relevant technologies, including image
understanding, ATR, pattern recognition, cannot support fully automated processing today, they can do a
       great deal to increase the productivity of our analysts, perhaps by factors of 100 to 1,000.

   Once exploited, we need to move the information (not necessarily the data) to those who need it.
  Generally, there is inadequate understanding of who needs what information and what form it is best

Data bases are key to sensor processing and achieving dominant battlefield cycle time. The data bases
will be tens-to-hundreds of terabits for a theater and the data streams will be tens of gigabits/second. The
real time data streams must interact with the data bases. We have a lot to learn in the management of the
                       data and the data bases to achieve that kind of interaction.

 The future effectiveness of our BMC4I architecture will depend upon how well we link all air, land, sea
and space assets into a common, shared view of the battle space. We are a team, and you are the key
 players. I offer my personal support and commitment to you as we work together to achieve dominant
                                   action cycle times on the battlefield.

                                              Thank you all.
     Building a Ready Force for the 21st Century
Prepared remarks of Paul G. Kaminski, undersecretary of defense for acquisition and technology, to the
                         Huntsville (Ala.) Chamber of Commerce, Jan. 17, 1996.

                Ladies and gentlemen, it's a great pleasure to be with you this morning. ...

 The people and leaders of Huntsville can be proud of those plans made by many of you in this room to
build the economy of this region -- you are not just surviving the defense downsizing, you are bouncing
                                    back to actively map out your future.

America will continue to count on Huntsville for its critical contributions to the world's best missile defense
systems and technology. Today, I would like to share some of my views on where I think we're headed in
             technology development and acquisition reform in the Department of Defense.

  As I look broadly at the external environment that impacts our national security, I note that so many
             things have changed -- not just in the past 20 years, but in the past year or two.

I have been in my job a little over one year now, and one of the moments that I want to share with you --
one that helps in understanding the fundamental change in our relationships -- was a trip that I made with
Secretary of Defense Bill Perry to four of the former Soviet republics -- Russia, Ukraine, Kazakstan and

 We visited an SS-19 silo near the city of Pervomaysk in the Ukraine. I think I had seen that silo before,
but from a different orientation. On that day, an SS-19 missile, one previously targeted against six cities
              in the United States, was being withdrawn from the silo and decommissioned.

On the same trip, we toured Russia's Engels Air Force Base and saw former Soviet Bear bombers being
           dismantled using American equipment provided through the Nunn-Lugar program.

    The use of Nunn-Lugar funds to support weapons dismantlement and defense conversion in the
republics of the former Soviet Union is part of our Cooperative Threat Reduction program -- it represents
  a fundamental shift in our approach to security relationships and is a good investment in our national

  In the post-Cold War world, the United States no longer faces a single galvanizing threat such as the
   former Soviet Union. Instead, there is increased likelihood of our forces being committed to limited
          regional military actions -- coalition operations -- which allies are important partners.

 This situation can be summed up in statistical terms. I'll risk sharing this statistical description with you
this early in my talk because you are an educated audience and George Bernard Shaw once observed
 that: "One of the distinguishing marks of an educated person is one who can be emotionally moved by
  I would sum up our current national security environment in statistical terms by saying that the mean
   value of our single greatest threat is considerably reduced. But the irony of the situation is that the
           variance of the collective threat that we deal with, plan for and must counter is up.

                          This gives us some pause in trying to plan intelligently.

In response to reduced mean value of the threat, the United States has cut end strength by about a third
from 1985 levels. But at the same time, the increase in variance has caused deployments of U.S. forces
                                             to go up by a third.

During this adjustment phase, we have brought the total defense budget down while maintaining the high
state of readiness needed to support increased operational tempos. We have done this by reducing our
  procurement at a pace that is twice the rate of the overall downturn in total obligation authority. This
   response is consistent with historical norms. Procurement has traditionally been the most volatile
 component of the budget in a drawdown because it is not necessary to purchase new equipment for a
                                           smaller force structure.

But this approach also defers long-term modernization and future readiness. I view this as a temporary
 condition as we complete our drawdown, which is just about over. Our current level of investment -- it
 was a little over $39 billion in procurement and $34 billion in RDT&E [research, development, test and
evaluation] in the president's FY [fiscal year] 96 budget request -- will not sustain the Bottom-up Review
force over the long term. The drawdown is nearly complete with the FY 96 budget, and so from FY 97 on,
               we will have to increase our spending to sustain modernization of the force.

  However, our investment outlays -- what industry actually receives -- lags budget authority by two to
  three years due to our full-funding policy. The implication is that industry is still working off of dollars
appropriated for FY 93 and will need to deal with a further contraction on the order of 20 percent over the
                                              next three years.

But now that the drawdown is nearly over, our modernization reprieve from aging is nearly over, too. So
next year, we have to start a ramp-up in modernization. That is absolutely critical to the readiness of the
      forces -- not this year or next year, but the readiness of our forces by the end of the century.

By the year 2000, we plan for a modernization account to go up to $67 billion in current dollars -- almost
twice what it was in the fiscal '96 budget submitted to Congress. And this modernization plan will focus on
   building a ready, flexible, responsive force for the changing security environment in which we live.

That means we will continue to maintain technological supremacy on the battlefield, especially by seizing
 on breathtaking advances in information technology: advanced semiconductors, computers, software
  and communication systems. We will maintain strong emphasis on missile defense and put greater
            emphasis on fast transportation and mobility: airlift, sealift, groundlift and trucks.

  Our future years modernization plan reflects these priorities. But I must be candid with you. We are
making three critical assumptions about where we will get the money to make this work. And the first of
             these assumptions is that we will receive significant savings by closing bases.
As I said earlier, the DoD budget and force structure are both down about a third from their peak levels in
    1985. Guess what? Our infrastructure is only down by 18 percent. It is the reason why the Base
Realignment and Closure '95 program is so important. The program we have laid out through BRAC '95
will reduce the infrastructure by an additional 11 percent over the next few years. It is important to bring
this infrastructure into balance with our smaller force structure. The savings produced are needed to plow
                                     back into our investment program.

Unfortunately, there is a bad news-good news story here. The bad news piece is that it takes money to
   save money. When we close down facilities, we actually end up spending money in the near term.
Typically, it takes between two to three years to break even before there is a net savings in this process.

We are still experiencing no net outflow due to the previous BRAC rounds. In the fiscal 99 budget, we will
be saving about $6 billion a year that will be available to plow back into our investment accounts. But we
                              have to succeed in our plans for closing bases.

Right now, integrated organizational planning teams from the Army's Aviation and Troop Command and
    the Army Missile Command are working to prepare for the move and realignment of the aviation
  management functions of ATCOM, the Army program executive officer for aviation and the Logistics
Systems Support Center from St. Louis to the Redstone Arsenal, here in Huntsville. If we hold to current
schedules, I would expect movement of some logistics support center functions beginning next summer
             with all ATCOM, PEO Aviation and LSSC moves complete by the end of 1997.

The second big assumption in our defense planning is that we will get significant savings by overhauling
our defense acquisition system. The idea here is to be more efficient in what we buy, how we buy it and
                                    how we oversee that buying process.

As I look at the defense acquisition system in detail, what I find is that the system is not broken -- it fields
equipment that is second to none in the world. What I find is that the system can and must operate more

  We're implementing the provisions of the 1994 Federal Acquisition Streamlining Act to increase the
     department's access to commercial products. We've now completed just about one full year of
 implementation. The act contains multiple provisions that establish a preference for commercial items
 while exempting those items from government-unique contracting and accounting requirements. In the
   past, these requirements served as disincentives for commercial companies to participate in DoD

 Although the new federal acquisition streamlining regulations will help the department use commercial
procurement procedures, we are beginning to understand that the principal problems are not statutory or
regulatory. We are finding that there is considerable freedom in our acquisition statutes and regulations.
The issue is really cultural. To make a cultural change, we need the appropriate incentives to adjust the
                                   behavior of our acquisition work force.

  In fact, the whole situation reminds me of a Mark Twain story about a cat on a hot stove. Mark Twain
  describes, "The cat, having once sat upon a hot stove lid, will not sit upon a hot stove lid again. The
  problem is that neither will that cat sit on a cold stove lid." That is the problem we have overall in our
acquisition system. We have become so risk-averse that we end up spending billions to make sure we do
                                               not lose millions.

     We have set up a structure that discourages risk taking -- it settles for very, very conservative
performance at all levels. We are moving now to try to adjust that culture. The first change we made was
to stop required use of military specifications -- those reams of documents that spelled out in meticulous
detail how contractors must design and produce a system of supplies and services. It was safe to specify
                            conformance to military specifications and standards.

  Instead, we are going to be using commercial and performance standards which call for the highest
quality standards available in the commercial market or if there is no commercial standard, describe how
we want our equipment to perform and then challenge the supplier to meet that performance standard.

We have effectively turned our procurement system on its head. A program manager in the past had to
   get a waiver in order to use commercial and performance standards. Now the reverse is true. If a
program manager wants to use military specifications, then he has to get a waiver in order to justify the
                                 extra cost entailed in military specifications.

   At the current time, we are implementing a block changes policy to use best commercial practices
throughout a contractor's facility. It makes no sense to use best commercial practices on new contracts
and maintain a separate set of procedures for existing DoD contracts. We are seeking to use the same
  inspection procedures on military production lines that are used for commercial lines -- for example,
  changing from the MIL-Q-9858A quality control standard in favor of standards like ISO [International
                       Standards Organization] 9000, used by companies worldwide.

  We are looking at our own internal acquisition processes within the department. We are beginning to
achieve real success in implementing a bold, new, re-engineered oversight and review process that will
                           better serve our warfighters and conserve public funds.

    DoD Directive 5000.1 and DoD Instruction 5000.2 are now being revised to define an acquisition
environment that makes DoD a smarter, more responsive buyer of the best goods and services that meet
                  our warfighters' needs at the best dollar value over the life of the product.

    The rewrite will take us from a very detailed, centralized management approach that was widely
  perceived as inflexible and overly bureaucratic, to a set of more flexible policies and procedures that
emphasize the use of professional judgment and common sense to streamline the acquisition process.
                          The major themes in the new 5000 series documents are:

              Teamwork among program managers, and OSD [Office of the Secretary of Defense] and
                                                      service staffs;
                      Tailoring acquisition process and procedures to fit individual programs;
                Empowerment of managers and staff to reach agreements at lowest possible levels;
           Cost as an independent variable to ensure lower-cost systems to meet mission needs and
                                                 life-cycle cost goals;
                Commercial products utilized when possible to reduce cost and time to field; and
                        Best practices modeled on sound commercial/business experience.

 To make a cultural change, we are putting the appropriate incentives in place to adjust the behavior of
                                         our acquisition work force.

 On May 10, 1995, Secretary Perry signed a letter directing the use of integrated product and process
                       development and integrated product teams in DoD acquisition.

  The intent of the department's IPPD-IPT initiative is to replace after-the-fact oversight with early and
 continuous insight. The goal is to institutionalize a management approach that encourages partnership
by stakeholders vs. sequential, adversarial relationships between and among organizations. We want to
                                build in quality rather than inspect in quality.

I would like to see service and OSD staffs discover problems and help develop solutions early rather than
  find and report on problems at the DAB [Defense Acquisition Board]. I expect to reduce government
                       decision cycle times using IPPD and IPT commercial practices.

Earlier, I spoke of some visible progress in acquisition reform. I've been keeping book on the acquisition
process at my level. For example, the cycle time for acquisition decision memorandums -- it averaged 23
days in 1994 -- it was 2.5 days in 1995. Seventeen of 23 scheduled DAB reviews in 1995 were not held --
   they were not needed because there were no issues as a result of our new Overarching Integrated
                                           Product Team process.

On the Space-Based Infrared program, we shortened the DAB preparation cycle from six to two months
      and supporting documentation for the DAB went from [more than] 1,000 pages to 47 pages.

 The story is the same on the Joint Direct Attack Munition program -- a joint Air Force/Navy program to
develop an affordable, accurate, all-weather guidance kit for 1,000- and 2,000-pound bombs in inventory.

 In fact, JDAM is probably one of the first programs to benefit from the full combination of our year-long
implementation of FASA acquisition reform initiatives. The first JDAM RFP -- request for proposal -- was
 issued in August of 1993 and required 87 military specifications and standards to be enforced. As we
    enter engineering and manufacturing development today, the number of milspecs and standards
required to build the system is zero. In August 1993, the number of pages in our statement of work was
                                  137; the number of pages today is two.

I credit the combination of our acquisition reform initiatives and a very able, aggressive program manager
  with reducing the unit price estimate from $40,000 at the 40,000th unit to $18,000 at the first unit -- a
                                           savings of $1.5 billion.
 These savings are predictions; they will not be validated until we enter production. But they provide a
quantitative indication of the range of savings that can be achieved. This is a good news story. I predict it
     will end up to be a good news story even if we do not achieve all of our aggressive objectives.

The third big assumption in our defense planning is that the defense budget modernization line will stop
declining and begin to go back up. This will depend ultimately on actions taken by Congresses three and
                                            four years from now.

  When I think of the future investment budget, I'm reminded of the Peanuts cartoon in which Charlie
     Brown is getting ready to kick a field goal and just down field, Lucy is kneeling on a hash mark
                                        representing the year 2001.

The football she is holding represents a procurement budget that we are counting on to grow by nearly 50
 percent to pay for much-needed modernization programs across the department. Despite having been
burned so many times before, Charlie Brown wants to believe the football will be there when he tries to
                                                    kick it.

I am not confident that the projected increases we are counting on will be there in 2001. ... It compares
the difference in budget authority set by the congressional budget resolution with that of the president's
 budget. As you can see, there is an unsustainable ramp in the near term -- and in the long term, Lucy
                                   could be planning to pull the football!

It is a sobering state of affairs. But my concern here is not directed only at the Congress. The DoD must
   continue to reduce infrastructure and to execute our plans to achieve greater efficiency if we are to
                                prevent Lucy from pulling the football away.

Our success in fielding superior systems will depend upon our success in reducing excess infrastructure,
  implementing lasting acquisition reforms and maintaining sustainable increases in our modernization

We are in the process of making the most revolutionary change in the defense acquisition system in the
past 50 years. The true measure of our success in reforming our buying practices will be acceptance in
                          the field -- not policy pronouncements in Washington.

   For this reason, it is important to "bubble up" the best ideas from the field -- that means closing the
                             feedback loop -- in government and with industry.

                   I sincerely hope that you will not be shy in raising your concerns. ...

The time is ripe to go forth and leave a legacy, a foundation, for those that will follow -- for U.S. forces in

                                               Thank you all.
                      DoD Single Process Initiative
Keynote address of Paul G. Kaminski, undersecretary of defense for acquisition and technology, to the
            Lockheed-Martin Common Processes Conference, Arlington, Va., Jan. 18, 1996.

   Ladies and gentlemen, it's a great pleasure to be with you here this morning. The government and
     Lockheed-Martin representatives present in the audience today are clearly demonstrating your
    commitment to the department's single process initiative. Thank you for your proactive approach.

From an acquisition reform perspective, this is a very important time for all of us. When I attend a meeting
  like this, I find that I benefit enormously from my interaction with all of you, so I plan to leave time for
                    questions and answers. This type of interaction is important to me.

When it comes to meaningful procurement reform, it has been my sense that it is easy to talk about why,
                              harder to talk about how and even harder to do.

  In June of 1994, DoD took a major step towards implementing real reform by authorizing the use of
  commercial specifications and standards. But those changes, as important as they were, effectively
applied to new contracts only. We have now taken the next major step toward reforming DoD purchasing
practices. Last month, I approved guidance implementing a single process initiative to reduce the number
                         of government-imposed processes on existing contracts.

This initiative addresses a very real problem. Its implementation requires a streamlined approach so that
we can get it done quickly and so that we can begin to benefit from the savings and the cost avoidance
                                    associated, sooner rather than later.

      I launched this initiative with the idea of achieving four basic objectives. The first one -- quick
                             implementation -- for the reasons I've just stated.

No. 2, it's my intention to obtain consideration when there are one-sided savings in the process. For most
contracts that we have in place, there will be bilateral cost avoidance. That is, the savings will be passed
 directly to the government and in the end, to the taxpayer. This occurs on cost-reimbursable contracts
                    and cases where we have priced options that can be renegotiated.

In the case of longer-term fixed-price contracts, there is a possibility of what I would describe as unilateral
cost avoidance. savings would be realized by the contractor, but the contract's fixed-price structure has
 no mechanism to automatically pass along these savings to the government. In these unilateral cases,
      we would seek consideration -- either nonmonetary or as adjustments to the contract prices.

    Thirdly, I wish to minimize the cost of implementation. We could go through a very cumbersome
  procedure to implement this change. I have asked this be done on a[n] expedited basis. We will not
spend months having detailed cost proposals prepared, audited and negotiated unless the initial review
   by an administrative contracting officer indicates that the possibility exists for substantial unilateral
savings after the contractor transition costs and the government administration costs are considered. We
                     expect the number of these unilateral savings cases to be few.

 Fourthly, we want to protect the interests of the principal stakeholders in this process -- the individual
program managers who may be affected and the individual program teams who are operating in a given

    We will be using an integrated product team approach to make a block change for modifying the
    specifications and the standards for all existing contracts on a facilitywide basis rather than on a
contract-by-contract basis. Here, really, the issue is you can't make a contract-by-contract change for a
 facility that has many contracts. You have to try to go through a set of common processes across the
                                               whole facility.

    Our goal here is to consolidate or eliminate multiple management and/or multiple manufacturing
processes when they're not needed. These multiple processes add unnecessary costs to the goods and
                           the services that are purchased by the department.

Let me give you my frame of reference here. About a year back, we commissioned a study conducted by
       Coopers and Lybrand [accounting firm]. They looked to see what were the added costs of
 government-unique requirements -- imposed by the DoD on our major contractors -- costs above what
                            would be imposed by normal commercial practice.

   I would cite for you a couple of examples that they found. They looked, for example, at one military
  standard -- our MilQ [military quality standard] Q 9858A. As many of you may know, it's a particularly
 intrusive quality standard used by the DoD. They found that the contribution of that standard caused a
cost premium of doing business with the DoD. That premium was about 1.7 percent of the cost of items
 purchased by the department in the facilities that they serviced. So that's a pretty significant number if
        you look at the overall cost, say, on a procurement budget of about $40 billion per year.

  They also looked at material management and accounting systems imposed by the government and
found this, too, to be a major contributor to cost, adding about six-tenths of a percent to the department's
    cost. In one facility, for example, we found that the same parts were being stocked in 15 different
locations because of multiple contracts, each with their own requirements. This, obviously, drives up the
stockage levels of parts required, adds to obsolescence and also deterioration problems, and it creates
                                inefficiencies that we would like to avoid.

 Another example of the sort of problem that we're trying to fix is the imposition of government-unique
   soldering specifications. In just one factory, a defense contractor was forced to use eight different
 soldering specifications -- five for the government and three for commercial clients purchasing similar
    types of products. This meant the workers had to be trained on all eight soldering and inspection
     techniques. It also meant that the contractor had to maintain eight different types of production
    documentation. This cost him more. In turn, he passed those costs on to us. That's fair, but it is
                            expensive. It's expensive for us and the taxpayer.
  It's very difficult to streamline manufacturing processes across a facility in this kind of overregulated
  environment. If we can consolidate to one or two major specifications, manufacturing personnel can
  become more efficient, the inspection requirements and the paperwork can be reduced, and we can,
                           where possible, leverage off the commercial process.

   What I've tried to illustrate here is how this may play out over time. There's going to be a period of
 transition... in which there will be costs of transitioning to a new process base. On the other hand, I've
                        seen situations where there are easy savings to be reaped.

 We don't know enough today to predict whether in the short term there's going to be a net savings of a
small cost. Whatever is going to happen in the short term, it is probably going to be small because we've
already identified much of the low-hanging fruit. But there are some places where the savings will be less,
                           and there will be some cost during a transition period.

I would expect this to play out in a year or a year and a half or so,[ehj1] where we now start to cross the
line and get out of the red and into the black, where there's a net cost avoidance to the department. The
focal point for this activity will be the administrative contracting officer assigned to the Defense Contract
Management Command ... [who] is located in the contractor's facility. They will follow a process that will
 include the streamlined review and the adoption of contractors' proposals to proceed with this initiative
                                           across the whole facility.

This doesn't mean that the customers, the program managers and the buying activities won't be involved.
Our local DCMC [Defense Contract Management Command]activities will use management councils, to
  include the involved program managers and other customers, as well as our Defense Contract Audit
  Agency, to review contractor proposals related to elimination or consolidation of these requirements.
  Only when there is agreement on the extent of the change will the administrative contracting officer
                        execute the block changes to the contracts for that facility.

  But we intend for this to be a streamlined approach. We will not spend months having detailed cost
  proposals prepared, audited and negotiated unless the initial review by an administrative contracting
 officer indicates that the possibility exists of substantial unilateral savings after the contractor transition
costs and the government administration costs are considered. As I said earlier, we expect the number of
 these unilateral savings cases to be minimal, so we don't want to overburden the system to deal with
                                         them where it isn't required.

 In summary, the longer it takes us to implement this, the longer we will bear the cost of inefficiency on
these separate processes. So in my opinion, we want to move very quickly to get on with it and to see if
     we can't begin to reach closure here in this year or year and a half timeframe that I've targeted.

 Second, we want to take prudent measures to ensure significant unilateral cost savings do not occur.

                          Third, we want to minimize the cost of implementation.

                 And fourth, we want to protect the interests of the principal stakeholders.
I believe the department has put tangible procurement reform into play with this single process initiative.
    Together, DoD and industry can now step up and do something real for the American taxpayer.

We are a team, and you are the key players. I offer my personal support and commitment to you as we
                           work together to implement this important initiative.

                                              Thank you all.
  Ten Things I Never Imagined Doing Five Years
Remarks by Secretary of Defense William J. Perry at the Business Week Forum, followed by questions
                             and answers, Washington, D.C., Jan. 18, 1996.

How appropriate it is to speak to a forum on change by way of advanced interactive satellite technology.
Indeed, thanks to modern telecommunications, I do not have to come to Palm Springs this January -- I'm
 able to stay in Washington with the snow and the ice and the fog. This is one case where technology
                               makes life easier, but not necessarily better.

The question before this forum is whether America can really change. I can tell you that when it comes to
protecting our national security interests, America not only can change, it has changed, and has changed

We face challenges and opportunities we never could have imagined five years ago. These challenges
 require us to pursue new and creative approaches to the way we protect our nation and advance our

To illustrate just how much our security world has changed, and our security strategies, I want to share
 with you a list of 10 unique events that have occurred over the past year. I call this the list of 10 things
that I never imagined an American secretary of defense would do. Let me start off with the least important
                                           and work my way up.

No. 10. I never imagined that I would cut off the ear of a pig in Kazakstan or listen to an Uzbeki colonel
  sing a Frank Sinatra song or eat rendered Manchurian toad fat in China. All of these incidents which
happened in the last year tend to illustrate how different today the job of secretary of defense is from any
of my predecessors. All of my predecessors, when they traveled, would visit our conventional allies -- the
          British, the French, the Germans, the Japanese, Koreans and perhaps a few others.

Last year, I visited 40 different countries. Many of them had not even existed 10 years ago. This year, the
first week of this year already, I have visited eight different countries -- Italy, Bosnia, Hungary, Ukraine,
Oman, Saudi Arabia, Jordan and Israel, just to reflect the diversity and the scope of the interests today of
                                         the secretary of defense.

The opportunity today to forge new security relationships with these nations is there, and the challenge is
                 to try to build these new relationships where none ever existed before.

No. 9. I never imagined that I would host the defense leaders from 33 democratic nations in the Western
                    hemisphere at a conference to discuss mutual security problems.

First of all, I never thought there would be 33 democratic nations in the hemisphere; and a few years ago
it would have been unthinkable that our hemispheric colleagues would be interested in such discussions
   with their imperialist neighbor to the north. But now that democracy, peace and market reform are
  ascendant in our neighborhood, we have an opportunity to promote regional trust, cooperation and
security, and we seized that opportunity last summer at Williamsburg, Va., when I hosted the 33 defense
   leaders of these nations at the first Defense Ministerial of the Americas. By the way, the Argentine
     defense minister picked up on this, and this year he will be hosting the second such meeting.

No. 8. I never imagined that I would actually dismantle the system of military spec[ification]s, and yet we
                                    are now in the process of doing that.

 A few years ago if a defense program manager wanted to use a commercial or industrial specification,
 he'd have to get a waiver. Today, if he wants to use a defense specification, a milspec, he has to get a
 waiver. The whole system has been turned on its head so that we're forcing compliance with industrial
   and business specifications because we want to make a much greater use of the technology, the
                  components, the parts that exist in the U.S. commercial sector today.

 No. 7. I never imagined that as secretary of defense I would be worrying about day care, but I am. It's
   turned out to be a critical part of quality of life for our military forces, and I've come to believe that
          enhancing the quality of life is a key to maintaining the high readiness of our forces.

Therefore, I have focused our energy and resources not only to building up readiness, but specifically to
 taking every action that I can take as secretary to improve the quality of life for our military personnel.
Because of the enormous amount we invest in our training, a key, then, is that we are able to retain them.
The key to retaining our military personnel today is maintaining a reasonable and an adequate quality of

No. 6. I never imagined that I would be running a school to teach Soviet military officers about democracy,
  budgeting and testifying to a parliament, and yet that's exactly what we do at the Marshall Center in
Garmisch [Germany] and have been doing it the last two years. Every six months a new class -- 60 to 70
     officers from the former Warsaw Pact countries -- convene there to learn about those subjects.

I have met with each of these classes, spoken to them, met with them in small groups. This is the most
   successful experiment we have today in actually introducing the emerging military leaders in these
                                 countries to the practices of a democracy.

No. 5. I never imagined that I would be in Louisiana, welcoming troops from the Warsaw Pact. But there
they were -- Albanians, Bulgarians, Czechs, Hungarians, Poles, Rumanians -- 14 nations in all. Each of
  them had sent a platoon, and each of these 14 platoons was carrying their flag and marching by the
                                               reviewing stand.

After the greeting, I went down and met with each of these individual platoons from the 14 nations. They
    were there to participate in a joint exercise, the first ever such exercise held on American soil, in
                   peacekeeping under the NATO's Partnership for Peace institution.

No. 4. I never thought I would be in Kansas watching United States and Russian troops training together,
    but there they were last October, training, again, for joint peacekeeping operations. It is the new
U.S.-Russia security relationship at work. I was there, the Russian defense minister was there, meeting
            with, speaking with the Russian and American forces who were training together.

As Minister [Pavel] Grachev and I gathered the Russian and American troops around us and I heard him
telling them how important their activity was to our children and our grandchildren there on the plains of
                   Kansas, I thought to myself, "Toto, we're not in Kansas any more."

No. 3. I never imagined that I would be helping the Russian defense minister blow up a U.S. missile silo
 in Missouri. Last October I did that, too. He and I stood together in the cornfield in Missouri. Both of us
  pressed the detonator button that blew up a Minuteman silo. This was part of the START -- Strategic
Arms Reduction Treaty -- program to reduce those missiles. I might mention that just last week I went to
Ukraine, and there he and I and the Ukrainian defense minister pressed a three-pronged detonator and
blew up a former ICBM silo. That was a[t] Pervomaysk. At Pervomaysk just a year ago, there were 700
  nuclear warheads at that one site -- all aimed at targets in the United States. This coming June, that
missile field will be transformed into a wheat field, and those 700 warheads will no longer be any threat to
                                             the United States.

   No. 2, I never imagined that Dayton, Ohio, would become synonymous with peace in the Balkans.
Frankly, I wasn't sure that the warring parties in Bosnia would ever be able to reach a peace agreement,
but in Dayton, that was the hardest thing for me to understand. There they were, finally ready to stop the
 killings and atrocities in Bosnia. They signed the peace accord. We're now one month, almost, into the
                          implementation of that peace accord. So far, so good.

 The No. 1 thing that I never imagined that an American secretary of defense would ever do, the No. 1
 thing, was to witness the participation of a Russian brigade in an American division in a peacekeeping
  operation in Bosnia. This past week, based on an agreement we made last year, this past week the
 advance elements of that Russian brigade arrived at Tuzla, were met by [Maj.] Gen. [William L.] Nash,
           who is our division commander, and are beginning to be integrated into that force.

These 10 things -- none of which I could have imagined a few years ago -- demonstrate just how much
  the world has changed, just how much our security has changed, just how much the Department of
               Defense has changed and, of course, just how much my job has changed.

          Samuel Johnson once said, "Change is inconvenient, even when it is for the better."

 These changes, indeed, have been inconvenient, but I believe they have definitely been for the better.
History will be the ultimate judge, of course, as to whether the dramatic changes we have seen last year
will cause 1995 to be regarded as the pivotal year in the transition from the Cold War to a post Cold War
                                            new security order.

                                          Thank you very much.

 Q. You have 1,450,000 people under arms or in the armed forces, and you have said that Republican
 plans to balance the budget in seven years, as opposed to the Democratic plan to do that, would force
                                      you to reduce these numbers.
Many of the C[hief] E[xecutive] Officer]s here have gone through this kind of downsizing of staff, and in
  many cases they have realized tremendous improvements in the productivity of their activities. Why
                                 would this not occur in the armed forces?

 A. It has occurred in the armed forces. We have reduced, in the last five or six years, from 2.1 million
 down to that 1.45 million -- about a one-third decrease. We have, today, a much smaller force than we
 had during the '80s. I believe it is a highly ready force, a very efficient force and a very effective force.

We could cut that force further, but if we did, we would not be able to take on all of the missions which we
are now scheduled to take. The best measure I have of that is the very high operational tempo rate of the
                   current force. I think it is at a rate about as high as we dare have it.

So if we were to cut the force another 10 or 20 percent, then I would be seeking ways of being relieved of
                 some of the missions which the U.S. armed forces are now carrying out.

             Q. Has the first cut you just referred to resulted in any loss of effectiveness ... ?

A. I think we have been very effective in it to this point, but I would like to suggest to you that even though
the reduction to 1.45 is essentially reached now, that many other aspects of this drawdown are still ahead
                                                    of us.

  The base closings has been proclaimed, but it's going to take us three or four more years to actually
 effect the closing of the bases and starting to gain some of the efficiencies of that. Let me just give you
                                                one example.

  In this year's budget, we have $4 billion cost associated with closing bases. In the FY [fiscal year] 99
 budget, we have a $6 billion savings associated with that. So there's a $10 billion swing there, but we
                       haven't reached that point yet, we haven't gotten the benefit.

So far, every year I've been secretary, the base closings have been nothing but a cost; it's been a burden
 to carry it out. But towards the end of this decade, my successor will get some of the benefits from that
                                    cost in the very substantial savings.

We are also making substantial efforts to improve or reform the acquisition system. I mentioned already
changing the milspecs. It's also changing over to commercial buying practices. We will be making major
efforts in those in this year, last year, next year, but the benefits from them are probably towards the end
                                               of the decade.

Q. We've heard about the very high regard that the military has achieved in the minds of the public. What
can we as businessmen do to make sure that we reinforce the proper budget allocations so they maintain
                                          their military readiness?

  A. The first and most important aspect is having an adequate top line for the budget. I think both the
Democratic and Republican proposals for budgets over the next five years have an adequate top line to
                                          maintain a good defense.
Second is the allocation within that top line. That's where most of our differences are lying. I have placed
    my primary emphasis on maintaining high-readiness forces -- forces that are well-educated and
well-trained -- and I think that has paid off in a very big way. My predecessor did that as well. That's paid
    off so that we have, I believe, the best trained, the most capable military force in the world today.

We have had a substantial reduction in the amount of funds allocated to modernization of the forces over
the last five years. We have been able to get away with that because the force has been drawing down
 during that period. But now that the drawdown is essentially over, we have to start putting money into
  modernization again. We must get that money through these savings that I described through base
  closing, we must get it through the savings we hope to get in the acquisition reform. If we cannot get
those savings, I would not be in favor of cutting readiness; I would be in favor of reducing the size of the
                    force and therefore, taking on fewer missions than we now have.

 Q. Not too long ago we were all quite concerned about North Korea's possible offensive intentions and
   their ability to bring some nuclear capability to bear. We've not heard too much about that recently.
       What's your sense now about the legitimacy of that risk, and what we might expect to see?

 A. There are two aspects to the Korean threat. One of them is their conventional military forces. They
 have more than a million men in their army. Two-thirds of these are based within about 50 miles of the
               DMZ [demilitarized zone], so they pose a very great threat to South Korea.

The combination of the South Korean military forces, the U.S. forces in country, plus the U.S. forces that
could be quickly brought into the country in an emergency, have been sufficient to deter that threat now
                for more than 40 years, and I think will be sufficient into the future as well.

 The second part of the Korean threat, though, is that a few years ago we became greatly concerned at
their program to develop nuclear weapons, because if they would add nuclear weapons to this equation it
  could really upset the deterrence balance, which had been very delicately achieved up to this point.

  Therefore, we made a major effort to stop that nuclear weapons program. We were prepared to take
 actions such as very substantial sanctions, putting more troops over into Korea, to put pressure on the
North Koreans to stop that program. Those actions would have risked a war, but we believed it was better
                to take that risk now than to take the risk after they got nuclear weapons.

They were successful, however, and we were able to negotiate an agreement with the North Koreans to
 terminate that nuclear program. That agreement has been in process now for more than a year. North
  Koreans continue to comply with the agreement. No more nuclear material has been generated. If it
  continues for another three or four years, then the program will be essentially behind us -- the whole
implementation of this program, it's a 10-year program. But the most critical phase of that is the first three
                                                or four years.

  So as long as the North Koreans continue to comply with this framework agreement to terminate the
nuclear weapons program, I think we have then only to deal with the conventional threat, and I think the
 conventional forces that we and the South Koreans have in place is sufficient to deter that threat from
                                             becoming serious.
Q. Mr. Secretary, could you fight two simultaneous regional wars now as you're currently structured and
        supplied, say something in the Korean Peninsula and something in the Iran/Iraq region?

A. Let me say first of all we do not expect to have to fight two conventional wars. That we size our force
  structure that way does not mean we expect it. It means that if we ever get in another major regional
conflict, we do not want to be so strapped for forces that we might invite or tempt some other country to
                                 be optimistic and to attack us at that point.

 With that in mind, the answer to your question is yes. We do have adequate forces for dealing with two
 major regional contingencies. That's not a hypothetical or an academic issue in my mind. Two times in
1994, in June of '94, we were challenged. In June of '94 we had a crisis with the North Koreans over their
nuclear weapon program, and in October of '94 we had a crisis with Iraq. In both of these cases, we went
 through a very detailed review of our war plan, down to the allocation and preparing for deployment of
forces, down to the brigade level. We would have been quite prepared to deal with that problem in 1994.
                                 We're better prepared to deal with it today.

 I might add one thing to that, that the stressing aspect, what our detailed war planning showed us, that
where we were stretched in dealing with two major regional conflicts was not in the force structure, per se,
    it was in having sufficient airlift and sealift to swing from one theater to another if the two of them
                                        happened too close together.

 Q. Could you tell us the two or three things that you hope will be on your '96 list that was equivalent to
                                                 your '95 list?

A. The No. 1 that I expect and hope to have on my '96 list is that we will have successfully completed the
                        mission in Bosnia and brought our forces back home again.

I also expect, and we're very near to it now, that we will have completed our mission in Haiti and brought
           our forces home from there. That I expect to happen in the first quarter of this year.

I expect to also have on this list ... that three nations in the world -- Kazakstan, Belarus and Ukraine -- will
become totally nonnuclear. Ukraine, I might mention, is the third largest nuclear power in the world. It has
    the third largest arsenal of nuclear weapons in the world. It should become nonnuclear this year.

   Those are three things that come immediately to my mind of what I consider to be very major and
                                    dramatic events coming up in 1996.

   Q. Your involvement of the Eastern European forces in these exercises, the Partnership for Peace,
seems to indicate that you feel extremely confident that the changes that have occurred in the East are
 quite permanent, and yet we see the pendulum of democracy swinging back in a socialistic direction in
  Poland, and this could happen elsewhere. The problems that these countries face are very daunting.
Nobody can cure them in just a five-year term or whatever it might happen to be. What is your view of the
                         stability of these new friends of ours in Eastern Europe?
 A. Nobody could be more concerned about the difficulty of the transition that these countries are going
through than I am. What is happening in Eastern Europe today is truly unprecedented. It's a revolution,
but to date, and hopefully forever, a bloodless revolution. It's a revolution from where these nations are
going, from an authoritarian society trying to converge to a democratic society, from a state-run economy
to a market economy. This is really unprecedented, that change of that magnitude could occur peacefully.
So there have been many problems in many of the countries in Eastern Europe as this change is taking
  place. The surprising thing is not that there are problems, but that the problems have not been more
                                serious than have already been manifested.

   In terms of our working with these countries, we consider that what we are doing with them in the
Defense Department, these military-to-military contacts, the exercises we conduct with them, the way we
work together in peacekeeping operations, help contribute to that stability. It's not something that's sitting
 off to the side independent of what happens in the country. It's close involvement of the United States
and other Western European countries. The associations that are formed there, the friendships that are
formed there, the contacts that are made -- all of that, I believe, makes a positive contribution to stability.
 It's not a guarantee, it's not an assurance, but a positive contribution to the success of the transition to
                                   democracy and free market systems.

                                                 Thank you.
        Military Medicine: In Step, Adept, Flexible
 Prepared remarks of Dr. Stephen Joseph, assistant secretary of defense for health affairs, to the DoD
                            TRICARE Convention, Washington, Jan. 22, 1996.

  Good morning. It is a pleasure to see so many gathered together here. I want to add my welcome to
those already offered. We have a terrific line-up scheduled for this week. This conference is a bit different
 from our past conferences in that we have invited more people from outside the MHSS [military health
services system] to give us their perspectives on TRICARE and to perhaps give us some pointers on how
 we might improve our approach. These are people from our congressional oversight committees, our
    beneficiaries represented by the military coalition, the media and our watchful advisers, the GAO
 [General Accounting Office], CBO [Congressional Budget Office] and DoDIG [Department of Defense
inspector general]. Please find time to meet and speak with some of these individuals, listen to them, and
                              tell them what you are doing with TRICARE. ...

 As I look out toward the horizon of 1996, I see a number of challenges, challenges that carry potential
obstacles to mission achievement. These expected events we can plan for, accommodate and turn to our
advantage. There are other events, however, which will appear unexpectedly, and they too will present
 obstacles for us. In this category I would include natural and man-made disasters, such as our recent
Blizzard of '96 or the shootings at Fort Bragg [N.C.]. However we are involved, we must be prepared to
  deal with unanticipated events. How well we deal with them is a reflection of our leadership and the
                                     underlying quality of our system.

In addition to the events that will occur in 1996, there will be a variety of decisions made by others quite
  apart from the military health services system. Many of these decisions will assist us in pursuing our
  mission and goals. Others will pose difficulties for us. Consider the effects of the recent government
                      furloughs or of our participation in the NATO force in Bosnia.

   These decisions were not made with military medical operations in mind, yet they carry significant
influence on our operations. Again, we must recognize that such decision making occurs and that we can
 and must plan for it. Solid leadership, guided by an understanding of our primary mission, will not only
         handle the effects of such decisions, it will find the means to capitalize on the situation.

For example, in Operation Joint Endeavor, in addition to Job No. 1 -- taking care of our people -- we will
      have an opportunity, and will take that opportunity, to demonstrate and develop advances in
          epidemiologic surveillance and the newest use of telemedicine cubed in that theater.

 No matter where you sit within the military health services system, there are events and decisions that
    affect what you are doing and how you do it. Your mission responsibilities continue regardless of
          obstacles placed in your path; you will exercise your leadership to reach your goals.

 This underscores for all of us the very real need for growing well-experienced, flexible, knowledgeable
  leaders for the MHSS. I say that particularly for those of you who are now experienced lead agents,
experienced leaders in our system. Remember the importance, the capital importance, of the people who
                                    come behind us, who will be smarter than we are.

Our conference this week is about being prepared and about having the ability to achieve our goals -- it is
                                                  about readiness and leadership.

 What I want to do this morning is to take a look at the landscape of military medicine. Just what does it
look like all around us? Then I will examine some of the steps we are taking to ensure that the MHSS is
        prepared to fulfill its obligations. Finally, I want to discuss what military medicine is doing that
 demonstrates its leadership within the community of health care delivery and in some ways within the
                                                            military itself.

Ten, even 15 years ago, there began a hue and cry in this country about the steeply rising costs of health
                   care delivery and about increasing dissatisfaction with the state of that delivery.

          Corporate America became increasingly aware of and involved in the health benefits offered by
                                                      its companies for its employees.
                    Unions held up labor negotiations until the health benefit was a comprehensive one.
                  Debates raged about where the blame rested for these increasing costs of health care.

   Many suggested solutions. Early in this administration, President Clinton offered a solution. It was
considered too complex, threatening to some, and it did not gain congressional approval. Emerging from
   this decade of debate, with no comprehensive answer to the issues of cost, came a proliferation of
  managed health care plans. Though around for a number of years, their ability to control health care
                                             costs was not a necessity. Today, it is.

 Managed care gradually is taking hold in all parts of the U.S. And when it is well done, managed care:

                                                   Enhances the care patients receive;
                                       Focuses on personal involvement in one's own health;
                                                    Guards against unnecessary care;
                                         Enables a clearer projection of annual costs; and
                                                 Controls the costs of health care delivery.

At the same time, it necessarily limits, or defines, the choice of providers from whom care may be sought
 and, without a good quality program, managed care can become more concerned with the immediate
   costs of care rather than the long-term health of its patient population. I mention that to deplore the
     rapidly increasing shift from the original not-for-profit shape of the managed care industry to an
                                                    increasingly for-profit array.

 Practicing within a managed care organization clearly is different from independent practice. There are
guidelines and rules to follow, there is accountability, and in staff models the providers are salaried. For
 many, this change in practice habits is difficult to accomplish. For many more, it is an alternative to the
 tremendous costs involved with setting up and operating one's own practice. The growth of managed
care, with its emphasis on accountability and effective practice, is influencing the delivery of health care
                                             across the nation.

 With managed care's emphasis on patient health, it has the potential to greatly assist the public health
capabilities in the nation today. Clearly, public health and our organizations that monitor, detect and offer
                 preventive advice and measures need greater attention and assistance.

Infectious diseases are resurgent around the world due to a variety of factors. The mobility of our national
population raises the risk of exposures. The increased resistance to antibiotics for some diseases, such
  as TB [tuberculosis], malaria and many common bacterial strains, is another example of why strong
public health programs in this country are very important, and managed health care delivery systems can
                                       contribute to these programs.

 Another public health factor, very important to military medicine, is the ability to gain a clear picture of
  disease patterns and disease trends in all parts of the world. Our forces must be prepared to rapidly
                      deploy anywhere in support of our national security interests.

 Being prepared includes being knowledgeable about all potential threats, including health threats, and
having the means to protect the force in the face of those threats. U.S. military medicine is unique in that
  we have medical capabilities spread around the globe, and these capabilities are linked to the larger
          military health care delivery system for communication, discussion and consultation.

 We are positioned to contribute in a major way to a worldwide system of disease surveillance, and we
also would be a clear beneficiary of such a system. Such a capability would assist as we embark on any
   one of the continuum of missions now emanating from the National Security Strategy of our nation.
 Turning to the environment within DoD, we all recognize that there has been significant change in the
past few years. The National Security Strategy is now one of engagement and enlargement. We want to
   be globally involved to help spread the tenets of democracy and to assist countries and regions to
            stabilize and become productive economic participants in the world marketplace.

Our military missions range from disaster assistance to peacekeeping to peacemaking to conflict and war.
 The way we carry out those missions is to rapidly project the appropriate force to the area of need. In
 most instances, the size force required is small compared to the force mobilized for Operation Desert
                     Storm or to that we planned for the defense of Western Europe.

  The thrust of the department today is to assemble and train the U. S. armed forces as flexible, highly
 mobile, technologically expert units prepared to deploy anywhere in the world. This involves creating a
   smaller forward footprint. Military medicine, as a supporting service to the line forces, must also be
                          organized as flexible, agile and technologically adept.

  As the forces have downsized to meet the new strategic objectives, the requirements for manpower,
  infrastructure and dollars also have downsized. There is much debate within the department on such
                                                questions as
      how much of which weapon systems should we have, should one service have full functional
responsibility for a given system, where research dollars ought to be spent and whether one of every four
                      O-6s on active duty should be in the health care community?

       These are extremely difficult issues facing the leadership of the military services and DoD.

 A false, but seemingly simple fix to the MHSS facet of these issues would be to privatize or outsource
  those military functions which can be most easily accomplished by the civilian sector. It is this line of
    thinking that leads to suggestions for severely scaling back the military health services system --
                                   manpower, infrastructure and dollars.

 We have been successful thus far in articulating the inseparability of our everyday health care delivery
responsibilities from our operational support responsibilities and therefore, establishing the requirement
 for a very robust military health care delivery system. In fact, we are in the process of looking again at
   medical personnel requirements, the minimum number of active duty physicians required, and the
                   number and size of our medical treatment facilities here in the U.S.

 This re-examination is known by many names, but it is the update to the original 733 Study. The most
 significant difference in this evaluation is the recognition by those outside the medical community that
  counting only deployed manpower does not represent the true requirement. We expect to see some
                                  study results toward the end of March.

As the armed forces are downsizing, they are also becoming significantly more advanced in their use of
 technologies: The digital battlefield involves sophisticated imagery, worldwide video communications,
 global positioning, precision bombing. In some ways, these technologies ease the difficulties produced
                                               by downsizing.

  Military medicine, too, is using many of these technologies in applications designed to enhance our
 capabilities to project sophisticated, specialized, health care forward to the patient, even to the point of
injury. They provide us the means to ensure rapid, high-quality care. They enable injured or ill manpower
     to remain on the job and avoid the costs of medical evacuations and replacement processing.

      Naturally, all health care cannot be delivered via telemedicine and the many other advanced
technologies that we have begun to analyze and test. We will continue to require medical support units,
  hospital complements aboard ships and aeromedical evacuation systems. And there will never be a
substitute for what [Vice] Adm. [Harold M.] Koenig [Navy surgeon general] calls "care at the deckplates."
  These units, complements and systems must be prepared to deploy with little or no notice, and they
                     increasingly have to be able to communicate with one another.

 I want to spend a few minutes describing for you just how we are building the readiness of our medical
 forces to be prepared to deploy rapidly, to have the resources they need to maintain the health of our
service members and to be able to communicate seamlessly with medical personnel of another service in
                                          the theater and beyond.
It is my belief that the most important accomplishment we have achieved within military medicine over the
past two years has been the solid ability to work together -- Army, Navy, Air Force medicine and [Office of
the Assistant Secretary of Defense for] Health Affairs. This ability is expressed in a number of forums, but
   the result is a crumbling of the territorialism, the parochialism, and a realization that our unity -- or
                            jointness -- has become military medicine's strength.

  The surgeons general, and [Dr.] Ed Martin [principal deputy assistant secretary of defense for health
affairs] and I meet weekly to discuss and decide the policies that will direct the operations of the military
health services system. I think of us as DHP [Defense Health Program], Inc., very much like a corporate
 board. And as many of you know, we have now expanded the TRICARE Executive Committee to the
TRICARE Readiness Executive Committee with the strong participation of J-4 [Office of the Joint Chiefs
                                              of Staff, Logistics].

   It is the Medical Readiness Strategic Plan 2001 that is our blueprint for ensuring a jointness in our
   planning, training and doctrine. This long-range plan supports execution of the full array of defense
  strategic planning documents and addresses how, jointly, military medicine will achieve that smaller
                                               forward footprint.

There are today over 1,000 action items being worked and implemented by military and civilian medical
personnel throughout the military services in support of this plan. DHP, Inc., in cooperation with the Joint
Staff, identified six highest-priority action items. Each of the six is under way, and each is a building block
for follow-on actions. These first six deal with doctrine, information support systems, readiness reporting,
medical evacuation, medical personnel fitness and readiness oversight within the military health services

      Within the Medical Readiness Strategic Plan 2001 are specific issues focused on our reserve
components. It is important to recognize the essential role these units and personnel play in our ability to
meet our medical mission responsibilities. Should our commitments to peacekeeping and peacemaking
operations continue to increase, we must consider the increased use of our Reserve and National Guard

  In view of this, the assistant secretary for reserve affairs, Debbie Lee, and I have established a Joint
 Reserve Health Coordinating Committee, which is tackling the role of our reserves and the issues that
 arise from such roles. In addition, the TRICARE Readiness Executive Committee includes the reserve
                                           affairs principal deputy.

  What is the relationship between TRICARE and readiness? A fair question. TRICARE is the military
 health services system. It includes everything and incorporates the dual responsibilities of our military
medical mission -- what [Air Force Maj.]Gen. George[K.] Anderson [deputy assistant secretary of defense
                   for health services, operations and readiness] calls "Big TRICARE."

   The transformation of our system of health care delivery to managed care brings a new flexibility to
     military medicine that enhances its ability to meet its readiness responsibilities. This flexibility is
    generated through the regional organization and planning for health care to a defined population.
   In that planning is a dependence upon interservice resource sharing. This sharing in the everyday
delivery of care not only makes it possible to have our military personnel gain essential readiness training;
                  it also builds familiarization among the personnel who work together.

  Second, the managed care support contracts bring a supplemental capability to our military medical
treatment facilities. It is a capability and a partnership that can support our beneficiary population in the
                    event of a deployment of hospital staff or of a readiness exercise.

TRICARE changes our health care delivery system to make it more accessible to our beneficiaries and
more cost effective for the department. Both accessibility and cost effectiveness are essential in order to
retain the delivery structure. And that delivery structure is vitally important as the source of training and
 skills maintenance for our medical personnel. TRICARE makes enhanced medical readiness possible.

    TRICARE also promises to make the military health services system a leader within the defense
                        establishment and within the national medical community.

  Many of the initiatives and characteristics of TRICARE that I have mentioned are goals among other
communities of the armed forces. Jointness and the ability to use one another's resources places military
medicine ahead of those who continue to vie for aircraft, vehicles, weapons. We are planning together,
                          developing policy together, creating systems together.

 Civilian-military partnerships are clearly reflected in our managed care support contracts. Our delivery
system improvements have come to depend upon these partnerships in order to accomplish our health
care responsibilities. Our improved business practices, such as use of Prime Vendor, have significantly
  increased our relationship with and reliance on the civilian sector to meet our needs. And we have a
number of partnerships, affiliations or agreements with civilian medical facilities and medical schools for
 specialized education and training. TRICARE has us actively engaged in civilian-military partnerships,
                     equal to or surpassing other functional proponents within DoD.

  One of our significant accomplishments is our National Quality Management Program. This program
   encompasses personnel readiness certification, facility accreditation, practitioner licensure, clinical
 credentialing and privileging, the National Practitioner Data Bank and special studies leading to "best
                                             practice" models.

  The Centralized Credentials and Quality Assurance System is a single data base which provides the
 means to rapidly assess the credentials of about 200,000 privileged providers throughout our military
 health services system, including members of the reserve components. Having this information readily
 available to all of our facilities, lead agents, major commands and service headquarters facilitates the
                 transfer and sharing of personnel among facilities and across services.

 Supporting the quality management program is a comprehensive contract designed to ensure uniform
    application of utilization management criteria and to monitor the quality of health care delivered
throughout the system -- in military medical facilities and by civilian network providers -- with the goal of
                          discovering and implementing "best clinical practices."
 An example of the benefit of these best-practice guidelines for how we use our resources is the recent
    study on hysterectomies. We found that we could avoid $1 million in costs annually by using our
                                    resources in a more effective way.

 The last area I will mention that I believe places us out ahead, both in the defense and in the national
 medical sector, is strategic planning. Our process to look ahead, to identify what we need to get under
  way today so that it will be there tomorrow, to create a framework for evolving our whole system has
                                       been a very energizing one.

  It began about a year ago with the surgeons general and myself and now involves an ever-growing
 number of our personnel throughout the military health services system and even a good number from
  other organizations, such as the assistant secretary for reserve affairs, the Joint Chiefs of Staff and
                        representatives of the surgeons of our unified commands.

 It is a tremendous accomplishment that we have all facets of military medicine and those who have a
   stake in military medicine working together on how we should jointly plan and approach our future.

 We have published a strategic plan for the military health services system, we have articulated our five
goals, and we have begun to identify the metrics by which we can determine the progress we are making
                in achieving those goals. The measures will differ for each organization.

For example, hospital commanders will need finer, more detailed information about their own facility than
 the lead agent or the surgeon general. And members of the health affairs staff will need greater detail
  than I on a given facet of the system. So this task of determining metrics is one we are working with
    diligence, finding the right set of measures and not collecting information for the sake of having it
  available. As you go about the task of developing your own metrics, I encourage you to make these
                                          rather fine distinctions.

In closing, it seems appropriate to borrow from President John F. Kennedy. These were his words when
                 he addressed the University of California at Berkeley in March of 1962:

"The wave of the future is not the conquest of the world by a single dogmatic creed but the liberation of
                           the diverse energies of free nations and free men."

  That thought can be interpreted to apply to our participation in the operational missions designed to
  implement our National Security Strategy of engagement and enlargement -- striving for democracy
 around the world and the regional stability that would accompany that achievement. Our participation
   presents challenges to our readiness posture, of our inclusion of the reserve components, and to
                             everyday health care for all of our beneficiaries.

  A second interpretation could be applied to the significant dialogue we, together, are accomplishing
    within the military health services system. This open dialogue has created the atmosphere which
encourages the "diverse energies" of all of you to help face our challenges, learn from them and move on
                                      to prepare for the next century.
  This year of 1996 does indeed pose challenges. We expect to award the remaining managed care
support contracts this year. We will continue to close medical treatment facilities identified in the BRAC
   [base realignment and closure] process. We will redouble our efforts to explain the details of our
  TRICARE triple option benefit plan to our beneficiaries and those who retain an interest in military
medicine. And we will continue our initiatives to meet the five goals of our strategic plan for the military
                                         health services system.

                                              Thank you. ...
                             Bosnia: So Far, So Good
    Remarks by Secretary of Defense William J. Perry at Nellis Air Force Base, Nev., Jan. 27, 1996.

I can't tell you how delighted I am to be here at Nellis ... and how grateful I am for the support that the Air
Force gets here from the local leaders, political and civic leaders and from our congressional delegation.
     It takes a team like that to really produce the fantastic results that we're getting out of Nellis. ...

 I'm going to talk to you tonight about Bosnia, because it's very much on my mind. One day after I was
   sworn in as secretary of defense ... about two years ago, the Serbs dropped an artillery shell in the
marketplace in Sarajevo and killed more than 60 people. And I was immediately thrown into the problem
  of what could the United States do about that, what could the international community do about that.

I had a historic meeting with my minister counterparts -- the British, the French, the Italian, the Dutch -- in
 Aviano, which is one of our air bases in Italy. And at that meeting we agreed that we would support --
vigorously support -- a political decision that would cause the Serbs to move all of their heavy weapons
out of the Sarajevo area. It was historic because that was the first really significant move in getting NATO
          -- in this case NATO air power -- involved to try to affect the outcome of that tragic war.

Most recently, just three weeks ago, I was in the Bosnia theater to see how our deployment was going.
And so, from the first day I've been in the job until this present month, I have been deeply and personally
 involved. I want to give you my own personal appreciation of what has transpired there, what's likely to
transpire in the future. I'll do it, first of all, by briefly describing the trip that I just made in Bosnia and trying
                                 to draw some lessons and conclusions from it.

 I spent the first day at our air bases in Aviano and Vincenza, both of which are in Italy. And there I saw
firsthand -- I've been to those bases many times before, but it's still gratifying to see firsthand again -- the
       results of the United States Air Force and the NATO air operations that are going on there.

 For 2½ years out of Aviano, we have conducted an operation called Deny Flight, which has prevented
   any of the sides in that war from conducting aerial bombardments of cities. It has saved countless
     thousands of lives. You don't hear much about that operation precisely because it has been so

Deny Flight was challenged once. Bosnian Serbs sent up four fighter-bombers to bomb a city in Bosnia.
 They were detected immediately by AWACS [Airborne Warning and Control System aircraft]. We sent
two F-16s in, which in about two minutes' time shot down three of them -- the fourth managed to get away.
  Since that time, nobody has bothered to challenge NATO's air, in terms of Deny Flight. As I said, the
    result of all that is thousands of lives have been saved that otherwise would have been lost in the
                     indiscriminate bombing of cities which surely would have followed.
The second major activity going on from Aviano has been the strike force which is located there. It was
  first brought in to bear as a threat to the Bosnian Serbs if they did not remove their heavy weapons
around Sarajevo, which they did, and so we did not have to fight immediately. That was done in February
                                                    of '94.

Later in '94, the Bosnian Serbs decided to test how serious we were about that and conducted some --
 basically, made some violations of this policy, and unfortunately, found out we were not very serious.
That is, the U.N. forces which were on the ground there, which had to give the permission for the NATO
forces to operate, withheld the permission. And so, the Serbs succeeded in getting away with a violation
        of these actions, and not surprisingly, then, they escalated from that point on into 1995.

This was a sorry page in history of the Bosnian operation and a sorry page in NATO's history -- although
 it was not NATO's fault. Nevertheless, we were in a position where we were basically impotent to deal
                                              with the problem.

The Bosnian Serbs were emboldened by this, and I told a group that I was talking with today that in poker
 terminology, they overplayed their hand, because in the spring of '95, they violated the so-called "safe
  area" of Srebrenica and not only took that city, but conducted unspeakable atrocities in the course of
  taking it. This action was so outrageous that even the nations who had been resisting strong NATO
  action to that point realized that they had to meet this provocation with a real show of military force.

   Winston Churchill, I think, said it once -- and perhaps best. He said, "Powerful force is a powerful
persuader." With that injunction in mind, we met in Winston Churchill's city, London, last July, and agreed
that if there were any further violations by the Bosnian Serbs that NATO air would not only react, but in
the proposal which I made in that meeting -- the phrase that I used was, we would unleash a massive "air

 We thought that would be sufficient to deter the action. It was not, because just two weeks later, they
                                    began bombarding Sarajevo again.

Two days after that, we unleashed a massive air campaign. That was done out of Aviano, plus carriers in
 the Adriatic. It was one of the most effective campaigns of the sort that has ever been launched. Every
target that was specified by the NATO air commander, every target was destroyed, and most amazingly,
 there was absolutely no collateral damage. We took very special pains to avoid collateral damage. We
    used only precision guided munitions, and we did not drop any munitions whenever the weather
                              prevented positive identification of the targets.

  We know now, having talked in some detail with a number of the Bosnian Serbs, including both the
    civilian and military leaders, that this was an absolutely stunning development to them. It totally
                     demoralized them and drove them effectively to the peace table.

These are two of the important components of the air operation that was being run out of Aviano. On this
trip, I also went to Vincenza, which is another one of the NATO air bases in northern Italy. Vincenza had
been -- is the location of the CAOC, which is our Combined Air Operations Center. It basically, provides
 all sorts of intelligence to our air operations in Bosnia. It is a splendid operation. Most of you will never
   have the opportunity to see it, but I want to tell you if you want to have pride in something that your
military is doing, and doing well, and doing something that really has not ever been done before just like
             that -- if you ever have an opportunity to tour that facility, it is really impressive.

  In addition to that, Vincenza manages the airlift operation. For more than two years, NATO has been
providing airlift into Bosnia as part of the humanitarian mission and again, how many thousands of lives
 have been saved by that it's really impossible to tell. But it's been the longest sustained airlift, airdrop
                          operation in history, longer even than the Berlin airlift.

 In the last month, it's been doing something quite different. It has been providing the airlift to make the
deployment into Bosnia of the NATO forces. And I believe, it is the best managed airlift operation that I've
                   ever seen. I'll share a little bit more about that airlift operation later.

From Vincenza, I went to Taszar, Hungary. What does Hungary have to do with this? We have decided
and gotten the Hungarian government to agree with our decision that we would put a sustainment base,
  logistics base, in Hungary, just across the border from Croatia and Bosnia, and that all of our forces
 flowing in there from Germany by train or by air would go to Taszar. They would be consolidated and
regrouped there, and then from Taszar they would go in tactical units, with their guns loaded, into Bosnia.

 We did this for a number of reasons. First of all, it worked out well logistically, but secondly, we did not
 know what we were going to run into [in] Bosnia. We thought there was a possibility we would run into
   organized, armed opposition. We didn't think it likely, but we could not rule it out, and therefore we
                                        wanted to be prepared for it.

 We have 7,000 people in Taszar running this logistics operation. It's a major accomplishment and very
 successful accomplishment, and we're getting tremendous support from the Hungarian government in
                                                  that regard.

From Taszar, I flew on into Bosnia first into Sarajevo. We landed at the Sarajevo airport and then drove
down to their president's residence. I was meeting with President [??] Izetbegovic and his cabinet. I was
   heartsick on the trip into Sarajevo. This at one time was one of the most beautiful cities in Europe.

For the last four years, Serbs have had their artillery and mortars on the hills outside of Sarajevo and just
 been pounding the city. In fact, before we began this exclusion zone I described to you, there were as
many as a thousand shells a day landing in Sarajevo. You could imagine what the city looked like. I had
  imagined it, but it wasn't the same thing as seeing it. There wasn't a building that I saw that had not
             received some damage from the shelling. Most of the buildings were in rubble.

  That was the sad news, the bad news. The good news is we drove into the town with no danger. We
drove the 10 blocks down what used to be called "sniper's alley," where you would have risked your life to
 have gone down that street just a month earlier. I went to the president's palace, met with him and his
cabinet for about an hour and a half. All of this had been done under a certain amount of security, so we
              were kind of whisked into the office and met with him and whisked out again.
 But the security wasn't as good as we thought, because when we walked out of the president's office,
    there was a huge crowd of Bosnians on the other side of the street. Word had gotten out that the
        American secretary of defense was in town. It must have been 300 or 400 of them there.

 As I walked out the door surrounded by my security people, they started cheering and saying, "U-S-A,
U-S-A." And then, I did something which drove my security people absolutely bonkers. I broke out of my
group and crossed the street and went over and mixed with and started talking with the Bosnians there.

I cannot convey to you the warmth and the gratitude from these people, who have been living in this town
and subjected to this pounding for the last four years, who now believed there was a prospect of peace,
 real peace. And they believed that the United States was responsible for that, and they just wanted to
                                           show their gratitude.

I went from Sarajevo into Tuzla, which is the headquarters of the American multinational division: I met
with [Army Maj.] Gen. [William L.] Nash, his commanders; the American forces there; the commanders of
the other nations who were part of our division there. We have a Nordic brigade. The Nordic brigade has
Norwegian, Finns, Swedes, Danes, soldiers from Latvia, Lithuania, Estonia and Poland all in that brigade.
They have a Turkish brigade. And when I was there, the Russian brigades were just starting to arrive --
                the advanced party from the Russian brigade was there. I met with them.

  We drove. The first thing we did was get in the helicopter and flew out to the Sava River. The bridge
across the river had just been opened the day before, and I wanted to see it, eat with the soldiers -- the
  combat engineers -- who had put it up. ... It's a pretty wide river. It's about as wide as the Rhine. But
 nevertheless we had put pontoon bridges over the Rhine many times in practice. We figured this was
  going to take us about a week, but this was 2½ weeks after we started and it had just been finished.

What had happened ... -- it's a pontoon bridge and it floats in the water, but you have to have it anchored
down on two sides, and our two anchor positions went underwater about the second day. They had the
  greatest flood in the Sava River that they've had this century. Water flowed out of the banks, and we
ended up having to build a bridge twice as wide as we had anticipated. Indeed, we ended up building the
               longest pontoon bridge that's ever been built in history. But we got it built.

And I got there -- landed the helicopter in Croatia and then got on the bridge and walked into Bosnia. And
  halfway across the bridge, there was a contingent of about 20 or 30 combat engineers who built that
bridge. They were exhausted, but very proud. We stopped and talked with them and thanked them. One
 of them turned, had just finished and wanted to be re-enlisted. So [Army] Gen. [George] Joulwan and
     Gen. [John] Shalikashvili and I signed him up; re-enlisted him; swore him in for one more term.

 As I left the bridge and thought about that event, I told the media ... walking with me that the American
soldiers had demonstrated "true grit." They had prevailed over enormous forces of nature. They refused
  to give up, and after they had finished the bridge, one decided to re-enlist. I thought that was a great

   I then went back to the base camp at Tuzla and went around and met with perhaps a dozen of the
different units -- ones who were on patrol, ... some of them were in offices doing planning; some were in
  offices doing intelligence. The ones on patrol were standing out in the snow and the mud and the ice
          looking pretty uncomfortable. There was an Air Force unit there called "Red Horse."

One of the "Red Horse" groups is right here at Nellis. This was a different one. This is one that I think that
 is at Hurlburt [Field, Fla.]. We have three "Red Horse" units. These are the teams that go out and build
                                       bases. The best in the world.

 Army doesn't usually get very excited about the arrival of Air Force troops, but in this case, they were
cheering them. And as the Army units would come in from patrol, the first thing they'd do is walk over to
their area that the "Red Horse" team was working to see if any -- how many more tents have been put up
  since they've gone out. They were building them at the rate of 20 tents a day -- ten-person tents with
  floors, walls, heaters. Quite comfortable, actually -- particularly compared with what they had up until

I spent a lot of time talking with the intelligence people on their assessment of the mine situation. One of
 the real problems, we knew from the beginning. We think there's several million mines in that country.
That's the bad news. There's some good news -- all three of the warring parties are trying to cooperate
with us to get rid of the mines. They had given us their maps, their charts of where they thought the mines
were. They didn't really know all of them, but they had quite a few of them marked. And they were busy
                                   removing and dismantling the mines.

So we're getting a lot of cooperation and a lot of support on that. We've been there a little over a month
now, and to this point we've had one mine accident, fortunately, not a fatal mine accident. [Editor's note:
        The first American casualty in Bosnia, Army Sgt. 1st Class Donald A. Dugan, died in an
 explosives-related accident on Feb. 3, a week after this speech.] I talked to a number of congressmen
  about that who asked me whether the vaunted American technology was what made the difference,
            because some of our NATO allies have had many more mine accidents than that.

   Technology is only a minor contributor to dealing with mines. It's mostly a matter of discipline and
  procedure and just being very damned careful -- paying attention to detail. And before all of our units
   went down there, ... each battalion spent a couple of months specifically training for that ... ground
  operation. And a very key part of that was mine awareness, mine location, mine removal and, most
        importantly, mine avoidance. Since you can't remove them all, the key is avoiding them.

We still have 11 months to go in Bosnia, and we're going to run into more mines before we're done. But
so far, so good. And the reason it's been good has been, first of all, cooperation from the warring parties
and, secondly, very good discipline and very good professionalism on the part of the American soldiers.

I'm going to come to a few conclusions about this, generalizing from some of the specifics that I've given
 you here. ... I testified to the Congress about seven or eight times, about going into Bosnia. I got about
every possible question I could get. And I contemplated every bad scenario that could possibly happen
                                  and tried to deal with it in my testimony.

The three bad scenarios -- there are really three scenarios that are bad -- that we worried about from the
beginning: The first is that there would be major resistance and armed resistance by one or more of the
 warring parties as our soldiers went in. The second is that there would be a major problem with mines,
   and the third is there would be a major problem, not with organized resistance, but with terrorists --
                                        basically dissident groups.

  The first of those we can now, I believe, safely dismiss. If any of those warring parties had wanted to
 resist us and wanted to try to block us, they should have done it two weeks ago or three weeks ago or
four weeks ago when we were coming in and when we were most vulnerable. Basically, it's too late to do
that now. We have a powerful force in the country -- 20,000 U.S. forces directly in-country, very heavily
armed, with M-1 tanks, Bradleys, artillery, very well trained, very well disciplined soldiers -- 60,000 NATO

There is not a force in the country or any combination of forces that could stand up to this force. We were
criticized -- some in Congress and some in the media -- for sending such a large and powerful force in.
                            And in retrospect that criticism, perhaps, was right.

We did not run into armed resistance, but I am unrepentant on the decision to send in that powerful force.
 If I had to err, I wanted to err on the side of too large and too strong a force rather than the other way
around. And we'll never know whether we might have gotten the armed resistance if we had gone in with
           a smaller or a weaker, force. In any event, I believe that danger is behind us now.

The second danger is mines -- I've already discussed that. So far, so good. We'll see more mines. We'll
   have more mine accidents before we leave there. At this stage, though, the biggest problem -- the
 problem I worry most about -- is simply becoming complacent, because this attention to detail and the
  discipline is motivated by being concerned. So our leaders, our commanders, will have to continually
     alert the troops to the dangers of this, to keep their attention so they do pay attention to detail.

And the third worry we still have, and that is the worry that there would be some dissident individuals or
 gangs who will attack our forces, not on any theory that they're going to be able to defeat them, but to
make a point, to harass them. And that's still a very real probability, and that's still the greatest concern,
                         the greatest worry we have about our troops over there.

We are well trained, well armed, well disciplined and very much alert to that possibility, but there are no
certainties and no way we can conduct ourselves which can preclude that possibility. Even in Oklahoma
                              City, we have been subject to terrorist attacks.

So one general conclusion that I make on this, I would sum up by the phrase I've already used, "so far, so
good." The second general conclusion -- we still have 11 tough months ahead of us, and we have to keep
      our eye on the ball, pay attention to detail. When I talked with our soldiers over there and our
commanders, I had two messages for them: one is, keep your focus, keep paying attention to detail; and
                                  the other was, take care of each other.

Another generalization I would draw from this is that this whole operation in Bosnia is going to cast a long
  shadow on European security, certainly for the rest of this decade, first of all because it has brought
 together NATO -- and not just NATO but about 16 or 17 other countries who volunteered to participate
                                             with NATO in this.
So the single biggest security problem in Europe since the ending of the Cold War, all of Europe is pulling
together finally to deal with under the United States' leadership and with NATO being the institution that is
  actually conducting the operation. And countries that are participating -- fully participating -- like the
Czech Republic and Slovakia and Hungary and Poland and Latvia, Lithuania and Estonia -- all of these
  countries see the opportunity not only to help out in Bosnia, but to be a part of this larger European

The last generalization I would like to make has to do with the role of Russia in this operation. I personally
 devoted a large amount of time to trying to work that arrangement and met for three months before we
                                            finally went in there.

 I met four different times with the minister of defense of Russia, [Pavel] Grachev, to try to come to an
arrangement whereby the Russian troops could participate with this NATO force in Bosnia. They wanted
           to participate. We wanted them to participate. They didn't want to be under NATO.

  In Russia, NATO is a four letter word. For decades, it has been the face of the enemy for them. They
                                could not quite bring themselves to do that.

    The agreement we finally reached was a strange agreement in some ways. It was intended to be
 face-saving for them. They are there. They are under NATO. But they describe this as working for an
American general, instead of working for a NATO general. Actually, two American generals: One is Gen.
Joulwan, from whom they take their operational commands; and the other is Gen. Nash, who is the head
                 of the American division there, from whom they get their tactical control.

 It's remarkable and surprising to me that they were able to accept direction from an American general,
 where they could not quite swallow the idea of direction from the NATO general. Now, of course, Gen.
           Joulwan is the supreme commander of NATO also, but he is an American general.

So as I said, I believe this operation in Bosnia is going to cast a very long shadow on European security,
certainly for the rest of this decade. Besides giving a prospect of finally ending this tragic war in Bosnia, a
  war in which millions of people remain homeless and several hundred thousand were killed, it finally
 gives them a chance to end that war. But perhaps over the long-term, even more importantly, it sets a
  pattern for European nations cooperating and dealing with important security problems in Europe, in
                          cooperating under the leadership of the United States.

Finally, it demonstrated once more the capability, effectiveness of the U.S. military forces. And I hope all
the American people can feel as proud of the American military as I do for what they are doing in Bosnia

  I should also say another very clear lesson of Bosnia was the importance of training, in particular the
 importance of the kind of combat training that you do here and that the U.S. Army did at Grafenwoehr
  [Germany] before they went in there. This is what distinguishes the U.S. military, which gives us the
 competitive advantage over any other military force in the world, and you are at the tip of the spear in
                                             demonstrating that.
           Completing Marshall's Plan In Europe
   Remarks by Secretary of Defense William J. Perry, Wehrkunde Conference, Munich, Germany, F

Behind my desk at the Pentagon hangs a portrait of the great statesman George C. Marshall. Marshall,
  who was the third secretary of defense in the United States, is a role model of mine. He had a great
  vision for Europe -- a Europe which from the Atlantic to the Urals was united in peace, freedom and
   democracy -- and a strong trans-Atlantic partnership sustained by bipartisan political support in the
                                              United States.

Marshall not only had this vision, he also had a plan to make this vision a reality in postwar Europe. And
in a famous speech at Harvard University in 1947, he outlined what came to be called the Marshall Plan.

 A little known fact is that joining Marshall on the dais that day was the famous poet T.S. Eliot, who 10
                                        years earlier had written:

                                      Footfalls echo in the memory

                                   Down the passage we did not take

                                  Towards the door we never opened.

  These words by T.S. Eliot foreshadowed the fate of Marshall's plan in Eastern and Central Europe,
   because on that day 50 years ago, as the footfalls of World War II still echoed across a shattered
 continent, the Marshall Plan offered Europe a new passage toward reconstruction and renewal. Half of
Europe took this passage and opened the door to prosperity and freedom. Half of Europe was denied this
passage when Joseph Stalin slammed the door on Marshall's offer. And for 50 years, the footfalls of what
                               might have been echoed in our memories.

Today, as the Cold War becomes an echo in our memory, we have a second chance to make Marshall's
   vision a reality: To go down the passage we did not take 50 years ago, towards the door we never
 opened. Behind that door lies George Marshall's Europe. To open this door, we do not need a second
                       Marshall Plan, but we do need to draw on Marshall's vision.

 Marshall recognized that peace, democracy and prosperity were ultimately inseparable. And Marshall
understood that if you identify what people desire most and provide them with a path to reach it, then they
                         will do the hard work necessary to achieve their goals.

                      In the late 1940s, what Western European countries desired

most was to rebuild their societies and economies. And the Marshall Plan provided a path for achieving
 this goal. By taking this passage, the nations of Western Europe built an economic powerhouse. And
       along the way, they built strong democracies and a strong security institution called NATO.
Today, countries in the other half of Europe are struggling to rebuild their societies and economies, and
the one thing they all desire is greater security. NATO's challenge is to provide these Europeans a path
    for achieving their security goal. And along the way, we want them very much to develop strong
                                   democracies and strong economies.

This other half of Europe includes the nations of Central and Eastern Europe and the newly independent
states. It includes Russia, and it includes the nations of the former Yugoslavia. Today, NATO is reaching
                     out to all three areas and providing a path to Marshall's Europe.

 The primary path NATO has provided is the Partnership for Peace. Just as the Marshall Plan worked
 because it was rooted firmly in the self-interest of both the United States and Europe, so too does the
Partnership for Peace work because it is rooted firmly in the self-interest of both NATO and the partner

     PFP is bringing the newly free nations of Europe and the former Soviet Union into the security
    architecture of Europe as a whole. Our nations are working and training together in military joint
exercises. But make no mistake, the Partnership for Peace is more than just joint exercises. Just as the
Marshall Plan had an impact well beyond the economies of Western Europe, PFP is echoing beyond the
   security realm in Central and Eastern Europe, and into the political and economic realms as well.

Just as the Marshall Plan used economic revival as the catalyst for political stabilization -- and ultimately
 the development of the modern Europe -- the PFP uses security cooperation as a catalyst for political
                                           and economic reform.

 PFP members are working to uphold democracy, tolerate diversity, respect the rights of minorities and
 respect freedom of expression. They are working to build market economies. They are working hard to
develop democratic control of their military forces, to be good neighbors and respect the sovereign rights
  outside their borders. And they are working hard to make their military forces compatible with NATO.

For those partner countries that are embracing PFP as a passage to NATO membership, these actions
are a key to opening that door. For many of these nations, aspiration to NATO membership has become
        the rock on which all major political parties base their platforms. It is providing the same

overlapping consensus that NATO membership engenders in NATO countries, making compromise and
                                          reconciliation possible.

In Hungary, all six major political parties in the Parliament united to pass a resolution in support of IFOR
[implementation force], the Bosnia peace implementation force, by a vote of 300 to 1. In Poland, the new
president -- a former member of the former communist party -- reaffirmed Poland's NATO aspirations. In
  Slovakia, Hungary and Rumania, governments are quietly resolving border disputes and putting into
   place protection for ethnic minorities. For these countries, the Partnership for Peace is becoming a
 passage to democracy and market reform, as well as a passage to security cooperation with the West.

But even those countries that do not aspire to NATO membership are realizing many of the same political
and social gains from active participation in the PFP. Moreover, PFP is providing them the tools and the
 opportunities to develop closer ties to NATO, and learn from NATO -- even as they choose to remain
outside the alliance. And PFP is building bonds among the partner nations -- even outside the framework
                                        of cooperation with NATO.

  That is why defense ministers from many partner nations have said to me that even if, or when, they
  eventually join NATO, they want to sustain their active participation in PFP. In short, by creating the
 Partnership For Peace, NATO is doing more than just building the basis for enlargement. It is, in fact,
                     creating a new zone of security and stability throughout Europe.

That is why I believe that the creation of the Partnership for Peace has been one of the most significant
  events of the post-Cold War era. By forging networks of people and institutions working together to
     preserve freedom, promote democracy and build free markets, the PFP today is a catalyst for
 transforming Central and Eastern Europe, much as Marshall Plan transformed Western Europe in the
   '40s and '50s. It is the passage this half of Europe did not take in 1947; it is the door that we never

To lock in the gains of reform, NATO must ensure that the ties we are creating in PFP continue to deepen
   and that we actually proceed with the gradual and deliberate, but steady, process of outreach and
    enlargement to the East. NATO enlargement is inevitable. And if NATO enlargement is a carrot
 encouraging reforms, then we cannot keep that carrot continually out of reach. So it is critical that we
 implement the second phase of NATO enlargement agreed upon at the NAC (North Atlantic Council)
                                     Ministerial Meeting in December.

 And even as some countries join NATO, it will be important to keep the door open for others down the
road. We must make sure that PFP continues to provide a place in the security architecture of Europe so
 that we keep the door open to Marshall's Europe even for those nations that do not aspire to become
                                             NATO members.

 For Marshall's vision to be truly fulfilled, one of the nations that must walk through this door is Russia.
 Russia has been a key player in Europe's security for over 300 years. It will remain a key player in the
               coming decades, for better or for worse. Our job is to make it for the better.

Unlike with the Marshall Plan 50 years ago, Russia today has chosen to participate in the Partnership for
Peace. And in the spirit of Marshall, we welcome Russia's participation and hope that over time it will take
              on a leading role in PFP commensurate with its importance as a great power.

 But for Russia to join us as a full and active partner in completing Marshall's vision, NATO and Russia
need to build on our common ground, even when we don't agree with each other's conclusions. It is fair
 to say that most members of Russia's political establishment do not welcome or even accept NATO's
 plans for enlargement. Anybody that doubted that yesterday, if you heard Mr. Andrey Kokoshin's [first
deputy minister of defense] speech, realized the extent of the opposition to NATO enlargement in Russia.

When I was in Russia last June, I had a number of conversations with Russian government leaders and
 Duma members about the future of European security. I offered them a series of postulates about that
future. I told them if I were in Russia's shoes, I would want the future security picture in Europe to have
                                        the following characteristics:

 First, I said, if I were a Russian leader, I would want the United States to be involved in the security of
                                 Europe. They agreed with that postulate.

Then, I said, if I were a Russian leader, I would want to see Germany an integrated part of the European
                          security structure. And they agreed with that postulate.

  And third, I said, if I were a Russian leader, I would want Russia to be in the security architecture of
                 Europe, not isolated outside of it. They agreed with this postulate also.

              Finally, I asked them how could a Russian leader best achieve these goals?

 I concluded they could only be achieved through a healthy and vibrant NATO. That is, NATO, far from
being a threat to Russia, actually contributes to the security of Russia as well as to the security of its own

When I reached that conclusion, most of the Russians I talked to fell off the cliff. They agreed with each of
my premises, but they did not agree with my conclusion. But in the absence of NATO and its partnership
arrangements, I do not see any way of achieving those goals -- our shared goals -- of a safe and peaceful

I have to tell you that I did not persuade my Russian colleagues with my argument. But I do believe that
as Russia deepens its involvement with NATO, it will come to believe in the truth of my conclusion as well
  as my premises. And I believe that Russia will want to have a cooperative relation with NATO and a
      leading role in the Partnership for Peace and that Russia will come to understand that NATO
enlargement means enlarging a zone of security and stability that is very much in Russia's interest, not a
                                              threat to Russia.

But the way for this new understanding to occur is for NATO to continue to reach out to Russia not only
 from the top down but from the bottom up. Last year at Wehrkunde, I proposed that NATO and Russia
begin a separate plan of activities, outside the Partnership for Peace. Since then, we have all discussed
and even agreed upon this proposal in principle, but we have not yet put it on paper. We must do so. We
cannot let disagreements over the "theology" of building NATO-Russia relations get in the way of "here
 and now" opportunities to work together where our interests clearly overlap. Instead of letting theology
                   dictate our practice, we should let our practice shape our theology.

  One example of where the United States is already doing this is with our program of bilateral training
exercises with Russia. We have held four such exercises in the last year, each a great success, and each
conducted in a spirit of trust and good will. This summer, the United States and Russia will move beyond
 the bilateral and jointly participate in a major regional Partnership For Peace exercise with forces from
                        Ukraine, Russia, United States and other regional powers.
 Our bilateral contact program with Russia is not confined to joint exercises or even to just the security
 field. Through the Gore-Chernomyrdin Commission, it extends to the fields of science and technology,
    space, defense conversion, business development, the environment, health care and agriculture.

Just this past week the commission met in Washington, and Mr. Kokoshin and I both participated in the
 defense conversion program of this commission. I urge all NATO nations to build on this model. These
   contacts provide important exchanges of information. They help break down years of distrust and
suspicion. They weave the Russians into the kind of personal and professional networks that have long
characterized relations among all of the allies. These are the kind of activities that will build trust between
  Russia and NATO. And these are the kind of activities that will keep Russia on the passage toward
                         integration with Europe, to pass through that open door.

Mr. [Russian Defense Minister army Gen. Pavel] Grachev and I attended the joint U.S.-Russia exercise
   in Kansas last October. And we met after the exercise with the American and the Russian soldiers
conducting that exercise, and talked to them. He told the Russian soldiers what they were doing was very
 important, that they should extend their friendship and cooperation with the American soldiers and that
 this was the basis for creating a peaceful world for their children. The American soldiers were as much
                interested in what he was saying as the Russians were, I can assure you.

   Ironically, the place where a distinct NATO-Russia relationship is occurring in practice is in Bosnia.
Today, as we speak, a Russian brigade is serving in the American Multinational Division of IFOR. It took
    an enormous amount of work to make this happen. Minister Grachev and I met four times over a
   two-month period to iron out the details. Gens. [Army Gen. George] Joulwan and [Army Maj. Gen.
William] Nash work closely every day with their counterparts, Gen. [Col. Gen. Leontiy] Shevtsov and Col.
 [Alexsandr] Lentsov. NATO and Russia do have a special relationship today in Bosnia, and Russia is
       demonstrating its commitment to participating in the future security architecture of Europe.

  The reason we are all working so hard to make this relationship successful is not just because of the
additional troops Russia brings to Bosnia, but because Russia's participation in Bosnia casts a very long
shadow that will have an impact on the security of Europe for years to come. When we deal with the most
   important security problem which Europe has faced since the Cold War was over, we want to have
           Russia inside the circle working with us, not outside the circle throwing rocks at us.

    Indeed, the more you think about what NATO and Russia are doing together in Bosnia, the more
amazing it becomes. I can only imagine what Gen. [Dwight D.] Eisenhower, the first SACEUR [supreme
allied commander Europe], would think if he saw a general from Russia sitting with Gen. Joulwan, today's
 SACEUR, at the SHAPE [Supreme Headquarters Allied Powers Europe] compound reviewing a secret
 NATO OPLAN [operational plan]. We need to build on this model, to institutionalize it and expand it to
  cover the entire range of NATO and Russia's overlapping security interests. By so doing, NATO and
                Russia can move forward as full partners in completing Marshall's vision.

Just as the NATO-Russia relationship is being forged in Bosnia, so too is the future of NATO itself. I was
in Bosnia several weeks ago. I was struck by the dedication and professionalism of every unit from every
country that is participating. I was also struck by the stark contrast between the devastation and suffering
 I saw in Sarajevo, and the rebirth and renewal I have seen in the other capitals of Central and Eastern

Bosnia is what happens when newly independent nations focus on old hatreds instead of new challenges.
  Four years ago, some people in the former Yugoslavia chose not to join Marshall's Europe. And the
death and bloodshed that resulted will long echo in our memory. But today, the door to Marshall's Europe
 is open again for them -- and holding that door open are NATO, Russia and the newly free peoples of
                                        Central and Eastern Europe.

  The success or failure of IFOR is crucial to whether or not we will complete Marshall's vision. It is in
 Bosnia where we are sending the message that NATO is the bedrock on which the future security and
      stability of Europe will be built. It is in Bosnia where NATO is first reaping the benefits of joint
  peacekeeping training with our new peace partners. It is in Bosnia where future NATO members are
 showing themselves ready and able to shoulder the burdens of membership. And it is in Bosnia where
we are showing that we can work as partners with Russian forces. Bosnia is not a peacekeeping exercise.
                                              It is the real thing.

Bosnia is also teaching us important lessons about the kind of NATO that Marshall's Europe will require.
Ever since the end of the Cold War, NATO has struggled to develop a mechanism for executing the new
            missions using NATO assets with the voluntary participation of NATO members.

 In the conference room, we have so far failed to come up with an agreement on a combined joint task
 force, CJTF. But in the field, we have cut through these theological arguments and put together IFOR,
which is a CJTF. As with the NATO-Russia relationship, we need to take the practical lessons learned in
              putting IFOR together and extrapolate back until we have a CJTF that works.

Bosnia also casts in sharp relief something we have suspected for some time: that it is time for NATO to
adapt itself internally to deal with the new challenges of this new era. NATO was not well structured for
the Bosnia mission. At a time when our political and geostrategic thinking has been completely reoriented,
    symbolized by our partnership in peacekeeping with former adversaries, and at a time when our
   individual military forces have streamlined and modernized for the battlefield of the future, NATO's
command and decision-making structure is still geared for the challenges and the battlefields of the past.
  The time has come to streamline and modernize NATO, recognizing that our challenge is no longer
     simply to execute a known plan with already designated forces, as it was during the Cold War.

  We must make NATO's command structure more responsive and more flexible, and streamline the
planning and force preparation process, and simplify and speed up the entire decision-making process.
   And we must complete the task of giving NATO's European members a stronger identity within the
  alliance. These kinds of internal changes will ready NATO for enlargement and will allow us to better
                   respond to the future challenges to European security and stability.

  It is in this context that we welcome the French decision to participate more fully in NATO's military
bodies. And we look forward to working with France as we transform the alliance and realize Marshall's
                       vision of a Europe united in peace, freedom and democracy.
 In 1947, Marshall told America that it must "face up to the responsibility which history has placed upon
our country," Today, it is not only America, but also Russia; is not only NATO nations, but all of Europe --
all of us must face up to the responsibility which history has placed upon us. This means reaching out to
 each other not only in the spirit of friendship, but also in the spirit of self-interest. This means working
  towards our goals not only from the top down, but also the ground up. And it means recognizing that
when the outside world changes, we must look inside our institutions and see what changes are needed

If we do these things, then next year, when we commemorate the 50th anniversary of the Marshall Plan,
 we will be able to say that we made Marshall's vision our own; that Partnership for Peace is a strong,
permanent pillar of Europe's security architecture; that NATO and Russia have a relationship where trust,
 understanding and cooperation are givens, not goals; that all the nations of the former Yugoslavia are
adding, not detracting, from Europe's security; and that we have taken the passage to a new Europe and
                    opened the door to a new era of peace, freedom and democracy.

                                           Thank you very much.
National Guard, Reserve -- Central Parts of Total
    Prepared statement of Deborah R. Lee, assistant secretary of defense for reserve affairs, to the
              Readiness Subcommittee, Senate Armed Services Committee, March 21, 1996.

    Thank you, Mr. Chairman and members of the committee for the opportunity to talk to you about
America's reserve components. Over the years, this committee's actions have supported reservists, their
 families and their employers. You have modernized their equipment and infrastructure, and you have
ensured mission-ready forces in the reserve components. Your efforts are appreciated, and on behalf of
                              each and every reservist, I thank you very much.

Since the congressional hearing season has been compressed this year, I want to take this opportunity to
present you with a broad overview of the accomplishments made possible by your support, our goals for
                    the coming year and areas where your continued support is needed.

 Before I begin, I want to acknowledge the bipartisan basis for today's increased reliance on the Guard
  and Reserve forces. In 1973, under Secretary [of Defense Melvin] Laird, the Department of Defense
  adopted a Total Force policy, which recognized that all of America's military assets -- active, Guard,
             Reserve, civilians and contractors -- should be fully used to provide for our defense.

  Each succeeding administration has supported this policy. The integration of reserve forces into the
services' warfighting capability, as required by the National Military Strategy, has reached an all-time high.
The lower peacetime costs of reserve forces, when compared to similar active units, have made possible
                            a fully capable total force at a smaller defense budget.

This year I established four overarching goals for the National Guard and Reserve to support Secretary
                            [of Defense William] Perry's goals for the total forces:

           Maximizing the reserve component contribution and promoting its accessibility in support of the
                                                       total force;
                                     Promoting readiness of the reserve forces;
            Promoting further integration and jointness of the reserve components in the total force; and
                        Improving reserve component quality of life to support a ready force.

 I will address each goal in greater detail and describe initiatives we have under way within each goal.

  You can feel proud of the contributions that the reserve forces made this past year in support of their
services and the CinCs [commanders in chief]. This year, I want to make it possible for them to contribute
    to their full capabilities. My three objectives under this goal are to promote increased peacetime
   operational use of the RC, to promote reserve component accessibility for the full range of military
 operations and to address force structure options for increased reliance on Guard and Reserve forces.

      Promoting increased peacetime use of the RC by leveraging existing training resources and
  opportunities overseas and in the U.S. communities is a win-win proposition. The use of existing RC
   training resources to support real-world mission requirements overseas for the CinCs and services
                                generates valuable training as a byproduct.

In addition, the RC undertake medical and engineering projects which enhance mission readiness skills
  and help address pressing community needs here in the United States. These innovative readiness
  training projects provide training normally not available, involve the military in our communities (thus
improving recruiting, retention and morale), while leveraging taxpayers' dollars to provide cost-effective
                                     medical and engineering support.

              In FY [fiscal year] 96 Secretary Perry set up a pilot program to increase the peacetime
             operational use of the RC to relieve active perstempo/optempo [personnel tempo/operations
             tempo]. He provided a central fund of $25 million per year to cover increased transportation
             costs and incremental days of active duty associated with training outside the U.S. In PSRC
             [Presidential Selected Reserve Call-up] 96, more than 120 CinC missions for the Guard and
                                   Reserve were approved and funded worldwide.
         In the FY 97 budget, we will need your support in providing us some flexibility to overcome an
             obstacle we have encountered to effectively implement these initiatives. We have requested
               authority to transfer small levels of O&M [operations and maintenance] funds to military
          personnel, should the CinCs desire, in order to pay some of the incremental costs associated
                                                with these initiatives.

Promoting reserve component accessibility is key to expanded RC use. The Commission on Roles and
Missions concluded that reserve accessibility is no longer a major issue. I agree. The department greatly
 appreciates your help in providing greater access to the Guard and Reserve by allowing for a 270-day
                                       call-up duration under PSRC.

The voluntary and involuntary use of reserve component units and individuals in Haiti and Bosnia have
been good news stories about the accessibility of the RC. In both instances, all the reserve components
have been involved. I will continue to push for streamlining of DoD's procedures to implement involuntary

 Providing analysis and advice on force structure options for increased reliance on Guard and Reserve
forces is an important part of my job. The Bottom-up Review established a DoD force structure capable
of fighting and winning two nearly simultaneous major regional conflicts and conducting a wide range of
                                         other military operations.
The department is always looking at ways to adjust the force structure and the use of Guard and Reserve
forces to meet these threats more effectively and at lower cost. I intend to continue to participate fully in
      these reviews and to advise the secretary on how Guard and Reserve forces can be helpful.

I continue to focus on the readiness of the reserve forces. In seeking innovative ways to man, train and
equip RC units, I am guided by the concept of mission readiness. This concept requires that peacetime
 resourcing -- for personnel, for training, for equipment and facilities -- be adequate to ensure that units
can reach deployment standards in time to meet their most stringent contingency. This approach allows
differing levels of readiness resourcing in peacetime, based on the time available to bring a reserve unit
                                           to full mission readiness.

Support continues to be provided to people affected by the RC downsizing. We have worked diligently to
 reduce the hardships associated with force structure changes by providing transition benefits to those
forced out of the Selected Reserve. The drawdown of the reserve forces to achieve BUR target levels is
now over 80 percent complete. Today, the Selected Reserve comprise[s] a higher percentage of the total
force than during the Cold War. The department will continue to use the full range of Guard and Reserve
 transition initiatives to provide fair treatment of Selected Reservists who will be involuntarily separated.

   Improving the effectiveness of recruiting and retention programs is particularly important now. The
perceptions caused by downsizing, reduced budgets and the inactivation of local units all contribute to a
                        public impression that the reserve forces are no longer hiring.

With the completion of the active force drawdown in FY 98, fewer prior service personnel will be available
  to enter the Selected Reserve. This will increase the need to expand nonprior service recruiting and
  intensify retention efforts. To address these concerns, I formed a RC Recruiting and Retention Task
Force to analyze the current programs supporting recruiting and retention and to explore innovative ways
                               to maintain National Guard and Reserve strength.

Ensuring adequate full-time support is critical to unit readiness. The full-time support people perform the
   training, administration and maintenance functions, and so maximize the training time available to
                           reservists during weekend and annual training periods.

Recognizing that all four categories of full-time support -- active Guard and Reserve personnel, military
technicians, active component personnel and civil service employees -- will continue to decrease through
the drawdown, my No. 1 priority for full-time support is to ensure the right mix, placement and use of the
                                            full-time support force.

                                 In the coming year, I have several objectives:

                   To revise department policy to have a more effectively managed program;
                         To review each component's program to assess its effectiveness;
                                To better manage and account for military technicians;
           To revise reporting requirements for more effective program evaluation and management;
        To assess readiness impacts that may result from any reductions in full-time support personnel
         and assist the components in maintaining the proper mix and use of each of the four categories
                                             of full-time support personnel.

Protecting activated reservist students is important for recruiting because 30 percent of our reservists are
college students. USERRA [Uniformed Services Employment and Re-employment Rights Act] provides
  civilian job protection for reservists, but there is no similar college education protection for reservists.

 I have worked to get voluntary support from colleges and universities to ensure that student-reservists
are treated fairly, so they receive partial course credit for completed course work or a refund of tuition and
     fees for that portion of the course they cannot complete, so they have the right to return to their
 educational institution without prejudice. I'm pleased to report to you that we have been successful in
gaining cooperation and voluntary support from the education community. New legislation is not needed.

  Implementing Title XI initiatives is well on its way toward full completion. The amendments Congress
 made to Title XI last year increased emphasis on prioritizing resources for early deploying units. Most
                                      initiatives are nearing completion.

The Army is moving towards assigning the entire mandated 5,000 AC [active component] soldiers to RC
units by FY 1997. One obstacle is the active duty officer grade strength caps. If the relief proposed by the
department is granted, then the Army could fully implement Title XI without adversely impacting joint duty
assignments, acquisition officer assignments and deployable unit leadership. I encourage your support
                                                 for this relief.

Promoting the medical fitness and medical readiness of RC forces. Our reserve medical force plays an
   important role in the total force. We remain committed to maintaining National Guard and Reserve
  medical force capability at the highest possible level. Our reserve medical forces have successfully
 supported not only Operation Desert Storm but also operations in Guantanamo Bay, Haiti and Bosnia.

  In addition to supporting operational requirements and missions, reserve medical forces support the
military health care mission within the United States, and,while continuing to practice their go-to-war skills,
                    they provide underserved Americans quality health care services.

 While being called upon more, our National Guard and Reserve medical force has also been under a
  great deal of change. Force reductions, reorganizations and mission changes have had a significant
impact. This kind of turbulence, coupled with the increased frequency of call-up, continues to challenge
                        our ability to recruit, train and retain a quality medical force.

   Last year, to address our concerns, we modified several of the incentives we use to recruit critical
   medical skills, thanks to your support. I would also like to thank you for the recent enactment of the
Ready Reserve Income Insurance program. While I will talk more about this program later, I want you to
know that this will significantly relieve one of the major concerns expressed by our health care providers.

    Providing reserve forces with a new medical and dental insurance program. A critical element of
   readiness is the medical and dental health of the reserve forces. However, unlike the active force,
 National Guard and Reserve members rely primarily on health care provided through civilian providers
                                 for their medical and dental care needs.

Since most of their health care is not provided through the military health care system, we are developing
strategies to incorporate all health care information, medical and dental, in each member's health record.
The addition of the Selected Reserve dental insurance program will assist National Guard and Reserve
   members in maintaining their dental readiness. Implementation of the dental insurance program is
   scheduled for Oct. 1, 1996. It provides for voluntary enrollment and premium sharing between the
Department of Defense and the member. A separate contract is being awarded to support this insurance.

Distance-learning initiatives can improve training effectiveness, efficiency and access for both individuals
 and units. A team was formed within DoD by my office to review the status of distance-learning usage
and potential RC requirements. Our next step is to expand the analysis to total force requirements. DoD
    is also a principal player in a group which promotes sharing of distance-learning resources -- the
   Government Alliance for Training and Education -- an organization of agencies across the federal

 Implementing my RC equipping strategy is a key step in meeting the equipment and logistics needs of
the RC. The goal is to have reservists equipped with modern, compatible equipment to enable them to do
their job side by side with the active components and coalition partners. The strategy calls for identifying
 all RC equipment requirements, using smart business practices whenever possible to solve equipment
  shortfalls and procuring new equipment only when necessary. The strategy seeks to ensure that RC
    units are equipped to respond to two nearly simultaneous major regional conflicts and peacetime

                                  As part of the RC equipping strategy:

        I am taking an in-depth look at the services' policies and practices for distributing new and used
          equipment to the RC. I chair semiannual RC equipment execution reviews to assess progress
          on service plans to provide equipment to the RC and to identify how each service is providing
                   the resources to properly accomplish planned distribution and redistribution.
        Equally important, I have established the Equipment Working Group, which I chair, to provide a
             DoD focus semiannually on the management initiatives directed at reducing ongoing RC
                               equipping issues and to begin to address new ones.

Supporting critical RC real property maintenance needs requires adequate Real Property Maintenance
Activity funding. Unfortunately, funds for replacing RC infrastructure are decreasing at the same time the
          average age of our facilities (and hence repair and maintenance costs) is increasing.

     This strains our limited RPMA funds and our ability to fully operate safe facilities. The reserve
 components backlog of maintenance and repair has grown steadily each year -- despite the relief you
provided us in FY 96 -- and is currently over $1.2 billion. Although FY 97 RPMA funding is constrained,
we are committed to fund requirements driven by urgent situations, health and safety, and environmental
                                            laws and regulations.

 Investing in reserve component military construction continues to be affected by many factors. These
factors -- downsizing of the reserve force; realignment among active, Reserve and Guard components;
leasing buyout programs; BRAC-created opportunities for reserve enclaves and joint reserve bases; and
               privatization and outsourcing efforts -- make it very difficult to see the future.

 Facilities investment this year focuses near term on projects that address critical mission needs and/or
enhance readiness. Joint use of reserve bases can pool resources, and I intend to promote this concept
not only to save money but also to promote integration and jointness of the reserve components into the
                                                  total force.

DoD is committed to meeting environmental challenges at sites used by the RC as well as by the active
forces. We have identified 3,704 sites currently used by the RC that require cleanup. The services have
estimated the cost of cleanup at about $1.3 billion and plan to achieve full compliance at these sites in 10
       years. To keep costs down, the RCs have developed one of the best, most comprehensive
environmental training and awareness programs in the department. The many environmental awards that
      the Guard and Reserve received in the last year speak to the excellence of these programs.

 The Army's Reserve Component Automation System has been restructured to meet fiscal constraints
and changed requirements. I want to thank you for your continued strong support of RCAS. I believe the
   restructured program will meet the long-standing need for a modern, yet affordable system able to
   exchange data with DoD and Army systems as well as support day-to-day decision-making needs
 required to have Army National Guard and Reserve ready to mobilize. The chief of the National Guard
  Bureau, with the Army's support, is currently seeking Milestone III approval to begin fielding the new
                                      RCAS architecture later this fall.

     To make full use of the reserve components, we must increase the RCs' capability to perform
successfully in a joint environment as fully integrated partners in the total force. This means anticipating
   and acting on opportunities to increase the reserve components' experience and capability to work
                   effectively with their active force counterparts in a joint environment.

To accomplish this, we will be looking into the benefits of maximizing joint use of facilities. We will also be
exploring ways to best employ RC units in long-term peacetime missions, expand opportunities for joint
                training and promote new opportunities for RC integration with the CinCs.

 As reserve component officers occupy an increasing number of positions in joint organizations and are
   called upon ever more frequently to support operational missions, the time has come to develop a
  personnel management policy that will put them on a more equal footing with their active component

Toward that end, we have developed an initiative to identify ways to promote reserve component officer
 readiness for those assigned joint responsibilities. With other defense agencies, the Joint Staff and the
     services, we plan to develop policies and the framework for a reserve component joint officer
                                      management program in FY 97.

    The primary quality of life issues for reservists and their families are centered around four areas:
 protection against economic loss, quality of participation, family readiness and support, and employer

In the area of providing protection against economic loss, I want to thank you for two recent changes to
    the law that provide support mechanisms to protect and assist reserve component members: the
   enactment of the Uniformed Services Employment and Re-employment Rights Act, and the Ready
Reserve Income Insurance Program. Both of these legislative actions help provide the economic safety
                  net that is critical to the men and women of the Guard and Reserve.

An important part of quality participation is ensuring our members are provided with adequate incentives
for their service in the reserve forces. This not only includes adequate pay and allowances, but also other
                                            incentive programs.

 Last year, we issued a DoD directive providing for the first time policy guidance on reserve component
 incentives. An accompanying DoD instruction that provides implementation procedures will be issued
 soon. These two DoD publications, in conjunction with the DoD financial management regulation, will
  combine to provide comprehensive guidance on all reserve component incentives and will form the
                        framework for the effective utilization of these incentives.

 Another important incentive tool is the Montgomery GI Bill-Selected Reserve. During FY 95, more than
  97,000 individuals participated in the Selected Reserve Educational Assistance Program. Since the
  program started, there have been 378,000 National Guardsmen and reservists who have applied for
   educational assistance. This high level of overall participation is evidence of its effectiveness as a
recruiting and retention incentive for the reserve components. Nearly 38 percent of all members eligible
   for educational assistance through the end of FY 95 had actually applied for educational benefits.

Furthermore, studies conducted by the Sixth Quadrennial Review of Military Compensation and the Rand
  Corporation indicate that the Montgomery GI Bill-Selected Reserve continues to be one of the most
important recruiting and retention incentives for the reserve components, especially for the first six years
                                     of a reservist's military affiliation.

  Finally, the Reserve Officer Personnel Management Act will provide a comprehensive management
   system for approximately one-quarter million officers not on the active duty list. It will also give the
  reserve components the needed flexibility to manage their reserve officer force while simultaneously
  providing visible career progression opportunities to the individual reserve officer. We are now in the
process of incorporating the ROPMA provisions into DoD publications, which will serve as the basis for
                              full implementation of ROPMA by Oct. 1, 1996.

Our efforts in family readiness and support are designed to ensure mechanisms are in place to support
reserve families across the spectrum of reserve service, from week-end training to mobilization. Our DoD
 instruction on family readiness in the National Guard and reserve components has formalized service
policies and procedures to ensure National Guard and Reserve members, and their families are prepared
and adequately served by the family care systems and organizations of the services for the uncertainties
and stresses incident to military service. Additionally, we are studying the feasibility of conducting a test
 of weekend child care for drilling reserve members and have requested authority to run a regionalized
                       test of unlimited commissary benefits for reserve members.

    We are committed to providing assistance to reservists and their employers through the National
 Committee for Employer Support of the Guard and Reserve. NCESGR operates a volunteer outreach
   program to generate nationwide employer support for the nation's reserve forces on behalf of the
                                           secretary of defense.

NCESGR's strategy of "Strength in Partnership" stresses the importance of the interrelationship among
employers, their reservist employees and the military chain of command. It builds on the success of past
outreach programs in concert with new programs to increase understanding of, and appreciation for, the
                          needs and concerns of all involved in the partnership.

Programs such as the Employer Action Council build on this strategy. The EAC brings together business
leaders and key members of the state committees to discuss employers' concerns about reserve military
service. These concerns are forwarded to DoD so that individuals who formulate and implement reserve
          policies are sensitive to the current corporate environment and needs of employers.

    Now, more than ever, as the nation's reliance on the reserve components continues to increase,
NCESGR's aggressive programs are an invaluable asset to the reserve forces. We believe NCESGR's
   positive approach will prevent potential problems and build strong relationships among employers,
                   reservists and DoD so that all understand and support each other.

  Let me assure you that this administration views a mission-ready National Guard and Reserve as an
essential part of our post-Cold War strategy. As a result, reservists will play an expanded role in war and
also be more engaged in these turbulent times of peace. While we ask our people to do more, we must
never lose sight of the need to balance a reservist's commitment to country with his or her commitment to
                                    family and their civilian employer.

We have covered much ground in the last few years, and the future promises to be equally challenging. I
 commit to you that I will do all in my power to support and protect reserve component people and their
families, and to work hard to ensure that the National Guard and Reserve is a well trained, mission-ready
            and accessible force capable of taking on missions overseas and here at home.

Thank you for the opportunity to testify today on behalf of the finest National Guard and Reserve military
                                            forces in the world.

                                    Addendum to prepared statement:
                          Reserve Forces Revitalization Act of 1995, H.R. 1646

I appreciate the opportunity to submit my comments for the record on the Feb. 13, 1996, version of HR
 [House of Representatives] 1646. The following comments address the issues identified by the Military
                                         Personnel Subcommittee.

General. It is difficult to establish a comprehensive department position on a bill that has undergone so
 many changes in such a short period of time. Pending modifications to important provisions of the bill
    were provided for the department's review last week. Given the frequency and extent of informal
 modifications to the original HR 1646, it is important that the department be provided an opportunity to
    thoroughly assess the implications of the various provisions, once revised legislation is actually

     The fact that this bill focuses on the organization, management and sustainment of the reserve
 components at a time when increased reliance on reserve forces for peacetime operational support is
becoming an essential part of department planning makes this an important piece of pending legislation.
There are clearly provisions that are intended to enhance the status of the reserve components within the
     total force and the ability of the reserve leadership to more effectively represent the needs and
capabilities of their reserve forces. At the same time, there are provisions of the bill that could potentially
   create barriers to more effective integration of reserve and active forces. These provisions require
                  modification before the department could accept the bill in its entirety.

                                     Organizational (Sections 201-208)

Issue: Evaluate the rationale for the statutory establishment of a separate Army, Navy, Air Force and U.S.
                                    Marine Corps Reserve commands.

DoD supports the modifications outlined in the official DoD general counsel response to Congress, dated
                                                   Feb. 27.

 These modifications are intended to provide greater flexibility in the proposed legislation and to ensure
consistency with existing statutory authorities. The statutory establishment of separate Army, Navy, Air
  Force and Marine Corps Reserve commands supports the increased role and importance of reserve
 forces within the total force. It would institutionalize the reserve chief's direct control over most reserve
forces until they are mobilized. In actual effect, we would see little direct change to the way we are doing
                                               business today.

     Issue: Evaluate the requirement that the commander of each of the services' separate reserve
   commands report directly to the service's chief, as well as the rationale for and implications of the
  assignment of some or all (depending on the service) non-mobilized reserve forces to the service's
                                             reserve command.
As the chief of the reserve force, the chief of each of the reserve components already reports directly to
                   the respective service chief. This bill would not change that relationship.

It should be noted that the commander of the Army Reserve does not report directly to the chief of staff of
   the Army. I would support the Joint Staff concerns that the provisions of the draft bill regarding the
  assignment of forces be consistent with department efforts to clarify command authority for reserve
                                               component forces.

I would agree that it is essential for combatant commanders to be directly involved in establishing training
standards and in evaluating the readiness of reserve forces, and that reserve component forces currently
assigned to combatant commands remain so assigned. I would also note that reserve component units
  face some unique challenges not faced by active forces, such as limited training times, geographical
                             dispersion and civilian employer-employee conflicts.

    Peacetime management by reserve commanders who understand these unique challenges is as
    important as training and readiness oversight by combatant commanders who need visibility and
              influence over reserve forces that will be operating in their areas of responsibility.

Issue: Assess the proposed increases in numbers and rank/grade of general and flag officers required for
the headquarters of the separate reserve commands and for the headquarters, National Guard Bureau.
 In addition, assess the rationale for the increase in the number of U.S. Marine Corps reserve general
                                             officers from 10 to 16.

            Although it is difficult to support proposed grade increases during a downsizing of the force, I
                believe that the numbers and grades of general and flag officers supporting the reserve
               command establishment may need to be reviewed on the basis of the relative size of the
             reserve force within the total force and the increased responsibilities inherent in the missions
             being assigned to that force. Reserve forces are no longer follow-on forces. They are now an
            integral element in nearly all military operations -- peacetime, wartime, contingency operations
                                             and operations other than war.
           The provision to increase the number of Marine Corps Reserve general officer billets from 10 to
              16 reflects the growing emphasis on more effective joint planning and joint operations. I am
             advised that the need to provide reserve expertise and perspectives on the capabilities, roles
            and missions of reserve forces in the joint arena has led to an increase in the requirements for
                  reserve general and flag officers to serve on the staffs of combatant commanders.

  Issue: Review the justification for and implications of the proposed exemption of general/flag officer
                              positions from statutory active duty grade ceilings.
   In its 1992 evaluation of reserve general and flag officer positions, the Hay Group concluded that
counting reserve general and flag officers against the active duty ceilings imposed by Sections 525 and
  526 of Title 10 U.S. Code has the potential to set up a competition between the active force and the
                   reserve force for the limited general and flag officer authorizations.

Hay concluded that a separate ceiling or separate management of the full-time reserve general and flag
officer billets within the active duty allocation would provide for a better management process and would
ensure proper emphasis of management on the key issue of delivering a ready reserve. The department
chose to make no recommendations at the time that it submitted the Hay Study to Congress, nor has any
                subsequent action been taken to implement any of the study's findings.

Issue: Assess the expanded responsibilities of each service's chief/commander of the reserve, including
   the new responsibility to make preparation, justification and execution of the reserve procurement
                                        program a principal duty.

The budget and appropriations management responsibilities as specified in this bill are for the most part
 inherent in the duties and functions of the reserve chiefs and do not represent an expansion of those
     responsibilities. The proposed language would serve to formalize these responsibilities in law.

One exception to the above comments and an area of concern is the assignment of responsibility to the
      chiefs of the reserve components for preparation, justification and execution of procurement
  appropriation budgets. There are currently no separate reserve component investment/procurement

The creation of a separate reserve component procurement responsibility would duplicate current efforts,
 create additional staff overhead and result in higher procurement costs. The additional administrative
burden would not ensure additional procurement funding. In fact, it could jeopardize existing processes
 which allow reserve component modernization requirements to be managed as a part of larger service
                 initiatives, making it easier to accommodate small pricing adjustments.

  The proposal, if adopted, does not include the two National Guard components, which would create
serious inconsistencies in procurement appropriations. I am concerned that this provision would result in
a less efficient procurement process and one that is less effective in considering procurement decisions
                                   as an investment in the total force.

                                 Mission and Accessibility (Section 301)

   Issue: Review the need for the proposed new authority and procedures permitting the president to
      involuntarily recall reserve component units and individuals to respond to natural disasters.
The National Guard continues to provide the first line of defense to support local authorities responding to
 domestic emergencies. The regional compacts being ratified by state legislatures facilitate emergency
                               response by Guard assets across state lines.

We are also improving the process for using reserves in support of domestic emergencies. In FY 1995,
 over 400 Army Reserve soldiers supported seven domestic disaster operations contributing more than
 12,000 man-days. In recent years, reservists [have] been used in various natural disasters, to include
                Hurricanes Andrew and Iniki, the Midwest floods and the Northwest fires.

   Reserve officers serve as emergency preparedness liaison officers to FEMA [Federal Emergency
 Management Administration]. Automated data bases can identify reserve units located in the vicinity of
local disasters. Regulations provide for loaning reserve equipment to Guard forces for disaster relief. The
activation of reserve forces in support of disaster relief is already provided for in law, either as volunteers
or, if necessary, under a declaration of national emergency. What is needed is not so much a change to
the law, but an improved process that ensures more effective state support and, when needed, adequate
 and timely federal assistance. This has been the core of our effort over the last several years and will
                                   continue to be the focus for the future.

 Issue: Assess the proposed change in reserve activation authority that restricts the president's partial
mobilization authority to involuntarily recall reserve units and personnel to situations when the president
  determines that augmentation of the active forces is necessary. Current law permits the president to
invoke partial mobilization "in time of national emergency declared by the president," without regard to a
                           determination of a need to augment the active forces.

   We have worked very hard to ensure the full understanding and acceptance of reserve component
    capabilities and the premise that reserve components are now fully accessible. Reliance on the
President's Selected Reserve Call-up authority, under Section 12304 of Title 10 U.S. Code, has evolved
            into an essential element in the planning for virtually any operational contingency.

 I am concerned that the new reporting requirements and limitations on reserve activation could prove
administratively burdensome and could potentially hinder flexible decision-making. This could have the
         unintended effect, either real or perceived, of limiting reserve component accessibility.

I can understand the intent but am concerned about legislating requirements such as 48-hour notification
before activating reserves, limitations on activating reserves more than once in any 24-month period and
  mandatory deactivation of reserve personnel whenever active personnel are available to perform the

 The department recognizes the need to protect our reservists from burnout and overuse. The services
  have made a concerted effort not to call the same members or units repeatedly for either peacetime
 support or contingency operations. For example, the reserve units that were called up for Bosnia were
                                not the same units that were called for Haiti.
  Issue: Evaluate the implications of the proposed requirement that the president provide Congress 48
hours' prior notice of the proposed exercise of the reserve recall authority, a description of the anticipated
                         use of the reserves and the anticipated length of service.

   We need to ensure that we do not legislate requirements that would tend to limit the use of reserve
   component forces due to additional reporting, monitoring, timing or other restrictive requirements.
Limitations or restrictions on the president's use of his authority to call up reserves would have the effect
                 of making those forces appear to be a less viable and responsive asset.

Similarly, I can see little benefit from imposing additional reporting requirements beyond those required in
     law today. The creation of added administrative tasks or burdens could adversely influence the
                  willingness of force planners and operators to rely on reserve forces.

                                      Resourcing (Sections 401-403)

     Issue: Evaluate the proposed limitation on the secretary of defense that any funds in a reserve
  component appropriation may be transferred to an active component account only when specifically
                                             authorized by law.

     My concern is that this provision would restrict the flexibility of the secretary of defense and the
   secretaries of the services to manage their resources most effectively in support of the total force.
   Requests to reprogram between appropriation accounts already requires congressional approval.
                  Requiring legislation would make for a much less expedient process.

   Issue: Assess the desirability of the proposed annual report to Congress that would detail reserve
                                      component resource shortfalls.

   The services already conduct extensive reviews of all personnel, operations and maintenance and
 construction requirements and programs as part of the planning, programming and budgeting process.
These programs, to include shortfalls, are addressed in current annual reports to Congress, which could
be modified if necessary. Such reports include the Secretary of Defense Annual Report to Congress, the
 National Guard and Reserve Equipment Report to Congress, the Reserve Forces Policy Board Annual
     Report, the Force Readiness Assessment and the Joint Military Net Assessment, to list a few.

  I think we should consider modifying current reporting requirements in lieu of establishing additional
                                        report requirements in law.

                                     Sustainment (Sections 501-508):
Issue: Assess the desirability and cost of the several proposed sustainment initiatives including revised
 transient housing allowances, and a local community and military personnel mutual benefits program.

         The proposed revision to Title 37, U.S. Code, to authorize reimbursement of transient housing
              charges for members performing active duty for training, is already provided in a recurring
          provision of the annual DoD Appropriations Act. It also is consistent with long-standing service
         practice of providing cost-efficient accommodations for reservists who perform training outside a
              reasonable commuting distance. We would support making this authority permanent law.
              Although the concept of Section 506 of the bill, concerning the establishment of a local
              community and military personnel mutual benefits program to provide price discounts for
              members of the armed forces, has some interesting aspects, I have been advised by DoD
             general counsel about the potential for conflicts of interest. Specifically, the provisions of the
                 draft legislation may be contrary to existing statutes governing ethics in government.

      Soliciting or leveraging merchants to provide discounts for military members would create the
appearance of department endorsements of merchants who agree to participate in the benefits program
    over those businesses that do not participate. This, in turn, could lead to the perception that the
     department is awarding certain government contracts on the basis of the discounts provided by
    businesses that choose to participate in the program -- a clear violation of procurement laws and

  Issue: Evaluate the requirement for and potential cost of the proposed requirement that there be no
  distinction between active duty personnel and reserve component members (and their dependents)
serving on active duty in pay, benefits, eligibility for medical care or any other benefit if such distinction is
                                based simply on length of active duty service.

Today, the compensation and benefit structure for reserve component members is not strictly dependent
upon the length of active duty service, nor should it be. We must continue to ensure that it is also based
                                   on duty status, mission and other factors.

  The full impact of a blanket policy change, such as that effected by this bill, on the overall system of
 benefits is difficult to assess. Each specific change that is intended to provide greater parity of benefits
   needs to consider the member's contribution (e.g., support for a contingency operation), the equity
 provided by the change, the capability of the military system to support the change and the cost of the

    For example: The proposed provision would presumably reverse a previous decision to eliminate
  entitlement to Variable Housing Allowance for Reserves on short-term reserve service. Providing an
 entitlement to VHA for all reserve members on active duty for less than 140 days would achieve parity
with regular active duty members, but would not be consistent with the intent of VHA and could generate
                                   an annual cost of more than $200 million.
 A second example: The provision would also entitle the family members of reservists called for active
duty for just one day to the full range of medical and dental benefits provided by the military health care
         system. The cost and administration of such a change could well be unmanageable.

    A third example: Parity could work to the disadvantage of the reserve components. Reserve are
  compensated for inactive duty training on the basis of one-thirtieth of basic pay, which serves as an
incentive for qualified personnel to enter and remain in the reserve components and encourages them to
   maintain and improve their military skills through regular training. The parity provision of the draft
    legislation could result in a reserve compensation system that is less fair and less reasonable in
                            considering the part-time nature of reserve duty.

                       These are only a few examples of potential problem areas.

                         Alternative to Section 301 (Draft dated Feb. 29, 1996)

    My concern with these alternative provisions is that they may require revisiting the Army Offsite
 Agreement, which was an unprecedented collaborative effort by the senior leaders of the Army, active
and reserve components, and supporting organizations. This overall restructuring plan has provided the
         basis for overall reductions, assignment of missions and force structure for the Army.

 The new Section 209 may overemphasize state and domestic requirements in making force structure
  decisions. Any major restructuring between the National Guard and Reserve must consider full-time
                          support, equipment and other resource implications.
The Reserve Components and the Real
Prepared remarks by Secretary of Defense William J. Perry , Adjutants General Association of the United
States, Washington, Wednesday, February 07, 1996

Thank you very much. ... Last June when I spoke to you, the National Guard had just made history when
it deployed the 4th [Battalion] of the 505th Infantry [Regiment], a unit made up mostly of guardsmen, to
   perform multinational peacekeeping duties on the Sinai Peninsula. Well, the 4th of the 505th made
  history a second time when they returned to the United States because they had proven the reserve
component's capabilities for dealing with post-Cold war missions and playing an even greater role in our
 national defense. We are confident that the Guard can play this greater role in the total force because
over the years in national disasters and national security threats, the Guard has proven itself ready and
                                       capable time and time again.

One of the Guard's roles today has been unfolding during the mission to bring peace to war-torn Bosnia,
where the Guard is serving from the flight lines in Aviano to the supply lines in Germany and Hungary to
                                       the front lines in Bosnia itself.

Today, I want to talk to you about Bosnia, because it's very much on my mind and it's probably very much
on your minds as well. Last month, I went to the Bosnia theater to see how our deployment was going. I
spent the first day at our air bases in Aviano and at Vicenza in Italy. For 2½ years, NATO has conducted
an operation called Deny Flight, which has prevented the warring parties in Bosnia from conducting aerial
bombardments of cities. It didn't get much publicity. Most people don't understand what it did, but it saved
 thousands and thousands of lives because it prevented that war from degenerating into indiscriminate
                                             bombing of cities.

Deny Flight was in operation 2½ years and was challenged by the Bosnian Serbs only once. They sent
four fighter bombers out and began bombing a city. Two F-16s intercepted those four, shot down all four
        of them, and it was never challenged after that. So that was a very successful operation.

 The second major activity in Aviano was the NATO air strike force that was put in place to coerce the
Serbs to move their heavy weapons out of Sarajevo and stop the ground bombardment of that city. That
 threat worked initially, and the weapons were silent. Prior to the institution of that threat, there were as
many as a thousand shells a day being launched from the hills and mountains around Sarajevo into the
 city. That was stopped. But then later in '94, the Serbs began testing the limits and began challenging
that exclusion. And the U.N. command, fearing Bosnian Serb reprisals against their troops on the ground,
             would not give the authorization for the NATO air strikes to be used effectively.

Unchecked, the Serbs continued to escalate their violations until finally they overplayed their hand when
they violated the so-called safe area of Srebrenica. That violation was so egregious that even the nations
with troops on the ground with the U.N. agreed at a meeting in London that it was time to use NATO air
                                      power and to use it effectively.
In fact, at that meeting in London, I made the proposal if there's any further violations, that there would be
a massive air campaign -- not just a bombing or two, but an air campaign. There was another violation.
The nations had agreed to that air campaign, and we had such a campaign. From Aviano and from the
decks of carriers in the Adriatic, we launched one of the most effective air campaigns that we've ever had.
  It was over 1,000 sorties. Every target that had been designated was destroyed, and there was zero
collateral damage. This was a rare instance where by combination of exclusive use of precision guided
ammunitions and very strict rules of engagement we conducted this massive campaign with no damage,
                         no damage to civilians, no collateral damage of any kind.

Quite aside from the military effectiveness of the campaign, we know now, having talked with the Bosnian
Serbs and the Serbian Serbs, that they were stunned by the power and effectiveness of this campaign.
 And more than anything else, that's what led them to conclude that the continuing fighting was a losing
 proposition, and they decided to go to the peace table at Dayton. This was one of the rare examples in
history of successful use of coercive diplomacy. That is, the use of military power to achieve diplomatic

On this trip, I also went to Vicenza. Vicenza is the air base near Aviano where we have the CAOC, which
is the Combined Air Operations Center. This is one of the most effective air intelligence operations that
    has ever been put together. At the CAOC, we bring in national intelligence, tactical intelligence,
           synthesize it and get it to the user -- to the pilots in the air -- in a matter of seconds.

This whole operation was rejuvenated after the shoot-down of [U.S. Air Force] Capt. [Scott] O'Grady. We
looked very carefully in the after-action analysis there and discovered that we had the information which
 could have warned off Capt. O'Grady three minutes before the missile was fired. We got it to him five
minutes later, which is two minutes after the missile was fired. Five minutes is pretty good, but not good
                 enough -- not good enough to prevent the shoot-down of that airplane.

And so at that point, we decided to completely restructure and organize air intelligence support. We had
to do two things. We had to change our procedures to get the information out to the field quickly, and we
had to find a way of downgrading some of the highly classified strategic intelligence which was needed
  by the pilot -- by the warrior. Most of those things have been done, and they are now operating quite
                                            effectively at Vicenza.

The other thing that's operating out of Vicenza is the management of the airlift operation into Bosnia. We
 have a massive airlift to deploy our forces and deploy our equipment into Bosnia. Everything is being
  coordinated out of Vicenza. I've seen the most effective logistics management that I've ever seen at
Vicenza. The National Guard airplanes, Reserve airplanes, the active duty airplanes, all coming from the
         United States and from Germany into Bosnia. All were being managed out of Vicenza.

From Italy, I got on a C-17 and flew into Taszar, Hungary. In Hungary we are managing the logistics for
 all of the equipment and personnel flowing into Bosnia. The concept that [U.S. Army] Gen. [George A.]
 Joulwan [supreme allied commander Europe] had was that we would take all of our forces that are in
   Germany and instead of moving them directly to Bosnia, we would move them to a staging area in
 Hungary. So we have 300 trains over a period of a month, each one with 20 or 30 freight cars, go from
 Germany to Taszar. We unload it, regroup, and then from Taszar we proceed by road in combat units
              into Bosnia. In combat units in full march with guns loaded ready for combat.

As it turned out, we did not meet any combat. We did not meet any armed resistance when we went into
 Bosnia. But we did not know we would not meet resistance, so we went in prepared for resistance. We
will probably be criticized for having overreached on this or having had too large a force, too well-armed a
force. But my judgment was the same then as my judgment is now -- that if I'm going to err, I want to err
             on the side of being too strong and too ready rather than the other way around.

 Also, we will never know -- since we cannot rewrite history -- the extent to which the strength and the
    capability of that force deterred or dissuaded people from resisting. As it turns out, we have had
absolutely no armed resistance in Bosnia. In fact, we're being met with full cooperation by all the parties
 there. And there was no question that the U.S. forces, when they entered Bosnia, were met with great
 respect. They came in, as I said, fully armed with flak jackets, with their helmets, with their guns at the
                      ready position and loaded. And people paid attention to that.

 Now, our reserve components have played a key role in all of these operations I've described to you.
    They provided significant airlift access including a large percentage of the truly tremendous C-17
capability, which is being used to airlift the supplies in there and which I used to hitchhike a ride when I
 went into Bosnia. They're being used in the aeromedical capability, and they provide about half of the
 tanker support. The reserve components continue to be crucial as we are slowly turning peace into a
                                             reality in Bosnia.

 Now, we also saw reserve component forces at the logistics staging area in Taszar, Hungary. We now
have 7,000 people running this logistics center. One incidental side feature of the operation in Hungary is
it has built up a new relationship with the Hungarian government. We requested permission of Hungary to
  have a base in Hungary. Hungary's parliament met, and by a vote of 300 to 1 they agreed to let the
 United States use their base. And when I visited that base, I was met by the leaders of the Hungarian
government, and I've never seen such a warm relationship between two countries as developed between
              Hungary and the United States -- all because of our use of the Taszar base.

From Taszar, I flew on to the Sarajevo Airport and then drove down to the president's residence where I
met President [Alija] Izetbegovic and his cabinet. On the drive from the airport into the president's office
  in downtown Sarajevo, I drove through the destruction that had been wrought by years and years of
 shelling in this city, and I was just heartsick to see this once beautiful city in Europe reduced almost to

 But as I drove through it, I also was heartened to see that this had now stopped. We drove right down
sniper alley without any danger. The shelling has stopped. I had a very good meeting with the president,
and when I left the meeting, I came out of the office building and there were 300 to 400 Bosnians on the
other side of the street being held off by a police cordon. They wanted to see the American secretary of

I had no idea what kind of reaction we would have in the crowd, but as I walked out the door, they started
cheering and shouting "U-S-A, U-S-A!" And I drove my security people actually wild at that point. I left my
group, crossed the street, went through the police cordon and started shaking hands and talking with the
                                         Bosnians who were there.

For me, it was the most emotional moment of the trip -- to see their gratitude. These are people who for
 four years have been living in this city that was subjected to continues shelling for much of that period.
They now saw a prospect of peace. And there's no doubt in their minds that peace was being delivered to
     them by the United States. I was a symbol of the U.S. and they wanted to show their gratitude.

 From Sarajevo, I flew to Tuzla, which is the headquarters of the American forces there, and met [U.S.
Army Maj.] Gen. [William] Nash. We got into Black Hawks and flew over to the Sava River, landing on the
Croatian side of the Sava River. This was the day after they had finished the bridge, opened the bridge.

I got out of the helicopter and walked up to the bridge and walked into Bosnia across the bridge. It was a
cold, windy, muddy walk. Halfway across the bridge there were 30 or 40 American combat engineers still
working on some aspects of the bridge. They were dirty, cold and tired, but very proud of what they had

  As it turned out, one of them had just completed his first enlisted term that week and had decided to
re-enlist. And so we had the re-enlistment ceremony there on the bridge. Gen. Joulwan, [U.S. Army] Gen.
[John] Shalikashvili [chairman of the Joint Chiefs of Staff] and I swore in this soldier for four more years in
the U.S. Army. And I can tell you I have never been more proud of the Army than standing there that day
and swearing in this soldier in the mud and the ice and snow. He had just been through that, and he was
ready for four more years of it. That tells you something about the spirit and the pride of the U.S. soldier.

   I went back then to the base camp at Tuzla. I got a real taste of the flavor of this operation and the
   jointness of it. This base is the headquarters for Army Gen. Nash and his division, and many of the
battalions are based there. But working alongside of these Army units was an Air Force unit called Red
    Horse. Red Horse is an engineer team that builds bases. And if you ever want to see jointness in
operation, go out to Tuzla and watch these Army soldiers not only working but living in the mud and the
snow and the ice, coming back after a patrol and finding that the Air Force had just completed building a
   tent for them with a wooden floor and a stove -- a warm, dry place to sleep that night. So this was
jointness in operation, and the Air Force were the heroes of the day for the Army soldiers who were there.

  Besides the jointness, this was a multinational operation. Gen. Nash ..., in addition to two American
brigades, has a Nordic brigade -- 4,500 people in the Nordic brigade. That is a build-up of a battalion that
had been there in the U.N. forces. They brought a knowledge of the territory and knowledge of the people
                     -- a great asset to Gen. Nash to have that Nordic brigade there.

 There is a Turkish brigade. They also had been there with the U.N., and they also brought a familiarity
with the people and terrain which is a great value to us. And most amazingly, we have a Russian brigade.
  When I was there, the advanced guard of that brigade had just arrived. But as of a few days ago, the
entire brigade is there, is out conducting patrols, and it's just one of Gen. Nash's brigades doing the job
I spent my whole career as a cold warrior and I never, never would have contemplated the possibility of
 having a Russian brigade working in an American division conducting a peacekeeping operation in the
                      Balkans. But there it is. And it seems to be working very well.

I can only imagine what Gen. [Dwight D.] Eisenhower, the first SACEUR, would think if he saw a general
from Russia sitting with Gen. Joulwan, today's SACEUR, at the SHAPE [Supreme Headquarters, Allied
Powers Europe] compound reviewing NATO's operation plan for deployment in Bosnia. But indeed, Gen.
  Joulwan and [counterpart Russian commander Col.] Gen. Leontiy Shevtsov spent a week at SHAPE
                 headquarters planning this whole operation which I saw getting started.

I spent a lot of time while I was in Bosnia talking with the intelligence people on their assessment of the
mine situation. The good news is all three of the warring parties are trying to cooperate with us, providing
              charts where they think the mines are located and helping to clear the mines.

Before all of our units went down there, each battalion spent a couple of months specifically training for
 combat operations that involved mine awareness, mine location, mine removal and most importantly,
                                             mine avoidance.

   I spent some time yesterday at our Advanced Research Projects Agency, reviewing some of their
technology. One of the specific things I was looking at was the technologies that might be useful in this
area. They're working on it, but I'm afraid the realistic assessment is that mine avoidance and detection is
                                       still a matter of training and

discipline and attention to detail. And so the training that we have done to prepare our soldiers was the
 best thing that we could have done in preparing our soldiers for the very real problems they're running
                                              into in Bosnia.

They've been there now for almost seven weeks and we've not had a fatality yet from a person stepping
on or a vehicle going over a mine. We have had one fatality [Army Sgt. 1st Class Donald A. Dugan, Feb.
    3], but it turned out it was not a mine accident. We have had four or five different mine incidents.
   Fortunately no one was killed in those incidents, but it's going to be a problem as long as we are in
 Bosnia. A way of dealing with that problem is going to be twofold: continuing to work with the warring
parties for removal of mines on the one hand, and the second, very careful attention to detail, discipline,
                          training to minimize our chance of the mine accidents.

I'm going to come now to a few conclusions about Bosnia to share with you. The first conclusion is so far,
 so good. I say this even as our hearts go out to the family of the American soldier who lost his life over
 the weekend. My second conclusion, which is suggested by that, though, is that we still have 10 tough
                          months ahead of us and we must not get complacent.

When Gen. Shali and I talked with our soldiers over there and our commanders, we had two messages
for them really. The first, keep your focus. Pay close attention to detail. And the other was, take care of
                                                each other.
My third conclusion is that this whole operation in Bosnia is going to determine the character of European
  security certainly for the rest of this decade and probably on into the next decade. One of the single
 biggest security problems at the end of the Cold War was finding the right formula for maintaining the
                      kind of security umbrella that NATO had provided for 45 years.

  We found that formula in Bosnia, where all of Europe is pulling together for peace. Not only all of the
NATO countries but one -- 15 in all (we had to exclude Iceland, which does not have military forces) -- but
even more non-NATO countries. Nineteen non-NATO countries are participating as well as the 15 NATO
               countries. The United States is leading the way, even leading the Russians.

This U.S. military performance in Bosnia demonstrates once more the capability and the effectiveness of
our forces. Our equipment, our training and our people are the best in the world. This goes both for the
  active and for the reserve components, and our challenge is to make wise and full use of all of these
assets. That means we need to involve the Guard and Reserve more deeply in the ongoing missions of
                                                our military.

 You all know that last year we announced what we called the Increased Use Initiative. The goal was to
find creative ways to include our reserve forces in real missions of the active duty forces, to increase their
           proficiency and their readiness and to make more use of your talent and capability.

  One of the important benefits of this is we helped reduce the very high operational tempo rate of the
active duty force. After one year, preliminary reports say, yes, we can do these things. But it's not just the
reports that are saying it. More importantly, the CinCs [commanders in chiefs] are saying it, too. They are
        saying it by spending time, effort and money to make use of Guard and Reserve talents.

In 1995, for example, the CinCs called on reserve component personnel for 97 missions. In 1996, it will
  be up to 167 missions. The CinCs have pledged about $10 million to make this integration possible.
However, the CinCs are assigning Guard and Reserve personnel to real-world, not make-work, missions.
   The Army Guard, for example, is supporting the Combat Maneuver Training Center in Hohenfels,
Germany. Navy reserve engineer units are deploying to Haiti to work with the United Nations forces there.
The Colorado National Guard will assume command of the 4th Space Warning Squadron, taking over for
                             an active unit which formerly performed that job.

 The Defense Department has added $25 million over the next two years to help the CinCs make more
   use of Guard and Reserve. I'm optimistic that if we put the total effort of our total force behind the
    program, it will be successful. But to make the program work, we must ensure that it achieves its
intended effect of increasing the CinCs' war-fighting capability as well as the readiness of our reserves by
  not having unintended bad side effects, such as hurting the recruiting and retention in the reserves.

One way to protect the Guard and Reserve recruitment and retention is by doing what we can to protect
 the quality of life of the reserve component. We can provide more support and outreach to Guard and
 Reserve families when their head of the household is on deployment. And we can also give employers
better warning when we send their employees on deployment, and give employers a voice in our Guard
and Reserve policies. Debbie Lee [assistant secretary of defense for reserve affairs] told you more about
  these and other quality of life initiatives for the reserve components. They are critical to making our
                                  Increased Use Initiative a real success.

I'm going to wrap up now by telling you that in case you did not know it, I do believe in a strong Guard and
Reserve, and I believe in taking care of our citizen-soldiers, their families as well, who serve our country.

Gen. Omar Bradley once said our military forces are a team, a team that's in the game to win. And each
player on that team must be an All-American. Every member of today's Total Force -- the active forces,
 the reserves, the National Guard, their families and their employers -- is an All-American. The National
 Guard and its leadership are doing an All-American job at home, around the nation, and wherever our
                                           country sends them.

    I am proud of your work, and I am proud to be your secretary of defense. Thank you very much.
                          It's Time To Dream Again
   Remarks delivered by Edwin Dorn, undersecretary of defense for personnel and readiness, at The
                      Citadel Greater Issues Series, Charleston, S.C., Feb. 8, 1996.

Thank you. Today I would like to talk with you about change. Change. The inexorable march of time. The

 Many of you are in college, anticipating what you'll do when you graduate. To some of you, everything
seems uncertain, up in the air. You probably think that things once were more predictable, and for some
people, they were. A generation or so ago, if you were among the fortunate, you finished school, went to
    work in a well-established company, and 40 years later you retired with a gold watch and a good
                                              retirement fund.

 And how did you find a job? Well, many of the big companies came to you; they'd set up booths in the
 student union. Or you might find a job by word of mouth. A friend or relative might drop by your house
and say,"Hey, they've got an opening down at the plant." Of course, those who didn't have contacts down
  at the plant were left out of this word-of-mouth advertising. But for those with the right connections, it
                                                worked well.

     Things have changed. There are still lots of jobs out there, lots of career opportunities, but the
opportunities look different. For one thing, you probably won't stay with the same company for an entire
 career. For another, lots of those big companies have broken up or are downsizing. Instead of one big
     national phone company, for example, we now have several regional companies and several
long-distance carriers. Another big difference is that you'll be working with a much more diverse group of
                      people than your parents and your grandparents worked with.

   There also are a few people in this audience my age. Like me, you probably are worried about the
     long-term prospects for Medicare and Social Security, because somebody in Congress keeps
                  threatening to cut them. It seems things used to be a lot more certain.

Nowhere have things changed more in recent years than in the area of national security. Today, instead
of a cold war, we have a fitful peace. We have moved from a focus on one overarching danger to several
diverse dangers. Today, we need a military that is extraordinarily flexible, equally capable of warfighting
                                            and peacekeeping.

For five decades, our nation competed economically, ideologically and militarily against a Soviet monolith.
   We equipped and trained our soldiers to fight Soviet bloc soldiers on the plains of Central Europe.

   Less than a decade ago, Soviet bloc divisions were lined up facing NATO divisions in the center of
Europe. But last year, U.S. and Russian units trained together on the plains of Kansas; and today they're
                     helping to keep the peace together in the mountains of Bosnia.
Those are huge changes. They constitute nothing less than a redrawing the map of the world, and they
                             call for a major reshaping of U.S. defense policy.

It takes time -- years -- to reshape something as large and complex as America's defense establishment.
We have to make decisions about people, equipment and training. For example, it takes about a decade
to design and build a modern nuclear-powered aircraft carrier, and it takes about 25 years to develop a
  Navy captain capable of commanding that carrier. So in DoD, we have to think ahead -- way ahead.

When the evil empire collapsed, we could have said, "All right, we've done our job. Now let's go home."
And some people wanted us to do that. They wanted us to pull our forces out of Europe and the Pacific,
   to cut our active military dramatically and revert to an essentially militia military defending fortress

The Bush administration resisted that; so does the Clinton administration. Why? Because we are a great
 nation, the sole remaining superpower. We have worldwide economic and political interests to protect.
 We also have values that we want to share with other societies -- democracy, free enterprise, human

 And we as a people are moved by the suffering of others. When the television news carries pictures of
war, of starvation, of unspeakable brutality, we Americans ask ourselves, "Isn't there something we can

 Several times in recent years, we have been moved to do something about war or injustice or natural
disaster in some distant country. We assembled an international force under a United Nations mandate
  to rout Saddam Hussein from Kuwait. We kept tens of thousands of people from starving to death in
Somalia. We helped restore the legitimate, democratically elected government in Haiti. And now, we are
                                 trying to give peace a chance in Bosnia.

   What we've done -- what we're doing -- takes a generous spirit. It also takes vision, a sense of the
                nation's greatness and of the obligations that flow from world leadership.

Let me give you an example of what I mean. In December of 1993, I had the pleasure of meeting several
 soldiers from the 10th Mountain Division, which is based at Fort Drum, N.Y. They'd just returned from
  Somalia. As you'll recall, in the fall of 1993, 18 of their comrades had been killed in a firefight on the
                                           streets of Mogadishu.

     I asked one of the soldiers, a young, ramrod-straight sergeant, how he felt about our Somalia

   "Well, sir ," he said, "all I can say is, 'God bless America.'" He said it in a deep southern drawl, and
immediately I thought I knew what he would say next. I thought he d start talking about how much better
   this country is than any other. I thought he'd speak bitterly about how we'd done so much for other
  countries and how they didn't appreciate it. I thought he'd make disparaging remarks about Somalis.
But that's not what he did. Instead, he said,"Sir, they sent us over there to keep people from starving to
     death, and we did that. They sent us over to build hospitals and roads, and we did that. Sir, we
                                       accomplished our mission."

 And he went on, to point out that we were the only country that would have or could have done those
things. We had the equipment and the trained people. More importantly, we had the generosity of spirit to
    help out in a land that nobody else cared about. We were willing to come to the aid of strangers.

 One of the great joys of my job is that every year I get to meet thousands of people just like that 10th
Mountain Division sergeant. They're men and women who are committed to serving their country, not just
 enriching themselves. They understand that America has a special role and responsibility in the world,
                                     and they want to be a part of it.

  They're sailors who spend hour after hour on the storm-tossed deck of an aircraft carrier, doing the
complex, dangerous tasks needed to launch and land aircraft. They're soldiers on a windswept dune in
  Saudi Arabia, working in 120-degree heat to keep their Patriot missiles in peak operating condition.
  They're Air Force doctors and nurses rushed to Panama to set up a field hospital to treat Cuban and
Haitian refugees. They're reservists who are willing to be called away from their homes and jobs in order
to help this country meet the obligations of world leadership. They are ordinary men and women who do
                                          extraordinary things.

 My job as the undersecretary for personnel and readiness is to ensure that the rewards of their service
are commensurate with the sacrifices they make. These men and women don't join the military to get rich,
but they don't expect to take a vow of poverty either. So we have to make sure that their pay and benefits
  are fair. On several occasions, we in the Clinton administration have had to fight back congressional
                                  assaults on military pay and benefits.

 The men and women of the armed forces exemplify the kind of can-do optimism that made this nation
  great. But I worry about something. I worry that this country's can-do attitude is being replaced by a
no-can-do attitude. I worry that we focus more on short-run costs than on long-term benefits. I worry that
             we have become instead of a nation of visionaries, a nation of bean counters.

  Let me tell you what I mean. I came of age in the 1960s. When I was in high school, President John
      Kennedy came to my hometown of Houston and gave a speech at Rice Stadium. He made a
commitment: By the end of the decade of the 1960s, he promised, we would send a man to the moon and
    bring him back safely. That was a bold vision. This nation got behind it, and we made it happen.

I also remember a summer day in 1963, when Martin Luther King Jr. stood at the Lincoln Memorial and
 inspired the nation to share his dream of racial harmony. And for a few years, following the passage of
civil rights legislation, we made enormous progress. We eliminated legal segregation. For the first time,
African Americans who had fought for this country in Germany and Korea and Vietnam had the right to sit
                  at a lunch counter in downtown Houston and Atlanta and Charleston.

And I remember in 1964, President Lyndon Johnson promising to fight a war against poverty. For a few
years during the mid to late 1960s, we made enormous progress on that front. We reduced poverty rates;
we improved health care for the poor and elderly; we reduced infant mortality; we reduced hunger; and
we reduced the number of people living in overcrowded, substandard housing. We helped poor children
get a head start on elementary school, and we helped a lot of poor high school graduates go to college.

It has become fashionable to criticize the Great Society, but much that happened during that period was
   good. It helped people, it promoted economic growth, and for a brief shining moment, it brought us
 together as a nation. I don't think I would be where I am today were it not for the bold challenges that
 John F. Kennedy, Lyndon B. Johnson and Martin Luther King Jr. inspired this nation to take on in the

But then, some very bad things started to happen, and we began to lose our boundless optimism. What
 happened? First, our dreamers were slain. President Kennedy was assassinated in 1963, followed in
1968 by Martin Luther King Jr. and Bobby Kennedy. Next, the war in Vietnam distracted us, disheartened
                           us, divided us and depleted our precious resources.

Later, the OPEC oil boycott of the early 1970s brought home the degree to which our nation's economic
 well-being depended on countries and on events we could not control. The realization that there were
  things we could not control was further enhanced by the Iranian hostage incident. By the late 1970s,
many citizens and political leaders, frustrated by our inability to find quick fixes for social and economic
        problems that had been festering for decades, concluded that our efforts were doomed.

That combination of things -- the economic shocks, the divisive war, our inability to bridge the racial gulf,
the slaying of our dreamers, all of that -- made us susceptible to a message which said, "Dream less lofty
dreams." The corollary was, "Forget about the other guy, just look out for No. 1." We had moved, in the
  course of just a few years, from being visionaries to being members of the Me Generation. A can-do
                                nation was turning into a no-can-do nation.

 I keep hearing people -- members of Congress, political pundits and policy wonks -- talking about what
 we Americans cannot do. I keep hearing about the investments we cannot afford to make, the lives we
  cannot uplift, the commitments we cannot fulfill. It's depressing. The no-can-do crowd sounds like a
            bunch of accountants dividing up the remaining assets of a bankrupt corporation.

 Well, I do not believe that this country is bankrupt. We are a great country filled with people who, when
we share a dream, can achieve great things. It's time for us to come out of our shells. It's time to embrace
                      change and be more positive about this country and its future.

  Look at the economy: Growth is up, productivity is up, employment is up. The unemployment rate is
  going down, and so is the federal deficit. The economy is growing at a good clip: real gross domestic
product grew at 3.3 percent in 1995. Productivity continues to rise. In 1994, output grew 4.4 percent, the
largest increase since 1984! Employment continues to grow: 8 million new jobs have been created since
              December 1992. Unemployment is down: It's at a five year low, 5.6 percent.

 So I ask myself, if things are going so well, how come so many people feel so lousy? Why do opinion
          surveys show such low public confidence in the future? A couple of reasons, I think.
 One is that our economy changed in odd ways during the 1980s. Relatively high-paying manufacturing
 jobs were being replaced by relatively low-paying service jobs. At the same time, a wave of corporate
  mergers and acquisitions and restructuring had the effect of increasing the stock value of companies
without increasing the number of jobs or of the number of things produced. As a result, we actually saw a
 growth in income inequality during the 1980s. The rich got richer, the poor got poorer, and the middle
                                             class got squeezed.

So for a lot of people, economic growth has not brought prosperity. A lot of us are like those boats people
talk about all the time -- the boats that are not able to rise with the rising tide. Indeed, when the tidal wave
                  of business restructuring struck in the 1980s, a lot of us got swamped.

 But there's another reason many of us are feeling lousy. It's because so many people are telling us we
   should. They keep telling us we're bankrupt. They keep telling us what we, as a nation, cannot do.

Well, if you believe that this country's best years are behind her, then they are. If you believe that we can't
  get out of this rut, then we won't get out of this rut. I, for one, believe that this nation's best days are
            ahead. I, for one, want to focus on the future and the many opportunities it holds.

 We Americans have always had a very distinctive view of the future. In most of the world, the view has
  always been that tomorrow will be pretty much like today, just as today is pretty much like yesterday.
 That's the way things were. If your father was a goatherd, then you would grow up to be a goatherd. If
your mother was a member of the royal court, then you would grow up to be a member of the royal court.
If the Montagues and the Capulets feuded during your father's generation, then you were honor-bound to
                                    continue the feud in your generation.

We Americans have always had a very different view. We believe that tomorrow will be different -- indeed,
that it should be different -- from today. We value our past, but we do not seek to live in it. We cherish our
traditions, but we don't wallow in them. We understand that history is about where we've been, not about
                  where we're going. We know that we cannot find our future in our past.

We believe that we can settle the wilderness, that we can end racial oppression, that we can cure dread
 diseases, that we can put people on the moon. We believe that we can do almost anything if we unite
                                         behind a common purpose.

 But in order to do anything but complain, we must replace our preoccupation with the short term with a
   willingness to invest for the long term. We must abandon this "Look out for No. 1" attitude with the
        realization that we're all in this together. We have to replace the can't-do with the can-do.

We, as a nation, need a vision for the future. We need to come together decide where we want to be in
10 or 20 or 50 years. As the Bible tells, where there is no vision, the people perish. If we cannot envision
        a future different from the present, we cannot achieve a future different from the present.

I think we need to ask ourselves: Do I believe in this country's greatness? Do I support leaders who bring
us together -- and reject those who spread bitterness and spite? Can I embrace change? Am I willing to
                 join hands with my fellow Americans and walk toward tomorrow's light?
Bobby Kennedy once said, "Some people see things as they are, and ask, why? I dream things that
                                 never were and ask, why not?"

                     In that spirit, I say my friends, it's time to dream again.
     Dr. King's Appeal to an Uneasy Conscience
Remarks by Emmett Paige Jr. assistant secretary of defense for command, control, communications and
   intelligence, for the Martin Luther King Jr. Executive Breakfast,Executive Dining Room, Pentagon,
                                         Washington, D.C., Feb. 8, 1996.

This is the 11th annual breakfast observance of the national holiday honoring an outstanding American,
                                            Dr. Martin Luther King Jr.

His many contributions toward human justice have been acknowledged internationally. I will only briefly
                                    recap some of those acknowledgments:

                                         In 1964, he received the Nobel Prize.
                   An annual Martin Luther King Jr. memorial award is sponsored in England.
                                   Rome has a Martin Luther King Jr. middle school.
             Sweden has a Martin Luther King Jr. Plaza opposite the ancient University of Uppsala.
                   The Martin Luther King Jr. Memorial Forest thrives in Israel's hills of Galilee.
            In 1981, the official mint of France struck a Martin Luther King Jr. commemorative metal.
                             Commemorative stamps have been issued by over 30 nations.
                               His book has been translated into a number of languages.

Why are we having a service to recognize this national holiday? Why should this be a national holiday?
  Why is Martin Luther King Jr. such an international hero? Is it because Dr. King was an exceptional
  preacher? Is it because he was an outstanding humanitarian? Is it because Dr. King was a great civil
                                                  rights activist?

  I submit that we can go on and on asking such rhetorical questions. There is a long list of renowned
pastors, humanitarians and civil rights activists who also dedicated their lives to great causes. Yet none
              of these individuals are recognized by a national holiday. So why is Dr. King?

   I submit that it is a national holiday because Dr. King, through his vision, leadership, courage and
dedication, moved this great nation to an enduring commitment to live up to the principles of democracy
   established by the Declaration of Independence and the great Constitution of the United States of
America. In simple terms, He put the "all" in front of the word "Americans." He was personally committed
to, and fought for, the protection of the rights of all Americans, regardless of the color of their skin, ethnic
                                           background or their religion.

 He was the leader of our second revolution -- the revolution for democracy within America for all of its
   people, and indeed for people all over the world. He enlisted our nation's conscience to right some
 fundamental wrongs. His moral leadership so moved the conscience of this nation and the world that,
        hopefully, lasting and unprecedented changes were made in this nation's social structure.
I am proud of this day not because Dr. King was a black man. I am proud that this great country of ours
finally recognized a giant who dedicated his life to the betterment of all mankind at home and indeed all
        over the world. In my mind, Dr. King stands beside and equally tall with Abraham Lincoln.

        Let us now for just a moment reflect not on the great man, but on the world as it is today.

We have troops deployed in Bosnia because of the terrible situation that existed there with ethnic hatred
and the various groups slaughtering each other. All is not well here on the home front with blacks killing
       whites and whites killing blacks for no other reason than racism or the color of one's skin .

I am sure that Martin must be churning in his grave with terrible disappointment that even to this day we
 still have such hatred and racial friction. We still have churches being burned down in Tennessee. We
still have malls in the so-called liberal North and elsewhere in this great country of ours where buses from
                   the inner cities cannot enter to take on or discharge passengers. ...

Let us not kid ourselves that all is well. We still have much work to do all over this land to bring our people
of all races, religions and ethnic backgrounds together. For all of us that are here this morning and those
that are not, we can reinvigorate our efforts beginning right here in the Pentagon, in our communities and
                                 indeed wherever our military forces exist.

There are some people here in this building that might tell you that all is well and that we are far ahead of
other sectors of our society. We are far ahead of the rest of our society, but all is not well, and we must
not kid ourselves that the pot is cool out there. I submit to you that it is boiling, and we must forever work
                                             to reduce the heat.

  God forbid that we ever again have the racial strife that we lived with in our armed forces during the
  Vietnam War. To believe that all is well out in the ranks is a disservice to ourselves, to the men and
women throughout DoD and to the country. We cannot wait until someone commits a horrible act such as
the events that took place at Fort Bragg and Fayetteville [N.C.] to emphasize to our troops that we will not
tolerate racism or discrimination in any form in our organizations. We must preach and practice what we
  preach every day if we are to change the culture of the people we receive from our society at large.

  Dr. King was very clear on how he wanted to be remembered. He wanted to be remembered as an
 individual who gave his life serving others. He wanted to be remembered as a person who tried to love
      everybody. He wanted people to know that he tried to be right on the Vietnam War question.

 He tried to feed the hungry, clothe those who were naked, visit those who were in prison, and love and
serve humanity. His words are, "I was a drum major for justice -- I was a drum major for righteousness."

 Many of us are old enough to remember the caste system that existed during the '40s and '50s. Under
that system, nonwhites in large areas of the country experienced daily indignities because of their color.
  As a young black Army officer I can assure you that it was extremely difficult to travel to a new duty
    station, to travel from Fort Monmouth, N.J., as an example, to my hometown of Jacksonville, Fla.
  There were very few motels or restaurants that would provide service to blacks if they talked like and
  dressed like they were Americans. Unfortunately, there were none along most routes that we had to

It was necessary to pack your food in your car with the wife and kids if you intended to have food to eat
without suffering the indignities of going to the rear door of a restaurant, even if it was a roadside dump. ...
You would eat in the car and you would sleep in the car if you were going to sleep at all. I would get up
   early in the morning and hit the highway before 0200 [2 a.m.] and drive straight through from Fort
Monmouth, N.J., or Fort Devens, Mass., to Jacksonville -- or believe it or not, from Fort Carson, Colo., to
   Jacksonville, Fla., without stopping except for gas. You never bought gas until you found out if the
                             service station permitted you to use their facilities.

                     Today, all of that has changed, thanks to the man named Martin.

Let us pretend for a few minutes as I try and bring Dr. King's vision to you in a more vivid fashion: A man
          calling himself Martin appeared at several locations in greater Washington yesterday.

 At each location he spoke about love, nonviolence, peace, justice and freedom. Some who heard him
reacted with anger, others lowered their head in shame, some stared expressionless into space. Others
simply walked away as he spoke. One minister who refused to give his name said, "Martin's speech and
 manner presented a sense of urgency." He emphasized by several examples that "In this life, there is
                                       such a thing as being too late."

  According to those who saw him, Martin was ordinary in appearance and neatly dressed. His clothes
 were not unusual and his hair was short. He was clean shaven with a neatly trimmed mustache. By all
                             measures, he personified America's middle class.

   He spoke without smiling, yet his face and voice remained calm, never showing anger. Numerous
 eyewitness accounts of what he actually said were given. The following is a compilation gathered from
                                   those who were willing to talk about it:

 His opening remarks were about love. He said, "The Lord sent me here, and I have to give you these
    words. You will always serve the Lord if you remember the importance of love. Love leads to an
 understanding of needs and aspirations far beyond that obtainable by fear, anger and hate. Love is a
    great moral principle more powerful than violence. Do not forsake the words of Jesus, 'Love your
 enemies, bless them that curse you, do good to them that hate you, and pray for them that despitefully
                                       use you, and persecute you.'"

     He then spoke about nonviolence. Martin said, "During my lifetime, I consistently preached that
nonviolence demands that the means we use must be as pure as the ends we seek." I have tried to make
clear that it is wrong to use immoral means to attain moral ends, but I also affirmed that it is just as wrong,
  or perhaps even more so, to use moral means to preserve immoral ends. I still believe that one day
  mankind will bow before the altars of god and be crowned triumphant over war and bloodshed. And
                   nonviolent, redemptive good will be proclaimed the rule of the land."
Next Martin talked about peace. He said, "The increasing perils of racial conflict and war make it urgent
for us to pursue whatever may help to evolve a world with stable and enduring peace." Peace imposed
 by violence is nothing more than suppressed conflict containing the seeds of its own destruction. Any
 credible program of stable peace must ultimately rest on a foundation which is nonviolent. "I refuse to
 accept the view that mankind is so tragically bound to the starless midnight of racism and war that the
                 bright daybreak of peace and brotherhood can never become a reality."

He continued by saying, "I have gained a measure of personal satisfaction being labeled an extremist for
 justice. During my lifetime I elected to be courageous rather than cautious and outspoken rather than
silent. In the midst of a mighty struggle to rid our nation of racial and economic injustice, I watched many
 churchmen stand on the sideline and mouth pious irrelevancies and sanctimonious trivialities." Today
"the judgment of God is upon the church as never before. If the churches of today do not recapture the
sacrificial spirit of the early churches, they will lose their authentic ring, forfeit the loyalty of millions, and
             be dismissed as an irrelevant social club with no meaning for the 21st century."

Martin then reminded his audience of his "I have a dream speech." He said, "I expressed the dream then
and I express the dream now that one day all of God's children will be able to sing with a new meaning,
  'My country 'tis of thee, sweet land of liberty, of thee I sing. Land where my fathers died, land of the
pilgrim's pride, from every mountainside, let freedom ring.' And if America is to have longevity as a great
  nation, this dream must be fulfilled. He told his audience, "I have the audacity to believe that people
 everywhere can have three meals a day for their bodies, education and culture of their minds, dignity,
                                    equality and freedom for their spirits."

Martin finished by saying, "I'm not fearing any man. Mine eyes have seen the glory of the coming of the
         Lord." This is a vision of Dr. King that you can build upon to truly understand the man.

  Dr. King appealed to our nation's uneasy conscience. He brought this nation face to face with unjust
inconsistencies in our inner character. But neither he nor his followers ever fought force with force. They
opposed injustices by a peaceful refusal to cooperate, nothing more, but nothing less. They were cursed,
beaten and jailed. They accepted blow after blow, showing no sign of fear or anger, stating their belief in
                   the goodness of America and trusting in the power of God almighty.

Today, many feel that the progress made in human rights and the fight against racism has lost much of
     its steam. Consider professional sports. The playing fields are fully integrated, but there is little
                                      integration at the managerial level.

  A study by Gary Oldfield, a political scientist at the University of Chicago found that "segregation of
blacks and whites dropped between 1960 and 1972, but little progress has been made over the past two
  decades. He found that whites now only comprise 3 percent of the students in public schools in the
 nation's 25 largest cities. He found churches remain highly segregated. He contends that in addition to
   racial segregation, the 1980s brought a new segregation -- class segregation. This study is not in
                           consonance with the dreams of Martin Luther King Jr.

              In a sense, one could almost feel that Martin may have lived and died in vain.
  Obviously, this is not true, for we all know that without individuals like Dr. Martin Luther King Jr. this
nation would still be living in the dark ages of intolerance and injustice. For example, let's never forget the
 injustice of the Dred Scott decision, which ruled that freed blacks were not raised to the rank of citizen;
  the injustice of the decision that the first civil rights act was unconstitutional; and the injustice of the
                          50-plus years under the "separate but equal" doctrine.

        Martin was a dreamer, but we should remember that America was founded by dreamers.

As we celebrate the birthday of Dr. King, and now Black History Month, we perpetuate the moral courage
 so necessary to ensure that America remains the beacon light of democracy and religious freedom for
                                                  the world.

With the Martin Luther King Jr. national holiday we perpetuate that appeal for a just society -— a society
   where all Americans, and indeed people all over the world, can live safely as free and responsible
  individuals, where all people are able to use their abilities for any constructive purpose that does not
  interfere with or harm the right of others and where all people can rise to the highest levels that their
   talents and abilities can take them without being penalized because of race, color, religion, ethnic
                                          background, sex or age.

                        Dr. Martin Luther King Jr. was assassinated 28 years ago.

Today, with this breakfast, we are trying to keep his dream alive. Whether the dream lives or dies rests
                                               with each of us.

                 My challenge to you is to always do all you can to keep the dream alive.

                                 My challenge to you is to love somebody.

            My challenge to you is to feed the hungry, clothe the naked and serve humanity.

This is the challenge embodied in the dream and the sacred heritage of our nation and most importantly,
                                           the eternal will of God.

  God bless you. God bless us all everyday, and particularly as we celebrate the national holiday that
                            honors the life of Dr. King and all that he stood for.

God bless the men and women of our armed services as they serve faithfully to bring peace and a better
                   life to those who are less fortunate than we are all around the world.

God bless America, as it is still the best and greatest nation on earth in every respect, despite the warts
                        that still exist and the frailties of our people in many ways.

God bless each and every one of you, and thanks for letting me share a few minutes this morning in your

                                           I love you -- all of you.
                       Vision for the Navy's Future
 Remarks as delivered by Navy Secretary John H. Dalton before the National Press Club, Washington,
                                               Feb. 14, 1996.

  Thank you very much for the kind introduction and warm welcome. I'm pleased to be at the National
            Press Club to give you my thoughts on the state of the Navy-Marine Corps team.

First, I must tell you that I'm honored to be secretary of the Navy. The Navy's been awfully good to me.
 I'm grateful for my Navy education and training. It's an honor and privilege to come back at this time to
       serve as secretary of the Navy. And I thank President Clinton for his trust and confidence.

I love what I do, and I challenge anyone to find a better, more rewarding job in Washington than running
            this department -- and that includes working budget negotiations with Congress!

You're familiar with what we do and where the Navy Department is today. So let me cut to the chase and
                               answer the question: "Where are we going?"

 The right answer -- the only answer -- is that we are moving forward! The Navy and Marine Corps are
dynamic organizations with vision. We are forward-thinking and forward-operating -- that's our tradition,
   and it's a tradition of success, which has played out over 220 years. We don't fight the last war, we
prepare for the next one. And when we get our nose bloodied, we clean up our act and enter the ring in
                                          time for the next round.

   This is my message for you: In an era of uncertainty and challenge, at home and abroad, the Navy
 Department is not afraid of change! And we've got the leadership and vision to effectuate that change
                             which is appropriate and desirable for the future.

It's that future that I want to talk about. Since I've been secretary of the Navy, I've focused on four themes
       with a vision for the future. Those themes are readiness,technology, efficiency and people.

     When I had my confirmation hearing before the Senate Armed Services Committee in July '93,
  committee members were most concerned about readiness. Several senators in that hearing asked
    about readiness in the Navy and Marine Corps, and they expressed deep concern that our Navy
                          Department was not as ready as it should have been.

 Readiness may have been a concern three years ago, but let me ask you this: When was the last time
                     you thought about the readiness of the Navy and Marine Corps?

That's because it simply is no longer an issue. Looking back across my time as secretary of the Navy, I
have no doubt that America in now getting a solid return on its investment in the Navy and Marine Corps.
                 Here are a couple of examples to emphasize that we are indeed ready.
Remember back to early last summer when [Iraqi President] Saddam Hussein moved some of his force
toward Kuwait. The Navy-Marine Corps team was right there. Within hours, we had strike aircraft flying
 sorties. We were ready, we responded, and we got the job done. And Saddam pulled back his forces.

The rescue of [Air Force] Capt. Scott O'Grady was another indicator of just how ready our people are. It
     was a complex, difficult rescue mission that our team made look easy. When he had his press
conference after the rescue, Capt. O'Grady's first words were: "I'm not the hero. The real heroes are the
                               sailors and Marines out on USS Kearsarge."

  There's probably no more human example of our readiness than Bosnia. Look at the success of the
  peace talks in Dayton [Ohio] and the initial deployment of U.S. forces. American military leadership
brought the warring factions to the table. The [USS] Teddy Roosevelt and [USS] America battle groups,
 including the cruiser [USS] Normandy conducting air and Tomahawk strikes last September, made the
              difference. The parties ended up at the peace table because of what we did.

Training is the key to our readiness. Adm. Arleigh Burke was the chief of naval operations when I was a
midshipman in 1960, and I had the sad honor to participate in his funeral ceremony just last month. When
 the USS Arleigh Burke was christened, the admiral told the crew, ... "This ship was made to fight. You
                                          had better know how."

  It's my job to ensure that our men and women of the Navy and Marine Corps know how, that they're
properly trained and ready to fight, because that's what we're in the business of doing -- to fight and win
           our nation's wars, and to prevent them with the influence of our forward presence.

                         What you should walk away with today is that the Navy

  Department's readiness is where it should be. However, my vision is that we'll be able to predict the
    readiness challenges of tomorrow, to be ready to fight the wars in the Navy after next so that my
                                  successors will have what they need.

                    My second priority for the Department of the Navy is technology.

 One of my predecessors, the secretary of the Navy during the 1920s, was Curtis Wilbur. We had just
 prevailed [in] World War I, and he was making a major thrust in Congress to fund naval aviation. Many
  people in Congress were skeptical. We had just won "the war to end all wars," and the last thing we
                                  needed was airplanes flying off ships.

But Secretary Wilbur persisted and got naval aviation off the ground. And 20 years later, we won World
 War II, particularly the war in the Pacific, in large measure due to our naval aviation capability. Without
Wilbur's vision and his dogged persistence in the early 1920s to fund an emerging technology, the result
                                      might have been catastrophic.

That's exactly the kind of vision I must have now to prepare the Navy after next for the challenges 20 to
                                          30 years downstream.
Let me give you another example. Five years ago in the Gulf War, the world watched as our battleships,
cruisers, destroyers and submarines launched highly accurate Tomahawk cruise missiles. Tomahawk's
   performance exceeded all expectations in its first operational use -- it wasn't perfect, but it was an
 important element in the first days of the war. The missile worked; it was ready-made. We could have
 stopped there, people would have said that success rates approaching 70 percent is "good enough for
                                             government work."

  Navy leadership didn't believe that, and I don't believe it now. We weren't satisfied with Tomahawk's
  success, and the department had a vision to make a better missile. The improved Tomahawk cruise
 missiles launched last summer into Bosnia had a better than 90 percent success rate. We took a great
      product and made it even better. That's the Navy Department's standard of doing business.

Looking to the future, we have some important aircraft and ship programs in the works that indicate our
             commitment to the technology necessary to win the wars in the Navy after next.

 One is the next generation of aircraft carrier -- the CVX. I'll emphasize that "X" -- I don't know yet what
 that carrier will look like. Probably the easy thing to do would be to build aircraft carriers just like we've
been doing. Well, we're spending the time, money and creativity on research and development to ensure
                            that we have the best aircraft carrier for the future.

  Other platforms you'll hear a lot about: the Seawolf and new attack submarine programs. These now
            generation of submarines are at the leading edge of our littoral warfare strategy.

 And there are more programs - all across the board of sea, air, land and special forces requirements.
These are programs we will need for the challenges of the year 2015 and beyond. It's important that we
invest in science and technology, that we invest in research and development to ensure that we have the
 right Navy and Marine Corps not just for today and tomorrow, but for the Navy and Marine Corps after

                                        My third priority is efficiency.

The department is taking a hard look at what decisions we must make now, particularly in modernization
  and capital investment, to get us to the future with our powder dry and with a full load of beans and
bullets. This is a long, multistep process, but let me cite one area where our vision for the future rests in
                   changing the way things used to be done. That's acquisition reform.

  My top research, development and acquisition leadership have a mandate that the Navy and Marine
  Corps must learn how to develop, build and buy systems according to the most successful industry

    I recently hosted ... the First Annual DoN-CEO [Department of the Navy-Chief Executive Officer]
conference, where our acquisition leadership met with top industry executives to map out our relationship
  for the future. We're breaking new ground in acquisition reform and becoming more innovative and
                                          productive in the process.
 The first major acquisition reform success story is the F/A-18 E/F Super Hornet. It's a program where
     we've used a modern business approach to develop an aircraft that is on-time, on budget and
             underweight -- three crucial elements of the right way to buy military hardware.

  I'm also very pleased about the cost-effective way we're approaching the joint strike fighter, our next
generation aircraft. This program is truly joint. The Navy, Marine Corps and the Air Force all need a new
fighter-attack aircraft by the year 2010. If each service approached this requirement individually, the cost
  would be around $27 billion. By combining forces and funding this project together, 80 percent of the
avionics and electronics will be common. We'll end up with an airframe unique to each service, but that
 can be produced for around $17 billion, saving taxpayers $10 billion in the process. It's a program that
    each service is committed to, and I'm pleased to say that we've engaged the United Kingdom to
            participate in this program as well, improving the economies of scale still further.

  Recently, I moved the senior leadership of the Marine Corps into the Pentagon. For the first time in
history, the commandant of the Marine Corps, his assistant and his leading staff operate in the Pentagon.
 Gen. Chuck Krulak's office is next to mine, just as is the CNO's [chief of naval operations], Adm. Mike
               Boorda. We'll be a more cohesive team and be more cost-effective as well.

  These examples should tell you that there has, in fact, been a paradigm shift in the way we conduct
   business. We are more efficient, more innovative and more productive. Our operational strategy is
aggressive and forward-looking, and the department has matched tactics with technology and equipment.
 These are win-win improvements. But the big winner in this dynamic approach to developing, building,
buying and deploying our forces is the American taxpayer. That's a vision for the future America can take
                                               to the bank.

Frankly, this is what good government is all about. Products stamped with "Made by DoD" should have
 the reputation of being the best around. I really dislike the phrase "good enough for government work."
That was yesterday and a standard that should have never been acceptable. I want the stamp "Made by
       the Navy Department" to be the positive standard to meet -- and we're going to get there.

  It's been my goal for the Navy Department to be a leader in Vice President [Al] Gore's reinvention of
government efforts, and I'm pleased with many of the initiatives that we've developed. The department is
 definitely more efficient, and I point with pride to the fact that in 1994 the Naval Air Systems Command
 won the Presidential Quality Award -- the highest award the president offers to recognize excellence in

   Nowhere is our mission of reinventing government more essential than in our focus on the me and
women who run our Navy-Marine Corps team. So here's my last point, but my No. 1 priority -- our people.

We have the best people serving in the Navy and Marine Corps that we've ever had. I served on active
 duty in the 1960s and early '70s. We had good sailors on our submarines then, but they are so much
   better today. They're better educated, higher quality people who are more interested in community
              service and being good citizens than those when I was a young naval officer.
Thirty years ago, just over 50 percent of our sailors and Marines had high school diplomas. Today, that
 number is over 95 percent. Their test scores are higher, they're smarter, they're better. Just last week I
 was in the Mediterranean visiting with men and women deployed with our ships and squadrons there.
   Their morale is high, they know their mission, and they're proud of what they are doing. These are
                         tremendous men and women doing a very important job.

Don't take my word for it. I'd like to invite you to spend a day with our Navy [on] one of our aircraft carriers
or other ships to see our people and how they got the job done. Or spend a day with our Marines in the
 field at [Marine Corps Base] Quantico [Va.] or Camp Lejeune [N.C.]. I encourage you to come see for
                                    yourself the quality people we have.

I mentioned early on that the Department of the Navy team is a warfighting organization. We prove that
 every day in the ways and places I've already described, and I'm very proud of our accomplishments.
 That said, however, on this Valentine's Day, you shouldn't believe that I think everything is hearts and
                                    roses in the Department of the Navy.

 The simple and often overwhelming fact is that we are also an organization of tremendous cultural and
social responsibilities. America is in an era of peace, however uneasy, and the nonwarfighting aspects of
 the Navy Department naturally have assumed a much more visible role. This in the area where we've
    been in the public eye, and for good reason. We've made some mistakes. And we'll make more.

 The process of change produces a range of side effects, some desirable, others less so. By its nature,
the process is imperfect. My expectation is that this change caused by moving forward will create friction,
throwing off sparks and introducing heat and light to some of the dark corners of the organization. A few
    of these sparks have attracted a great deal of attention. They've been reported on, reviewed and
                   discussed in the public forum. I will tell you that this is a good thing.

 Just like in the rest of our great democracy, open discussion of a Navy problem brings fresh ideas and
 creates fertile ground for chance and improvement. It hurts me -- it hurts the entire team -- when even
 one individual fails to meet our demanding standards of conduct. Yet the process of review that results
            from our shortcomings leads to organizational introspection and corrective action.

   There is certainly a price for identifying problems --embarrassment, wounded egos and self-doubt,
among others -- but that's the nature of change! And the more open the forum, the better environment for
organizational and public feedback. The steady give and take is the critical element in maintaining public
                                        confidence in our institution.

This process of public renewal is fundamental to the traditions of the Navy and Marine Corps. The Navy
  Department has hit patches of stormy water now and then throughout our history. We have, at times,
endured the critical scrutiny of insiders and outsiders alike. But it has attracted that scrutiny for the simple
reason that our standards are so high, that we represent, -- not just in my view, but also in the public's -- a
                      touchstone of extraordinary integrity, character and discipline.

  Now more than ever we are a Navy in transition. For more than 200 years, our combatant force was
essentially all males. Beginning in 1976, we had women entering the Naval Academy and noncombatant
ships. In 1993, women began serving on combatant ships. Today, we have women serving in all types of
                                             ships and aircraft.

  Let me cite one example of how far we've come in the last few years. Just five years ago, we had six
 aircraft carriers fighting in the Gulf War. Not a single one had women embarked. Today, USS Nimitz is
   maintaining the peace off the coast of Kuwait with women serving in nearly every aspect on board.

 But with these remarkable changes has come a change in our culture. In our past, we've done things
which might then have been considered acceptable that are no longer acceptable. Indeed, we must turn
                                    the page on that part of our history.

I'll be the first to tell you not every one of our men and women absorbed the message right away -- they
 didn't. There are some in our service that still don't get it. And that, unfortunately, includes some of our
flag and general officers and senior enlisted personnel. I liken our million-member department -- with an
average age of 24 -- to a 90,000-ton aircraft carrier. We've ordered the course change and the rudder is
                        over at right full, but we can't switch directions on a dime.

    But the message is clear: The Navy and Marine Corps have zero tolerance for any behavior that
threatens the dignity and respect of any individual in this department. When I say zero, that's what I mean.
     Behavior that doesn't conform to the high standard we've set will be identified and disciplined

Thirty years ago, we tackled race issues. Twenty years ago, it was drug use. Now, the Navy Department
         sets the standard with our equal opportunity and our zero-tolerance drug-use policies.

   My goal is to have zero tolerance for sexual harassment and fraternization as well. We are making
 significant strides in that regard. Obviously, our cultural change presents a challenge. I'm confident we
             will meet that challenge, and we'll meet it with honor, courage and commitment.

   Although change will take time, I intend to speed the process along with some long-term, in-house
 remedies. For example, when you look at the behavioral problems we've had, the common element in
 many incidents is alcohol abuse. I've asked Mike Boorda and Chuck Krulak to take a hard look at the
matter and to recommend how we can deglamorize alcohol use. I'll review those recommendations and
will announce some changes in the coming weeks, with the goal of creating a healthier, safer atmosphere
                                               for our people.

I have constantly referred to the importance of our people living up to the standards which go back to the
origins of our Navy, those standards set out by John Paul Jones in describing the qualifications of a naval
                                             officer. He said, ...

 "It is by no means enough that an officer of the Navy should be a capable mariner. He must be that, of
   course, but also a great deal more. He should be as well a gentleman of liberal education, refined
                 manners, punctilious courtesy, and the nicest sense of personal honor."
If John Paul Jones had lived in our time, I'm sure he would provide the same guidance to female officers
                                                as well.

 My point is that the Navy and Marine Corps have always had a tradition of character, so our efforts at
re-emphasizing the need for ethical leadership is not something new. It's our naval heritage. It's strong
individual character that allows teamwork to flourish and ensures that our force is ready and capable to
                              meet any challenge to America's interests.

 If you take away anything from my remarks today, I'd like you to remember this: The Navy and Marine
Corps are committed to lasting change in the way we do business. We are emphasizing our tradition of
     strong character and ethical behavior. This renewal of our core values of honor, courage and
 commitment is a crucial part of the military's self-help cycle. The Navy Department is stronger for the
change. We are poised to remain the pre-eminent military force, the force of choice for the our nation's
                                     leaders, for decades to come.

   Thank you for giving me this opportunity to speak to you. God bless you and God bless America.
              Six Emerging Trends in Information
Address by Emmett Paige Jr., assistant secretary of defense for command, control, communications and
  intelligence, at the American Defense Preparedness Association's Information Management for the
                           Warfighter Symposium, Vienna, Va., Feb. 29, 1996.

 Good morning. ... The topic of this symposium, "Information Management for the Warfighter," I believe
should be the assumed nature of all information systems for the Department of Defense. It may be that
our warfighters are being called upon to be peacekeepers, but peace is only enforceable when backed by
                                    the clout of warfighting capabilities.

As Dr. Martin Luther King Jr. reminded us in his letter from the Birmingham jail, "Injustice anywhere is a
threat to justice everywhere." Indeed, in peacekeeping and humanitarian relief, as well as in warfighting,
                             our nation's capabilities must be second to none.

 This means that we must maintain our edge in weaponry, in training, in motivation and in technology.

As we track our progress in Bosnia -- and information on that progress is openly and readily available to
everyone through DoD's BosniaLINK on the Internet -- we are reminded of the fortitude and dedication of
                                      our men and women in the field.

The Internet was also the medium in December for the wide dissemination of a poem about Santa Claus
 being reminded that he was safe to deliver gifts because of the American military presence around the

   The Internet is a prime example of technology research funded and fostered by the Department of
 Defense that has come to have massive payback to all aspects of our society. The idea started in the
 1960s with the intent of having a computer communications network that would have no single point of

In 1969, the ARPANET [Advanced Research Projects Agency network] was begun by DoD for research
in data networking. It began with four nodes, all of which were within the research realm. Now the number
          of users totals in the millions, and yet the Internet is still seen as being in its infancy.

 Industry and entrepreneurs are running with the ball, but we didn't get to this point by just following the
philosophy of letting a thousand flowers bloom. It started with a vision that at the time seemed far-fetched
                                              or of limited use.

    President Clinton recently released a white paper detailing how investments in technology drive
  economic growth, generate new knowledge, create new jobs and improve our quality of life. He also
  emphasized that advances in technology are essential to sustaining our national security. It is these
national security aspects that I would like for us to keep uppermost in our minds today -- and throughout
                                  this symposium -- and into the future.

 As we do our planning for the future of our nation's security, we in the DoD and industry must be both
  practical people and dreamers at the same time. While we in DoD must do rigorous analyses of our
requirements and mission needs, we must also envision defensive and offensive capabilities that do not
exist but that we believe are attainable. And we must do this in these times of austere resource levels to
                                         operate our government.

I would like to cover with you today some of the future capabilities in the information systems arena that
 have been identified as focus areas. These are areas that we believe should be exploited to our future
                                       national security strategies.

 Our warfighters need to be able to maintain near-perfect, real-time knowledge of an adversary and to
communicate that knowledge to all forces in near-real time. Note that I did not say deliver the information.
                                           I said communicate.

This means we must not only have the mechanisms to obtain, assimilate and distribute information, we
must have the ability to filter it according to the recipients' needs. And we must be able to discern which
   information and intelligence must be made most readily available to which combatants or potential

We must have all our forces and coalition partners share information with great ease, but this information
must be secure, timely and accurate. We are placing higher priority on our information security initiatives,
   and this increased emphasis is shown in our increases in funding levels for these programs for the
                                    immediate and foreseeable future.

    Protection of information is a high priority, and so is harmonization. We have set into motion the
  mechanism to establish a single, unifying DoD technical architecture that will become binding on all
   future DoD C4I [command, control, communications, computers and intelligence] acquisitions and
                                           development efforts.

We are having to move away from our legacy of dissimilar systems and architectures. We need to have
systems that are born joint and interoperable. Our architecture working groups are setting up the genetic
                                    blueprints for those new systems.

  The need for interoperability and integration of C4I capabilities, along with those for surveillance and
  reconnaissance, are recognized at the highest levels of the department. In October 1995, the deputy
    secretary of defense directed the establishment of a DoD-wide C4I integrated product team. C3I
  [command, control, communications and intelligence] is the sponsor, organizer and manager of the

 The effort has evolved to become the C4ISR [surveillence and reconnaissance] integration task force
 and has already produced results in identifying proposals that are "low-hanging fruit." Most notable of
     these are the C4ISR decision support center and the complementary joint C4ISR battle center.
Efforts such as these can be best understood within the context of overall defense planning. The director
of the joint staff, in December 1995, forwarded to the secretary of defense a joint planning document that
identifies warfighting capabilities needed for the future and for related R&D [research and development]

 It identified 12 emerging trends for achieving future joint warfighting objectives. Of the 12, half of these
                                     are information system capabilities. These are:

                  Dominant battlespace knowledge. This requires the totality of C4ISR capabilities to work
                 together in a seamless fashion to acquire and assimilate information needed to dominate and
                                                    neutralize adversary forces.
                  The next is precision force. This capability to destroy selected targets with precision -- yet
                limiting collateral damage to the fullest extent possible -- requires advances in sensor guidance
                 and control. Additionally, sensor-to-shooter C4I enhancements are necessary for responsive,
                                                      timely force application.
               A key capability that must be enhanced is combat identification. We must have the capability for
                assured, reliable identification, friend or foe. These decisions must be made quickly enough to
                do good and not so quickly as to do harm. This thorny issue has been around as long as there
                                                      have been combatants.
               This brings us to electronic warfare. This includes capabilities for deceiving or disrupting, as well
                as destroying, the surveillance and command control systems that go along with an opponent's
                Information warfare is another leading, emerging trend. This is both offensive and defensive.
                 We must have the ability to affect adversary information and their information systems, while
                            leveraging and protecting our own information and information systems.
               Another important emerging trend is for real-time logistics control. This is an information window
                into the innermost workings of the entire logistics support structure. It includes both total asset
                     visibility across service and agency lines and in-transit visibility throughout all forms of

 We must bring all these capabilities together, so we will pursue the global command control system as
our core C2 [command and control] capability for the 21st century. We will continue to build the Defense
  Information Systems Network, the Defense Messaging System and MILSTAR [Military Strategic and
                                            Tactical Relay System] programs.

  We must also turn to the commercial sector for many vital information capabilities: selected satellite
        capabilities; mobile, personal communications services; and the commercial global fiber grid.

     The expansion of DoD's use of commercial assets and capabilities was well articulated by the
                                commission on roles and missions of the armed forces.

 The commission pointed out, and I staunchly agree, that outsourcing is a valuable tool to refocus our
  attention and resources on our core competencies, increase efficiencies, save money and enhance
 effectiveness. There are many companies out there who have a longstanding, excellent reputation for
providing information processing services in a cost-effective, reliable manner. Couple this with my views

            Our data centers do not have a compelling need to be operated and maintained by military or
                                                    civil servants;
              In-house O&M [operations and maintenance] is not necessary for national defense; and
              We would very likely achieve significant savings if these operations were contracted out.

   I firmly believe that many of our data center operations can and should be outsourced, I am doing
 everything I can to make this a reality. Prior to the commission's recommendation on outsourcing data
 center operations, I requested that the director of the Defense Information Systems Agency conduct a
study, focusing on the 16 defense megacenters that are owned and operated by DISA. We just received
a report of the results of the study, and we are currently reviewing these results in conjunction with DISA.

     Let me now turn your attention to software. I am a strong advocate for the use of commercial,
off-the-shelf software. Why? Because it makes good business sense and common sense to use COTS

Simply put, we will use COTS software, whenever it exists, to satisfy DoD requirements. However, it must
   indeed be a commercial product already in use, with a proven track record and a market demand.

   In those cases where no COTS solution exists and DoD must develop new codes for which we are
  responsible for life-cycle maintenance and support, we will write it in ADA. This includes the code for
   interfacing among COTS packages and for interfacing among systems supporting various defense
functions. This policy applies to all -- let me repeat, all -- software-driven systems regardless of functions

As you can see from all the information-related capabilities that are deemed to be crucial to our nation's
defense, we cannot afford to squander resources on software that are not interoperable or are unreliable.

   We must proceed with all due haste, but we must proceed methodically. President Truman told us,
"Patience must be our watchword if we are to have world peace." Patience must also be our watchword if
     we are to have interoperable, seamless, robust C4 capabilities for all of our peacekeepers and

We must work together for results. This is especially true for information management programs, where
 there is all too often the urge to charge individually ahead of the pack, rather than work cooperatively
                   toward a more solid and lasting foundation for all programs concerned.

  We have accomplished much together already. We have re-engineered many processes away from
service-unique stovepipes to being truly joint. But we are just scratching the surface on what can be done.
              We are just at the beginning of exploiting information systems for our warfighers.
I thank you for your kind attention this morning. I would be glad to entertain your questions.
              Improving the Combat Edge Through
                                    A DoD report, released March 1996.

          In the post-Cold War era, the Department of Defense must meet three major challenges:

             Readiness -- Our fighting forces must be prepared at all times to respond to threats to our
              national security interests anywhere in the world, participate in peacekeeping efforts and
             provide humanitarian assistance. Readiness has been, and must remain, the department's
                                                    highest priority.
           Quality of life -- Readiness depends on attracting top quality people and retaining them after
               they have developed technical and leadership skills. To do so, DoD must offer not only
           challenging and rewarding work, but also an appropriate quality of life, which encompasses the
           entire package of compensation, benefits and work and living environments for military service
            Modernization -- Modernizing our forces is imperative for future readiness. The department
           must increase investment to develop and acquire the weapons that will ensure our technological

DoD can meet these challenges today and free up the additional resources required for modernization in
   the future by managing its internal operations and particularly its support activities more efficiently.

Support activities, broadly defined, represent a sizable portion of the defense budget. In FY [fiscal year]
 1996, DoD will spend approximately $93 billion on operations and maintenance. These activities were
  largely established and organized during the Cold War when DoD had to depend predominantly on
     organic support. Such support was driven by the possibility of an extended conflict with a rival
                  superpower and a less sophisticated private, commercial infrastructure.

Like the best companies and organizations in the United States, DoD has embarked on a systematic and
           vigorous effort to reduce the cost and improve the performance of its support activities.

 This report describes our initiative to determine where outsourcing, privatization and competition can
 lower costs and improve readiness. (In this report, outsourcing is defined as the transfer of a function
  previously performed in-house to an outside provider. Privatization is a subset of outsourcing which
 involves the transfer or sale of government assets to the private sector.) It is submitted in response to
   Section 357 of the National Defense Authorization Act for Fiscal Year 1996, Public Law 104-106.
 Our success in ending the Cold War has ushered in sweeping changes to the Department of Defense.
  The United States no longer faces a long and protracted conflict with a rival superpower. Instead, we
 must be prepared to fight and win two nearly simultaneous regional conflicts. These conflicts are often
described as "come as you are" wars, meaning that there will be little lead time for mobilization or surge
of production capability. They will require rapid transportation, tailored and flexible maintenance support
                             and greater reliance on private sector suppliers.

   These conflicts will be technology intensive. Technology has improved our lethality, precision and
  mobility. As a result, victory will require dominating flows of information and communication. As our
warfighting scenarios have changed, so too have attendant support functions. Best business practices,
 tempered by risk and threat assessments, must be used to determine where outsourcing, privatization
                    and competition can improve the performance of these activities.

 With the end of the Cold War, the Department of Defense has tailored its force structure and budget to
meet the changed security threats. DoD's force structure today is roughly 30 percent smaller than it was
in the 1980s. Our budget has also declined to about 60 percent (in real terms) of its peak in 1985. In FY
    1997, DoD's budget amounts to $243 billion. Within this budget, the department must meet three

    Readiness. During this drawdown of forces and budget, the department provided full funding for
  readiness. The department's actions ensured that U.S. forces have remained ready and prepared to
  defeat any adversary and perform required missions to meet our national security objectives. As the
                      drawdown comes to an end, readiness indicators remain high.

 Quality of Life. The quality of life for our military personnel is a paramount ingredient to attracting and
retaining a dedicated, motivated force. The department recognizes that a broad spectrum of services is
required to meet the needs of service members and their families. The department has therefore placed
  a high priority on ensuring that our personnel are adequately paid, housed and otherwise supported.

 Modernization. The U.S. armed forces are the best equipped in the world. As the department's overall
budget fell in the past decade, DoD reduced resources allocated to the purchase of new equipment and
  the modification and upgrade of existing systems. Between 1985 and 1996, the procurement budget
declined by about 68 percent in real terms. In FY 1996, the department's procurement budget totaled $43

  This reduction in the procurement budget came at little risk to our fighting forces. In fact, the armed
services were able to maintain the average age of most weapons in the hands of the fighting forces, even
 though they bought fewer new systems, by discarding their oldest equipment and redistributing newer
equipment throughout the smaller force structure. However, this process is ending, and new equipment
 must be purchased. In addition, new technologies are now emerging that will dramatically increase the
   capabilities of our forces. In the coming years, therefore, the department must increase funding for
               procurement to ensure our continued technological superiority in the future.

The commitment to reduce the federal deficit to zero by the year 2002 means that the department cannot
responsibly plan its future budget needs with the expectation of a significant sustained increase in its real
"top line." Solutions to our funding challenge must be found within our current and projected (i.e. FYDP
[Future Years Defense Program]) budget top line. To this end, DoD has initiated a series of initiatives to
     increase the efficiency of its operations in order to gain more value for every dollar expended.

 First, the department has significantly reduced infrastructure costs through the base realignment and
 closure process. In FY 1996, the BRAC budget crossed over from a net loss on DoD budgets to a net
surplus. Over the next five years, BRAC will generate net savings of $17.8 billion. DoD estimates that the
   results of the four rounds of base closures and realignments, when fully implemented, will produce
                                   annual savings of about $5.5 billion.

   Second, the department has initiated a thorough reform of the acquisition process. Over the years,
     numerous blue ribbon panels and commissions have proposed reforming the defense-unique,
   slow-moving and thus expensive acquisition system. Today, we are implementing those changes.

 The Federal Acquisition Streamlining Act of 1994, the Federal Acquisition Reform Act of 1996 and the
  recently signed DoD Directive 5000.1 and DoD Regulation 5000.2 will enable significant changes to
DoD's procurement of goods and services. These initiatives, now in place, are beginning to show results
                    and will lead to substantial efficiencies and savings in the future.

Third, the department is now beginning a systematic review of its support operations to determine where
    competitive forces can improve overall performance at lower cost. Outsourcing, privatization and
 business re-engineering offer significant opportunities to generate much of the savings necessary for
                                      modernization and readiness.

Summarizing the challenge for the DoD, [Army] Gen. John Shalikashvili, the chairman of the Joint Chiefs
 of Staff, recently told the Senate Armed Services Committee that increasing funding for modernization
 will take tough management decisions, innovation and even revolutionary approaches, as well as your
continued support to accomplish this challenging task within our top line budget projections. One answer
                  lies in aggressively pursuing institutional and business opportunities.

 We must continue to push with all energy acquisition reforms, commercial off-the-shelf opportunities,
       privatization, outsourcing of non-core activities and further reductions of our infrastructure.

   The purpose of the department's initiative is to sustain or improve readiness, generate savings for
           modernization and improve the quality and efficiency of support to the warfighters.

    To achieve these goals, the deputy secretary of defense established a comprehensive, ongoing
   DoD-wide review to identify functions that could be outsourced, analyze them to determine where
 outsourcing is cost effective and begin the outsourcing process. The review involves the senior civilian
and military leadership in the military departments, defense agencies and the Office of the Secretary of

     Outsourcing, privatization and competition offer the prospect of lowering costs and improving
performance across a wide range of support activities. The department's total budget for operations and
support activities in FY 1996 amounts to approximately $93 billion. Such activities will only be considered
                            for outsourcing or privatization when they meet three conditions:

First, private sector firms must be able to perform the activity and meet our warfighting mission. DoD will
                        not consider outsourcing activities which constitute our core capabilities.

Second, a competitive commercial market must exist for the activity. Market forces drive organizations to
 improve quality, increase efficiency and reduce costs. DoD will gain from outsourcing and competition
                            when there is an incentive for continuous service improvement.

   Third, outsourcing the activity must result in best value for the government and therefore the U.S.
    taxpayer. Activities will be considered for outsourcing only when the private sector can improve
                          performance or lower costs in the context of long-term competition.

  Analyses of department activities are still under way. These assessments will likely determine that a
    number of activities are not appropriate candidates for outsourcing or competition. However, the
remaining pool of candidates will be sizable, and we expect that the potential for increased savings and
         improved performance will be significant, amounting to billions of dollars on an annual basis.

    These savings will directly benefit modernization. To make this connection clear and to provide
         appropriate incentives to the military departments, the deputy secretary of defense signed a
 memorandum on Feb. 26, 1996, stating that the DoD components will not have their outyear budgets
  reduced as a result of the savings they create through their initiatives, and that these savings should
                                                 benefit modernization.

   DoD stands to create the most significant savings and improve readiness when it can augment its
    internal capabilities with those available from competitive commercial markets. Outsourcing can

                 Competitive forces. Competition drives organizations to improve quality, increase efficiency,
                 reduce costs and better focus on their customers' needs over time. For DoD, competition can
                 lead to more rapid delivery of better products and services to the warfighter, thereby increasing
                Flexibility. Outsourcing provides managers with flexibility to determine the appropriate size and
                   composition of the resources needed to complete tasks over time as the situation changes.
                 Economies of scale and specialization. Firms that specialize in specific services generate a
                  relatively larger business volume, which allows them to take advantage of scale economies.
                 Often these economies of scale mean that specialized service firms can operate and maintain
                 state-of-the-art systems more cost effectively than other firms or the government. Outsourcing
                   to such firms provides a means for the government to take advantage of technologies and
                           systems that the government itself cannot acquire or operate economically.
                   Better management focus. In recent years, our nation's most successful companies have
                 focused intensively on their core competencies -- those activities that give them a competitive
           edge -- and outsourced support activities. The activities that have been outsourced remain
          important to success, but are not at the heart of the organization's mission. Business analysts
          frequently highlight the fact that the attention of an organization's leaders is a scarce resource
               that should be allocated wisely. This is equally true for the Department of Defense.

 The benefits of outsourcing and competition are apparent every day in our national economy; they are
  not theoretical or based on uncertain assumptions. Companies report that outsourcing provides the
   desired benefits. It enables the firms to focus on their core competencies; improve service quality,
  responsiveness and agility; obtain access to new technologies; and employ more efficient business

Over the past two decades, competitive forces in the private sector have revolutionized how companies
     obtain services. Entire new industries -- and companies -- have grown to meet this demand for
specialized services across a range of functions: aircraft and ship maintenance, inventory management,
accounting and finance, internal audit, data center operations, software maintenance, computer network
 support, applications development, telecommunications, transportation services, facility management
 and benefits administration. In 1996, these service industries will generate an estimated $100 billion in

  Surveys performed by a range of organizations for different purposes all document the trend to more
                                        outsourcing. For example:

 A 1994 study conducted by Pitney-Bowes Management Services found that 77 percent of 100 Fortune
            500 firms surveyed outsourced some aspect of their business support services.

A 1992 study of 1,200 companies conducted by the Outsourcing Institute found that 50 percent of firms
  with information technology budgets over $5 million are either outsourcing or actively considering it.

A 1994 study conducted by KPMG-Peat Marwick of 309 Fortune 1,000 companies found that 48 percent
                                   outsourced warehousing functions.

   A 1994 study conducted by the Olsten Corp. of 400 firms found that 45 percent outsourced payroll
                                         management functions.

 The experiences of individual companies further illustrate the prevalence of outsourcing in the private
 sector. Canon guarantees photocopier replacement within 24 hours, but outsources the delivery of this
   service. Avis operates one of the largest data processing systems in the world to handle rental car
    reservations, but outsources the data processing of its payroll. Chrysler manufactures engines,
transmissions and exterior body skins internally, but outsources the remaining 70 percent of final product
                 content. Similar examples exist in every successful American industry.

  Many state and local governments carry out effective programs to take advantage of the benefits of
competition. Chicago, Indianapolis, Los Angeles, Philadelphia and San Francisco, among others, have
                 used competition and outsourcing to improve services and lower costs.
  Within the Department of Defense, experience demonstrates that competition and outsourcing have
yielded both significant savings and increased readiness for each of the military services. As a result of
cost comparisons conducted between 1978 and 1994 (under OMB [Ofrfice of Management and Budget]
Circular A-76, the federal guidance on performance of commercial activities), the department now saves
 about $1.5 billion a year. On average, these competitions have reduced annual operating costs by 31
  percent. (Private-sector entities won about half of these competitions; government activities won the
  other half.) The consistency of these results highlights the potential benefits to the department from
          opening up a significant portion of the operations and support budget to competition.

 These benefits have accrued across the range of DoD support activities. In aggregate, DoD currently
outsources approximately 25 percent of base commercial activities, 28 percent of depot maintenance, 10
 percent of finance and accounting, 70 percent of Army aviation training, 45 percent of surplus property
 disposal and 33 percent of parts distribution, as well as substantial portions of other functions. Indeed,
virtually every support function that the department carries out is provided by the private sector at some

   The Defense Logistics Agency's Direct Vendor Delivery and Prime Vendor programs illustrate the
 savings and improvements in readiness that DoD has achieved through business re-engineering and
 outsourcing. Under these programs, suppliers deliver products directly to their DoD customers rather
                   than to a DoD warehouse for storage and subsequent distribution.

   The programs have made a tangible contribution to readiness: Reducing the need for DoD's own
warehousing and transportation allows DLA to deliver supplies to warfighters cheaper and faster. In the
   case of pharmaceuticals, for example, DoD customers now receive their requested goods 75 to 90
percent faster (within 24 hours) and 25 to 35 percent cheaper. These programs not only save resources,
                                           but do the job better.

There are numerous other examples of outsourcing's beneficial results. The Air Force has successfully
 outsourced all support functions at Vance Air Force Base [Okla.] and several bases overseas. The Air
Force also contracts for maintenance for the KC-10 and F-117 aircraft and for software in the B-1 and B-2
aircraft. The Army has created a government-industry team to upgrade the Paladin artillery system. The
   Navy outsources a substantial amount of ship repair, including maintenance on its most advanced
                                           surface combatants.

  To maintain readiness and generate the resources required for modernization, the department must
continue on this path and, where appropriate, draw on the competitive forces found in the private sector.
 We cannot afford in either economic or military terms to perform the myriad of support functions in the
                                         absence of competition.

  The department's review has focused to date on six areas: materiel management, base commercial
    activities, depot maintenance, finance and accounting, education and training, and data centers.

 Building on the successes demonstrated by the Defense Logistics Agency's Prime Vendor and Direct
    Vendor Delivery programs, DoD has initiated a thorough review of materiel management which
 encompasses the actions by which DoD manages its supply system. (Materiel management includes
functions such as provisioning, cataloging, requirements determination, asset management, distribution
and disposal.) Our review is focused primarily on three functions that account for a significant portion of
the materiel management budget: disposal operations, distribution depots and inventory control points.

Disposal Operations. DoD disposes of surplus or worn out equipment and other materiel -- valued at $24
 billion last year -- through transfers to eligible users (e.g., state and local governments) or sales to the
  public. We expect that the department's re-engineering efforts will permit placing many government
                            disposal services in the competitive marketplace.

In 1996 and 1997, for example, DoD plans to re-engineer and/or privatize the sales of excess trucks and
 trailers, medical and dental equipment, and power distribution equipment, as well as various functions
  supporting those disposal operations. Such actions are estimated to increase revenues from surplus
   property sales by as much as 50 percent, decrease operating costs by more than 10 percent and
         significantly reduce the need for new capital investment for property disposal functions.

   Distribution Depots. In 1997, the department plans, on a pilot basis, to privatize all functions at the
  distribution depots in Sacramento, Calif., and San Antonio, Texas.(Report of the 1995 Defense Base
   Closure and Realignment Commission and the July 8, 1995, letter from its chairman to the deputy
secretary of defense.) In order to take advantage of recent improvements in the state-of-the-art physical
distribution technology, DoD will encourage contractors at both sites to re-engineer the distribution depot
     business processes and evaluate the results for potential expansion to other distribution sites.

    Inventory Control Points. Later this spring, the department will complete the initial business case
analyses for the armed services' inventory control points. This study will enable the department to identify
                                      high pay-off/low risk functions.

Base commercial activities refer to those functions that are necessary to support, operate and maintain
   DoD installations -- such as facilities maintenance, food services, local transportation and vehicle
               maintenance. DoD currently outsources about 25 percent of this workload.

At the present time, DoD components are conducting cost comparisons -- studies that compare the cost
  of the government's most efficient organization with the cost of performance by private contractors --
encompassing about 150 functions at many different locations. Over the next two years, the department
expects to expand greatly the number of functions and locations being studied in search of opportunities
                                 to lower costs and improve performance.

The department's depot maintenance policy focuses on maintaining core capabilities in organic facilities.
    The core concept ensures that critical warfighting capabilities remain under the direct control of
 warfighters. In the area of depot maintenance, core capabilities consist of the facilities, equipment and
skilled personnel necessary to ensure a ready and controlled source of technical competence to meet the
                               Joint Chiefs of Staff's contingency scenarios.

    Subjecting noncore depot maintenance to the forces of competition will lower costs and improve
  readiness. Reliance on the private sector in this manner complements, but does not replace, organic
 capabilities. Further discussion of the department's core policy and details of how DoD calculates core
   are provided in two accompanying reports submitted to the Congress. (Section 311 of the National
    Defense Authorization Act for Fiscal Year 1996 requires the two accompanying reports: one on
  comprehensive maintenance policy and another on the depot maintenance workloads, including the
   allocation of work between the department's own depots and the private sector. DoD is submitting
    separately a report on depot maintenance personnel that is required by Section 312 of that act.)

 DoD has initiated a robust campaign to increase use of the IMPAC (International Merchants Purchase
 Authorization Card) purchasing card. The IMPAC is a VISA card issued by the Rocky Mountain Bank
Card System under a contract with the General Services Administration and used throughout the federal

   Greater use of the card (permitted by the Federal Acquisition Streamlining Act) would dramatically
 reduce acquisition cycle time and the paperwork associated with making and paying for procurement
actions, thus reducing costs and improving timeliness. One study of purchases below $25,000 within the
   Defense Logistics Agency estimated that use of the IMPAC card instead of purchase orders would
 reduce administrative expenses by over $70 million in a five-year period. In a second study, use of the
   IMPAC card to purchase automated data processing equipment reduced procurement cycle time
               (requisition to delivery) from an average of 29 days to less than five days.

The department needs to re-engineer some of its internal processes so that it can make maximum use of
  the IMPAC card's potential for reducing costs. Expanding use of the IMPAC card requires improved
    communication, coordination and business practices in DoD's financial, logistics and acquisition

  The department has established two teams to identify barriers and propose solutions: an Integrated
Policy Team reporting to the deputy undersecretary of defense (acquisition reform), and a Purchase Card
Financial Management Team, reporting to the undersecretary of defense (comptroller). These groups will
                                   complete their work this summer.

The department has announced A-76 cost comparisons in three finance and accounting areas: debt and
claims management; facilities, logistics and administrative support at Defense Finance and Accounting
Service sites; and bill paying for the Defense Commissary Agency. As required by the National Defense
      Authorization Act for 1996, the department plans to carry out a pilot program for outsourcing
     nonappropriated accounting and by Oct. 1, 1996, complete a plan for outsourcing civilian pay.

   The department has also started to build an entirely new travel system using the best commercial
 practices. This system will streamline and improve the efficiency of the travel process through greater
 reliance on the private sector and commercial automation technologies. Opportunities for privatization
include increased use of full-service commercial travel offices, use of off-the-shelf software and the use
                                      of a commercial travel card.

The Gulf War demonstrated the increasing role of technology in the art of war. Such technology demands
 highly trained personnel in both operating and supporting roles, placing a premium on widespread and
                                         cost effective training.
    Technology has also changed teaching and training methodologies. Selected individual training
programs can now be delivered through the use of telecommunications at remote locations -- a process
 termed distance learning. Increasing the use of these advanced learning technologies can reduce the
                  need for more expensive classroom training at centralized locations.

The department is evaluating how these new technologies affect training requirements and how private
sector providers can help the department in this area. The department has met with industry to determine
           if it can adopt successful training management strategies from the private sector.

Over the last several years, DoD has achieved substantial economies and efficiencies in its data center
   operations, Through the base realignment and closure process, the Defense Information Systems
Agency is consolidating from 59 data centers to 16 larger defense megacenters. DoD estimates that this
consolidation, scheduled to be completed late in 1996, will produce net savings of $474 million from FY
  1994 through FY 1999, produce $208 million in annual steady state savings thereafter and eliminate
                                         2,400 civilian positions.

  As a result of these consolidations and associated process re-engineering actions, 57 percent of the
     operating budget for DMCs in FY 1996 will be for contracted services. Further analysis of the
department's activities in this area will be submitted to Congress, as requested by the Conference Report
                   on HR 2126, the Department of Defense Appropriations Act, 1996.

The department is also assessing opportunities for achieving economies and efficiencies in data center
 operations within the purview of the military departments. These actions will take place under Office of
           Management and Budget Bulletin 96-02, "Consolidation of Agency Data Centers."

Increasing the level of competition could prove valuable for many other DoD commercial functions. DoD
                         will continue to evaluate opportunities for outsourcing.

 In order for the department's initiative to be fully successful, DoD must make changes to its traditional
  approach to contracting for services. Early investigation or market research of services that may be
 available from the private sector is paramount. Frequently, the department has prepared statements of
              work for bid before or without surveying the capabilities of the marketplace.

Similarly, well written, performance-based statements of work that contain output-oriented measures of
  performance are essential. DoD's statements of work have traditionally focused on inputs or detailed
specifications and in many cases failed to provide a basis for evaluating contractor performance. These
changes in the department's approach to contracting for services are part of our ongoing effort to reform
          the acquisition process and related training provided to DoD's acquisition workforce.

The Department of Defense employs the same superior talent in its civilian workforce as in the military;
         indeed, DoD civilians consistently demonstrate impressive capabilities and dedication.

To the extent that activities are transferred outside the department, employees will face dislocation. The
department is committed to making the transition as humane as possible. DoD actions significantly eased
                    such transitions during the recent drawdown and BRAC rounds.
 Procurement regulations [Federal Acquisition Regulation 7.305(c) and 52-207-3] include a right of first
refusal provision that is required for solicitations that may result in a conversion from in-house to contract

 The department's well-established Priority Placement Program continues to find new positions for over
  900 employees a month, thereby retaining valuable investments in human capital. Also, the Defense
Outplacement Referral System makes the resumes of DoD civilians and military available to over 18,000
                                         private sector employers.

 DoD makes very effective use of Voluntary Early Retirement Authority, which enables people to enter
    retirement comfortably under a variety of situations. Also, the department created the Voluntary
Separation Incentive Payment, better known as the buyout. This congressionally approved program has
  been used by over 78,000 employees, thereby avoiding a like number of layoffs. Between PPP and
  buyouts, the department has been able to hold involuntary separations to less than 9 percent of the
                                positions eliminated over the past six years.

To make our employees affected by base realignments and closures more attractive job candidates, the
department sought and received congressional approval for the Nonfederal Hiring Incentive. Initiated last
 fall, this program enables managers to provide funds for retraining and relocating DoD employees that
they keep on the payroll for at least a year. On other fronts, the department provides retraining to enable
 people to qualify for licenses and certificates needed to do their current jobs when they transfer to the
                                               private sector.

   The FY 1996 National Defense Authorization Act [Sections 1033 through 1036] provided additional
  flexibility by removing the 120-day limit on details at closing or realigning installations, permitting the
payment of severance amounts in a lump sum rather than biweekly, providing continuing health coverage
  for employees facing a layoff and permitting individuals in similar occupations to volunteer to replace
                                     others on reduction-in-force lists.

These initiatives are successful, but the department recognizes that further changes are needed to ease
  the transition while promoting workplace stability. To that end, it is encouraging suggestions for such
          changes from employee unions, professional associations and all of the components.

 Outsourcing, privatization and competition are topics that spotlight sometimes conflicting goals among
  DoD components, employees and contractors. To maintain an appropriate balance, the department
recognizes that all such efforts need to motivate employees to maintain readiness, retain sufficient talent
   to complete future missions and recognize the factors that historically have drawn people to public

From the beginning of its outsourcing initiative in August 1995, the department has actively sought input
from private industry. DoD recognizes that it can learn a great deal from industry's extensive outsourcing

  In November 1995, the department commissioned a Defense Science Board task force to ascertain
    which activities DoD is currently doing that could be performed by the private sector with greater
      efficiency at lower cost with higher quality. Companies, outside analysts and numerous DoD
organizations have briefed the task force. The department expects the task force to issue its report in late
                                                    April 1996.

In addition, a coalition of 10 industry associations [Aerospace Industries Association, American Defense
   Preparedness Association, American Electronics Association, American Shipbuilding Association,
Contract Services Association, Electronic Industries Association, National Security Industrial Association,
 Professional Services Council, Shipbuilders Council of America and the U.S. Chamber of Commerce]
  has provided the department with their views and analysis on outsourcing issues. The coalition has
                              offered valuable information on how industry:

                             Selects functions for outsourcing or retention in house;
                                               Chooses external suppliers;
                                            Writes appropriate contract terms;
                                         Monitors supplier performance; and
         Assesses the results in terms of cost savings, improved efficiency, enhanced capabilities and
                                                  other potential benefits.

  DoD also met with numerous industry representatives and other experts to discuss their outsourcing
experiences and opportunities for further outsourcing by the department. In addition, the department has
discussed its outsourcing initiative with representatives from the Office of Management and Budget and
the General Accounting Office. We have also consulted with the United States Chamber of Commerce,
   the National Association of Women Business Owners, the National Minority Supplier Development
  Council, the National Industries for the Blind and other organizations. DoD will continue to work with
                                        these and other organizations.

 DoD has consulted and will continue to consult with federal employees at a variety of levels. Under the
 federal government's commercial activities program, for example, DoD policy calls for employees and
their union representatives to be notified and involved during the development, preparation and review of
                        performance work statements and management studies.

  At the department level, DoD has two avenues for consultation with unions. First, eight major unions
have national consultation rights with the department. DoD provides these unions with any revisions to its
policies affecting civilian employees and considers their views regarding such revisions. Second, seven
 of these unions are Defense Partnership Council members. DoD officials have provided information to
DPC representatives on DoD's outsourcing and privatization initiatives. The department expects the DPC
                                       to stay involved in these matters.

 There are active labor-management partnerships at many activities throughout the department where
unions have bargaining rights. The partnerships are working together on various initiatives, such as those
                                concerning outsourcing and privatization.
For example, American Federation of Government Employee officials and Kelly Air Force Base [Texas]
 managers formed a successful partnership recently, which was recognized with a National Partnership
   Award Honorable Mention Citation presented by Vice President [Albert] Gore. Similarly, union and
management representatives at McClellan Air Force Base [Calif.] are members of the Mission McClellan
 Executive Advisory Committee, which advises on matters related to the privatization and conversion of
                                                the base.

Several statutes state a preference for private performance of commercial activities. Section 2462 of Title
  10, United States Code, requires the department to obtain services from private firms when they can
provide them at lower cost. Section 357 of the National Defense Authorization Act for Fiscal Year 1996
 requires the secretary of defense to endeavor to obtain commercial products and services from private
                                             sector sources.

Achieving the department's goal -- relying more on outsourcing, privatization and competition to generate
   savings for modernization and improve readiness -- is hindered by several statutory and regulatory
   provisions. Despite the clear policy statement in Section 2462, a variety of other laws, singly or in
  combination, have complicated, delayed or discouraged outsourcing, privatization and competition.

  DoD's depot maintenance policy is to conduct only the minimum workload at organic facilities that is
necessary to preserve core capabilities. For other depot work, DoD believes drawing on the capabilities
 of the private sector could lead to more efficient operations. Balancing public and private sector depot
  maintenance workload would minimize costs and ensure requisite readiness. Provisions of law that
                                  impede achieving these benefits are:

                         Section 2466 of Title 10, United States Code -- the 60-40 rule.

  The department has established a core depot maintenance policy based on maintenance capability
requirements that are calculated to meet the department's warfighting needs in the scenarios approved
                                       by the Joint Chiefs of Staff.

Necessary depot-level workloads are then identified to sustain those capability requirements. In this way,
 the department can ensure that the personnel, equipment and facilities necessary to support essential
  core requirements are being maintained. (A more detailed discussion of the department's core depot
maintenance policy is included in the accompanying report submitted pursuant to Section 311 of the FY
                                     96 Defense Authorization Act.)

 In contrast, Section 2466 establishes an arbitrary percentage (60 percent) of depot maintenance that
 must be accomplished by federal employees. The 60-40 split limits the department's ability to manage
                      depot maintenance in an efficient and cost-effective manner.

                    Section 2464 of Title 10, United States Code -- core logistics functions.
    Assuring victory at war demands minimizing risk for both operations and support. Therefore, the
department must determine which logistics capabilities are truly core to its warfighting mission and keep
                              those core capabilities under its direct control.

 Sustaining core capabilities does not mean that all maintenance on mission-essential equipment must
 take place in organic facilities. Maintenance of mission-essential equipment can be and is outsourced
successfully. Examples include various types of maintenance for the B-1, B-2, F-117, KC-10, U-2 aircraft
                                 and numerous surface combatant ships.

    Private firms should be considered to perform depot work when such work can be done at low or
    acceptable risk to the warfighting mission and provide best value to the department. Introducing
competition among private firms for depot work that is not required to sustain core capabilities will reduce
                                         cost and improve quality.

Core assessments need to be based on a consistent methodology involving assessments of both threats
    and risks. It is department policy to review every two years core requirements and the workloads
                                  necessary to sustain those capabilities.

 Section 2464, by contrast, arbitrarily defines core in terms of workload performed at specified facilities.
 This creates an artificial constraint that reduces the department's ability to manage effectively its depot
                                   maintenance activities and facilities.

                       Section 2469 of Title 10, United States Code -- the $3 million rule.

Section 2469 requires public/private competitions before any depot workload in excess of $3 million can
 be transferred to the private sector. The department believes that competitions normally should occur
only between private firms. DoD believes that government depots should compete against private firms
                           only when private sector competition is inadequate.

                       Section 2470 of Title 10, United States Code -- other federal work.

   The department believes that it should not compete with private industry by performing any depot
     maintenance work beyond that which is required for core capabilities. However, this provision
encourages government depots to maintain capacity over and above what is necessary to sustain core
                         capabilities in order to compete for additional workloads.

    The department is seeking to introduce the benefits of outsourcing, privatization and competition
throughout our support establishment. Several provisions of law impose unnecessary constraints on this
    process or preclude outright the ability to reduce costs, improve quality and maintain readiness:
                         Section 2461 of Title 10, United States Code -- general outsourcing.

     The department recognizes the need for congressional oversight of its management of support
    operations. However, DoD believes that Section 2461's requirement for four separate reports is
unnecessary. Moreover, the extensive how-to requirements create disincentives for DoD components to
                                              pursue outsourcing.

As a result, these provisions make it difficult to meet the requirements of other statutes to complete any
 cost comparison expeditiously. (Section 8037 of the Department of Defense Appropriations Act, 1996,
   which is a recurring provision, restricts the use of appropriations for cost comparisons that are not
         completed within 24 months (for single functions) or 48 months (for multiple functions).)

                    Section 2465 of Title 10, United States Code -- firefighters and security guards.

Firefighting and security guard functions must, by this provision, be performed by government personnel
-- even in those locations where such services could be performed more efficiently by local municipalities
or the private sector. Many military installations are next to or near local municipalities that could provide
                                                 such services.

This provision reduces management flexibility and, more significantly, diverts government personnel and
resources from mission-essential tasks. (In addition, this provision is a significant problem at installations
  being closed or realigned where firefighting and security guard formerly provided by DoD personnel
                                            ceases to be available.)

        Section 8020 of the Department of Defense Appropriations Act, 1996 -- 10-employee threshold.

 Experience demonstrates that studying more employees at one time produces proportionately greater
recurring annual savings and reduces the one-time study costs on a per-person basis. (See Marcus, Alan
   J., Analysis of the Navy's Commercial Activities Program, Report CRM92-226.10, Alexandria, Va.:
Center for Naval Analyses, July 1993.) This provision, however, requires the department to go through a
comparably detailed analysis of a function involving 10 employees as it does for those involving 1,000 or
    more. This is inefficient and unnecessary. A higher threshold would streamline decision-making
processes and ensure a greater return on taxpayer resources. Such thresholds are set by OMB Circular
                                     A-76 and need not be included in law.

                 Section 317 of the National Defense Authorization Act for Fiscal Year 1987 -- specific

DoD believes that it should be able to consider outsourcing at all installations unless there is a compelling
rationale for exempting particular ones. The department does not believe that there is such a rationale for
   exempting Crane Army Ammunition Activity, Crane, Ind., and McAlester Army Ammunition Plant,
         McAlester, Okla., from being evaluated for outsourcing, privatization and competition.

   The federal government has published formal policies on government performance of commercial
 activities since 1955. The current federal guidance is Office of Management and Budget Circular A-76.
   The A-76 Circular is a straightforward statement of the executive branch's preference for obtaining
     commercial services from private sources where it will achieve best value for the government.

A supplement to Circular A-76 sets forth detailed, how-to procedures for conducting cost comparisons to
  determine whether commercial activities should be performed under contract or in-house. DoD fully
supports the requirement to perform cost comparisons before converting performance of a function from
     in-house to contractor. This is standard practice in industry and makes sound business sense.

  The Office of Management and Budget has recently revised the A-76 supplement, which it plans to
      release shortly. The revised supplement represents an improvement over the earlier version.
Nevertheless, DoD remains concerned that the process is costly and time-consuming. DoD organizations
 typically take up to 24 months to complete simple cost comparison, and 48 months for more complex
        ones. In the private sector, by contrast, these same tasks require only about 12 months.

 The long time lines for completing A-76 cost comparisons act as a strong disincentive to government
managers. Moreover, DoD managers may be reluctant to dedicate resources -- A-76 cost comparisons
can cost hundreds of thousands of dollars -- to the outsourcing decision-making process if the benefits of
 the process will not be realized until years later. Such costs and time delays make it difficult for DoD to
  achieve its objectives. DoD intends to take full advantage of the new flexibility and streamlined cost
                         comparison approaches offered by the new supplement.

DoD must continue to reduce its infrastructure and support costs to increase funding for modernization in
the coming years. Introducing the competitive forces of the private sector into DoD support activities will
                                 reduce costs and improve performance.

Outsourcing is not a theory based on uncertain assumptions. Experience in DoD and the private sector
consistently and unambiguously demonstrates how the competitive forces of outsourcing can generate
 cost savings and improve performance. One need only glimpse at the operations of our nation's most
successful companies to see the dramatic benefits that they realize through outsourcing and competition.

Through its outsourcing initiatives, DoD has begun a long-term effort to streamline its support functions
  further. The success of the department's initiatives today will help determine how well it supports the
                                           warfighters tomorrow.
   Women Play Crucial Role in Nation's Defense
  Executive summary of "Women in Defense -- DoD Leading the Way," a Defense Department report
                                           released in March 1996.

   The United Nations Fourth World Conference on Women developed actions to achieve women's
  empowerment and reaffirm the human rights of women and the girl child. The report categorized the
                              objectives into 12 critical areas of concern. ...

 DoD has initiated policy changes which parallel the actions from the U.N. Fourth World Conference on
Women. The all-volunteer force provides a vast pool of qualified military men and women. The total DoD
       force includes DoD civilians, reservists and family members, including wives and children.

DoD is the nation's largest employer of women. There are over 500,000 women in defense. This includes
371,000 civilian employees and 195,000 active duty women. Women comprise a significant portion of the
                                           defense force including:

                                          12 percent of the active duty force;
                                           14 percent of the reserve force;
                                 37 percent of the DoD civilian labor force and
                            19 percent of civilian midlevel managers (GS-13 to 15).

   The DoD force includes more than just the active duty military woman, reservists and DoD civilian
 employees. DoD also considers 757,164 spouses (90 percent are women) of active duty military and
 1,373,978 children (approximately 50 percent are girls) important stakeholders and integral to the DoD

We provide for the education of 114,000 students worldwide in 135 schools in 14 countries. We are also
  the nation's largest affordable employee-sponsored child care program. DoD provides care to over
 200,000 children daily at 346 locations. Therefore, our programs and budget decisions incorporate the
                                       needs of these constituencies.

  The Clinton administration opened many nontraditional career fields in the armed forces to women.
 Currently, there are 186 pilots and navigators flying combat aircraft with approximately 141 in training.
The Clinton administration appointed more women to the DoD than any past administration. For example,
the first woman head of a major branch of military service, Ms. Shelia Widnall, was appointed during this

 Below is an overview of the DoD's actions consistent with the Beijing conference on women. ... DoD is
                                               leading the way.
                 DoD Instruction 1344.12 assists wives in receiving involuntary allotments (garnishment) to
                facilitate child support enforcement. DoD has published the names and addresses of points of
            contact to facilitate child support enforcement. This effort is in compliance with Executive Order
                                               12593 signed by the president.
               DoD has 200 trained employment assistance managers worldwide to assist spouses (over 90
                percent are women) develop skills and identify employment opportunities in the private sector.
                DoD has initiated a major research effort to study the barriers which impact spouses (mostly
                   women) of military members who earn less than $25,000 per year (E-5 and below) with
               The Navy has 137 women pilots and navigators flying combat aircraft. The Army has 38, and
                  the Air Force has 10. The Marine Corps has one pilot and 11 in training. The Navy has 87
            women pilots in training and 40 naval flight officers in training. The Air Force has three women in
               DoD has special emphasis programs designed to enhance the employment and advancement
                                      of minorities, women and people with disabilities.
                The aid societies of the Air Force and Navy offer tuition assistance programs for spouses of
            active duty members overseas. The program encourages the completion of degree or certificate
                                programs to increase occupational opportunities for spouses.
                  The Defense Women's Health Research Program established by the FY [fiscal year] 94
                  National Defense Authorization Act created a coordinating office for multidisciplinary and
                multiinstitutional research within the DoD. The purpose of the office is to coordinate research
            within the DoD on women's health issues as it relates to service in the armed forces. Research
                                   will encompass active and reserve component women.
               All active duty DoD women have pelvic exams during accession physicals. Active duty women
            are required to have annual Pap smears and clinical breast examinations. During annual exams,
                  active duty women are routinely offered counseling on family planning and contraception
                The Air Force Reproductive Hazards Initiative Group at Brooks Air Force Base, Texas, will
                develop a technical report on guidelines for handling reproductive concerns in the workplace.
                The report will recommend guidelines for women exposed to chemical or biological pollutants.
               The DoD New Parent Support program provides prenatal support, counseling and home visits
            after birth to both the mother and father for certain families at risk for family violence. Preliminary
                    evaluations indicate this program reduces the risk of spouse abuse and child abuse.
           A senior level Pentagon task force, co-chaired by the secretary of the Air Force, Sheila Widnall,
            identified strategies to eliminate sexual harassment and other forms of discrimination. The task
                            force also identified 48 ways to improve equal opportunity for women.
                 DoD collaborated with service family advocacy offices, Cornell University, Department of
                  Justice and the Department of Health and Human Services to publish a 1995 package to
                                    increase awareness on domestic violence prevention.
                   DoD has made a significant commitment to peace in Bosnia and Herzegovina with its
            deployment of forces to enforce the Dayton agreements. It cooperates with the effort to bring to
                  justice those guilty of war crimes, including allegations of widespread war crimes against
                                                    women and children.
                Integration of women in the armed forces in a broad range of functions enhances sensitivity to
                 and treatment of women who suffer as a result of armed conflict. The recent repeal of combat
                 exclusion provided the following increased military services opportunities available to women:
                   91 percent of Army billets are now open to women; 96 percent of Navy billets now open to
                  women; 93 percent of Marine Corps billets are now open to women; 99 percent of Air Force
                                                 billets are now open to women.
                   DoD has the nation's largest affordable employee-sponsored child care program, which
                  provides care to over 200,000 children on a daily basis, with over 16,000 employees (mostly
                                           military wives) at 346 locations worldwide.
                The DoD acquisition process has an aggressive outreach component to target women-owned
                    businesses. To raise the level of awareness, DoD provides seminars and procurement
             conferences to educate women on economic opportunities within the DoD acquisition program.

 Women serve as senior-level leaders, assistant secretaries of defense and as senior executives in the
military departments. The Air Force has four women in the astronaut program. The Navy has one woman
                                               in the astronaut program.

The secretary of the Air Force is a woman; the Army has five women general officers; the Navy has five
 women admirals; the Air Force has six female generals, and the USMC [U. S. Marine Corps] has one
                                                     female general.

                The secretary of defense memorandums on equal opportunity issued March 3, 1994, and on
                  prohibiting sexual harassment in DoD issued Aug. 22, 1994, exemplif[y] the United Nation[s]
                   objective that "Government responsibility for the advancement of women is vested in the
                                              highest possible level of government."
                The Defense Advisory Committee on Women in the Services was established 45 years ago to
                 evaluate and make recommendations on women's issues. This organization regularly reviews
                         policy decisions and garners field input in its analysis of women in the military.
                The Army has instituted the Army Family Action Plan to improve family programs, benefits and
             entitlements for the Army family at the grass roots level. Established by Army leadership in 1983,
                          it implements a partnership that exists between the Army and Army families.
                 The deputy secretary of defense published in May 1995 an action agenda for civilian equal
                                       employment opportunity progress within the DoD.
                DoD published a Department of Defense Human Goals charter. A vital part of the DoD public
                      affairs program is to present information about women as they are -- accomplished
                                            professionals. Recent examples include:
                 "CBS This Morning" aired a multipart series on women recruits and drill instructors at Marine
                                           Corps Recruit [Base], Parris Island, [S.C.].
                   The National Air and Space Museum interviewed women helicopter pilots for [the] 150th
                                   anniversary of Smithsonian Institution television programs.
                 The Chicago Tribune covered a story on aviation training for women; Newsweek conducted
             interviews of women cadets for gender integration at the U.S. Military Academy, Virginia Military
                                                    Institute and The Citadel.
           The top environmental policy maker in DoD is a woman. Ms. Sherri Goodman is the deputy
                               undersecretary of defense for environmental security.
       The DoD has executed a program that targets outreach, training and education opportunities for
            women in communities surrounding military installations through the implementation of the
                                      environmental justice executive order.
                The Department of Defense Education Activity Strategic Plan targets narrowing the
                   achievement gap of girls in math and science by 50 percent by the year 2000.
               DoD has an aggressive public awareness effort to disseminate knowledge about child
            maltreatment. Additionally, DoD provides training and education on resources available for
                          parents, information on child development, disciplinary methods
        Managing Danger: Prevent, Deter, Defeat
Introduction to the "Annual Report to the President and the Congress" by Secretary of Defense William J.
                                       Perry, released March 4, 1996.

Contrary to the hopes of many and predictions of some, the end of the Cold War did not bring an end to
 international conflict. The most daunting threats to our national security that we faced during the Cold
                  War have gone away, but they have been replaced with new dangers.

During the Cold War, we faced the threat of nuclear holocaust; today, we face the dangers attendant to
  the proliferation of weapons of mass destruction. Nuclear weapons in the hands of rogue nations or
terrorists are especially dangerous because unlike the nuclear powers during the Cold War, they might
                                 not be deterred by the threat of retaliation.

 During the Cold War, we faced the threat of Warsaw Pact forces charging through the Fulda Gap and
  driving for the English Channel; today, we face the dangers attendant to the instability in Central and
Eastern Europe resulting from the painful transition to democracy and market economies now under way
there. This instability could lead to civil wars or even the re-emergence of totalitarian regimes hostile to
                                                  the West.

During the Cold War, we faced the threat of the Soviet Union using Third World nations as proxies in the
   Cold War confrontation. Today we face the dangers arising from an explosion of local and regional
  conflicts unrelated to Cold War ideology, but rooted in deep-seated ethnic and religious hatreds and
frequently resulting in horrible suffering. These conflicts do not directly threaten the survival of the United
  States, but they can threaten our allies and our vital interests, particularly if the regional aggressors
                                  possess weapons of mass destruction.

The new post-Cold War dangers make the task of protecting America's national security different and in
some ways more complex than it was during the Cold War. Our task of planning force structure is more
                          complex than when we had a single, overriding threat.

   Previously, our force structure was planned to deter a global war with the Soviet Union, which we
  considered a threat to our very survival as a nation. All other threats, including regional threats, were
                                   considered lesser-but-included cases.

The forces we maintained to counter the Soviet threat were assumed to be capable of dealing with any of
   these lesser challenges. Today, the threat of global conflict is greatly diminished, but the danger of
regional conflict is neither lesser nor included and has therefore required us to take this danger explicitly
 into account in structuring our forces. These risks are especially worrisome because many of the likely
   aggressor nations possess weapons of mass destruction. Additionally, our defense planning must
provide a hedge for the possibility of a re-emergence at some future time of the threat of global conflict.

Also, our task of building alliances and coalitions is more complex in the absence of a global threat. With
the collapse of the Soviet Union and the dissolution of the Warsaw Pact, the raison d'etrre of NATO, for
example, had to be reconsidered from first principles in order to relate its missions to the new dangers.
    Also, new coalitions and partnerships needed to be formed with the newly emerging democratic

 In building such international coalitions, we understand that the United States is the only country with
truly global interests and a full range of global assets -- military, economic and political. Thus, we are the
natural leader of the international community. However, even the United States cannot achieve its goals
 without the active assistance of other nations. No state can act unilaterally and expect to fully address
               threats to its interests, particularly those that are transnational in character.

  Thus the new post-Cold War security environment requires a significant evolution in our strategy for
managing conflict, and it requires new and innovative defense programs and management philosophies
                                         to implement that strategy.

   Today, our policy for managing post-Cold War dangers to our security rests on three basic lines of
defense. The first line of defense is to prevent threats from emerging, the second is to deter threats that
do emerge, and the third, if prevention and deterrence fail, is to defeat the threat to our security by using
military force. A renewed emphasis on the first line of defense -- preventive defense -- is appropriate in
dealing with the post-Cold War dangers and is a significant departure from our Cold War defense policies,
                             where the primary emphasis was on deterrence.

During World War II, all of America's defense resources were dedicated to defeating the threat posed by
 Japan and Germany and their allies. That war ended with a demonstration of the incredibly destructive
 power of atomic weapons. Thus, when the Cold War began, the fundamental predicate of our defense
strategy was that fighting a nuclear war was an unacceptable proposition -- unacceptable from a military
                                       as well as a moral standpoint.

So we formulated a strategy of deterrence -- a logical response to the single overarching threat we faced
 during that era: an expansionist Soviet Union heavily armed with nuclear and conventional weapons.
 This strategy meant that the primary responsibility of previous secretaries of defense was making sure
   that we had adequate forces, both nuclear and conventional, to provide unambiguous deterrence.

Today, we continue to deter potential adversaries by maintaining the best military forces in the world. But
in the post-Cold War era, the secretary of defense and the department also devote significant efforts to
working on preventive defense. Preventive defense seeks to keep potential dangers to our security from
becoming full-blown threats. It is perhaps our most important tool for protecting American interests from
   the special dangers that characterize the post-Cold War era. When successful, preventive defense
                                precludes the need to deter or fight a war.

Preventive defense is nothing new. It has been a central idea of military strategists for over 2,000 years.
Indeed, it has been an important strand in United States defense policy that has been used before with
                                              notable success.

After World War II, the United States and its allies undertook significant efforts to prevent a future war by
    holding out a hand of reconciliation and economic assistance to our former enemies, Japan and
   Germany. These efforts were an outstanding success, especially the Marshall Plan in Europe. The
  economies of Japan and Western Europe rebounded, democracy grew deep roots, and our military
 cooperation and strategic alliances flourished. But Joseph Stalin turned down the Marshall Plan for the
Soviet Union and the Eastern European countries that he dominated, and our preventive efforts with the
                                                Soviet Union failed.

 Instead, the Cold War ensued, and for more than 40 years the world faced the threat of global war and
      even nuclear holocaust. Having failed to prevent the conditions for conflict, the United States
                             concentrated on the second line of defense -- deterrence.

  Over the next 40-plus years, deterrence worked, and World War III was averted. Finally, largely as a
result of fundamental flaws in its political and economic system, the Soviet Union collapsed, and many of
the new independent states sought to establish democratic governments and free-market systems. The
outcome of that unprecedented transformation is still uncertain, but today the threat of worldwide nuclear
conflict has receded, former Warsaw Pact nations are seeking to join NATO, and Russia and the United
                         States are cooperating in both economic and security programs.

  Clearly, deterrence and warfighting capability still have to remain central to America's post-Cold War
  security strategy, but they cannot be our only approaches to dealing with the threats to our security.
 Instead, the dangers facing us today point us towards a greater role for preventive defense measures.
  Just as preventive defense measures helped shape our security environment following World War II,
  preventive measures can help us deal with post-Cold War dangers. Indeed, the end of the Cold War
 allows us to build on the types of preventive measures successfully introduced by George Marshall in
                Western Europe and extend them to all of Europe and the Asia-Pacific region.

In addition to maintaining strong alliances with our traditional allies in NATO and the Asia-Pacific region,
                         our preventive defense approach consists of four core activities:

              Working cooperatively with Russia, Ukraine, Kazakstan and Belarus to reduce the nuclear
                     legacy of the former Soviet Union and to improve the safety of residual weapons;
                     Establishing programs to limit the proliferation of weapons of mass destruction;
              Encouraging newly independent and newly democratic nations to restructure their defense
               establishments to emphasize civilian control of their military, transparency in their defense
                             programs and confidence-building measures with their neighbors;
               Establishing cooperative defense-to-defense relationships with nations that are neither
                    full-fledged allies nor adversaries, but who are nonetheless important to our security.

  Investing in these programs today, which my predecessor Les Aspin aptly dubbed "defense by other
                               means," saves us both blood and treasure tomorrow.

Proliferation is a prime example. The possession of nuclear or other weapons of mass destruction by a
    potential aggressor not only increases the potential lethality of any regional conflict, but the mere
possession of the weapons by the potential aggressor increases the chances of conflict arising in the first

In other words, it is not just that a nuclear-armed Iraq or North Korea would be a more deadly adversary
in a war, it is that with nuclear weapons they are likely to be harder to deter and more likely to coerce their
   neighbors or start a war in the first place. The Framework Agreement with North Korea is a prime
example of our counterproliferation program at work. The dangerous North Korean nuclear program has
             been frozen since October 1994, when the Framework Agreement was signed.

  Another example of preventive defense is our Cooperative Threat Reduction, often referred to as the
  Nunn-Lugar Program. Under this program, we have assisted the nuclear states of the former Soviet
    Union to dismantle thousands of nuclear warheads and destroy hundreds of launchers and silos.

 Reducing the nuclear threat to the United States and stopping proliferation are only the most dramatic
examples of why prevention is so important to our security. This annual defense report describes in detail
 the programs we have initiated to strengthen our preventive defense, most notably the Partnership for

No matter how hard we work on preventive defense, we cannot be sure that we will always be successful
in preventing new threats from developing. That is why we must deter threats to our security, should they

The risk of global conflict today is greatly reduced from the time of the Cold War, but as long as nuclear
weapons still exist, some risk of global conflict remains. The United States therefore retains a small but
   highly effective nuclear force as a deterrent. These forces (as well as those of Russia) have been
reduced significantly, consistent with the START I treaty, and will be further reduced when Russia ratifies
                                            the START II treaty.

  Similarly, to deter regional conflict we must maintain strong, ready, forward-deployed, conventionally
armed forces, make their presence felt and demonstrate the will to use them. While the diminished threat
of global conflict has allowed us to reduce U.S. force structure accordingly, the increased risk of regional
                      conflict places sharp limits on how far those reductions can go.

   Today, the size and composition of American military forces, consistent with the Bottom-up Review
   conducted in 1993, are based on the need to deter and, if necessary, fight and win, in concert with
regional allies, two major regional conflicts nearly simultaneously. The guiding principle is that the United
            States will fight to win and to win decisively, quickly and with minimum casualties.

 This principle requires us to maintain a force structure today of about 1.5 million active duty personnel
and 900,000 reserve personnel. These forces are organized into 10 active Army divisions and 15 Army
National Guard enhanced readiness brigades; 20 Air Force wings (including seven reserve wings); 360
  Navy ships, including 12 aircraft carriers; and four Marine divisions (including one reserve division).

    Equally important to the size of the force is the requirement to maintain a commanding overseas
 presence, including 100,000 troops in Europe and about the same number in the Pacific, all in a high
    state of readiness. Our overseas presence not only deters aggression, it also improves coalition
  effectiveness in the event deterrence fails, demonstrates U.S. security commitments, provides initial
                       crisis response capability and underwrites regional stability.

Strong deterrence also requires us to maintain pre-positioned equipment in the Persian Gulf, the Indian
 Ocean, Korea and Europe and carrier task forces and Marine expeditionary units afloat, able to move
                                         quickly to any crisis point.

And finally, it requires that we keep our forces in the United States in a high state of readiness and that
 we have the lift capability to transport them and their equipment rapidly to distant theaters. Having the
 capability to deploy forces quickly to a crisis decreases the likelihood that they will actually have to be
                   used and increases their chances for success if force is necessary.

Our planning involves the extensive use of well-trained reserve component forces. Fifteen Army National
 Guard brigades and many combat support reserve units will be maintained at a high readiness level to
allow their use at early stages in military operations. The rest are intended to be used as follow-on forces
                       available for later deployment in longer-term contingencies.

 Those are the requirements that go with the ability to fight and win, in concert with regional allies, two
        nearly simultaneous major regional conflicts. U.S. forces today meet these requirements.

 While being able to fight and win is essential, that ability alone cannot deter conflict. Deterrence stems
 from military capability coupled with political will, both real and perceived; credibility is as important to
deterrence as military capability. Deterrence of regional conflict failed, for example, in 1950 when North
Korea doubted American political will. Some World War II veterans had to turn around and return to the
Far East to reassert that political will at a very high price. Today, American forces in the region serve as a
        visible reminder of our willingness and capability to help defend our South Korean allies.

In 1990, deterrence of regional conflict failed again when Iraq doubted our political will to defend Kuwait
  and Saudi Arabia. We demonstrated that will through a costly but highly successful war to evict Iraqi
                                             forces from Kuwait.

In contrast, deterrence succeeded in October 1994 when Iraq moved forces down to the Kuwaiti border a
second time. This time, the United States demonstrated political will by rapidly deploying additional U.S.
                                         military forces to the Gulf.

 Within a few days after the Iraqi forces had moved to the Kuwaiti border, we had deployed 200 fighter
aircraft, an armored brigade, a Marine expeditionary unit and a carrier battle group to the theater. These
          forces created in a few days a presence that took many weeks to assemble in 1990.

Faced with that presence and the lessons of Operation Desert Storm, [Iraqi President] Saddam Hussein
sent his brigades back to their barracks. We achieved deterrence through the capability to rapidly build
            up a highly capable force, coupled with the credible political will to use that force.
Deterrence can sometimes fail, however, particularly against an irrational or desperate adversary, so the
United States must be prepared to actually use military force. Use of force is the method of last resort for
defending our national interests and requires a careful balancing of those interests against the risks and
   costs involved. The key criteria are whether the risks at stake are vital, important or humanitarian.

 If prevention and deterrence fail, vital U.S. interests can be at risk when the United States or an ally is
threatened by conventional military force, by economic strangulation or by the threat of weapons of mass
destruction. These threats to vital interests are most likely to arise in a regional conflict and by definition,
                                      may require military intervention.

In contrast, military intervention in ethnic conflicts or civil wars, where we have important, but rarely vital
    interests at stake, requires the balancing of those interests against the risks and costs involved.

  In general, any U.S. intervention will be undertaken only after thorough consideration of the following
  critical factors: whether the intervention advances U.S. interests; whether the intervention is likely to
  accomplish U.S. objectives; whether the risks and costs are commensurate with the U.S. interests at
         stake; and whether all other means of achieving U.S. objectives have been exhausted.

The United States chose not to intervene as a ground combatant in the war in Bosnia and Herzegovina
because the risks and costs were too high when weighed against our interests. This decision was made
by two successive administrations for essentially the same reasons. However, after successful American
   diplomacy and NATO military force reshaped the situation and the risks, we made the decision to
              participate, not as a combatant, but in the NATO peace implementation force.

The bottom line is that the United States is a global power with global interests, and as President Clinton
has said, "Problems that start beyond our borders can quickly become problems within them." American
leadership, global presence and strong armed forces can help keep localized problems from becoming
                                   our problems and protect us if they do.

At the same time, there are limits to what the United States and its forces can or must do about problems
                                  around the globe. As the president said:

"America cannot and must not be the world's policeman. We cannot stop war for all time, but we can stop
   some wars. We cannot save all women and children, but we can save many of them. We can't do
everything, but we must do what we can. There are times and places where our leadership can mean the
difference between peace and war, and where we can defend our fundamental values as a people and
                                 serve our most basic, strategic interests."

Finally, in some instances, the United States may act out of humanitarian concern, even in the absence
of a direct threat to U.S. national interests. Agencies and programs other than the U.S. armed forces are
  generally the best tools for addressing humanitarian crises, but military forces may be appropriate in
                                 certain, specific situations, such as when:
                        A humanitarian crisis dwarfs the ability of civilian agencies to respond;
                     The need for relief is urgent, and only the military can jump-start a response;
                                   The response requires resources unique to the military;
                                     The risk to American service members is minimal.

A good case in point was America's humanitarian intervention in Rwanda in the summer of 1994 to stop
 the cholera epidemic, which was killing 5,000 Rwandans a day. Only the U.S. military had the ability to
rapidly initiate the humanitarian effort to bring clean water, food and medicine to Hutu refugees who had
 fled from Rwanda in the wake of a catastrophic tribal conflict, and U.S. forces carried out their mission
                      successfully, at little cost, with little risk, and then quickly withdrew.

Implementing our defense strategy involves literally hundreds of programs. Their details can be found in
the sections which follow this introduction. Highlighted below, however, are some of the key ways that we
                         are implementing our approach of prevent, deter and defeat.

   During the Cold War, the Soviet nuclear physicist Andrei Sakharov said that preventing a nuclear
                  holocaust must be the "absolute priority" of mankind. This is still true.

Today, a primary means for accomplishing this goal is the continued dismantlement of nuclear warheads,
 bombers and ballistic missile launchers. The touchstone of our preventive activities in this area is the
Cooperative Threat Reduction program, which helps expedite the START I treaty reductions in the states
                                             of the former Soviet Union.

This program contributes to some remarkable accomplishments: over 4,000 nuclear warheads and more
 than 700 bombers and ballistic missile launchers dismantled, a nuclear-free Kazakstan, a Ukraine and
Belarus on the way to becoming nuclear free and successful removal of nuclear material from Kazakstan
                                              through Project Sapphire.

 It is also vitally important that we prevent potential regional conflicts from assuming a nuclear aspect.
 That is why we have worked hard to help implement the framework agreement which has frozen North
Korea's dangerous nuclear program and, when fully implemented, will eliminate the program altogether.

 Efforts to reduce the nuclear threat also include sanctions on Iraq and Iran and the indefinite extension
without conditions of the historic nuclear Nonproliferation Treaty. Such diplomatic measures do not stand
      in isolation. They are an integral and crucial part of the U.S. approach to preventing conflict.

  Despite our best efforts to reduce the danger of weapons of mass destruction, it is still possible that
America and our forces and allies could again be threatened by these terrible weapons. That is why it is
             important for the United States to maintain a small but effective nuclear force.

This deterrent hedge is not incompatible with significant reductions in American nuclear forces, nor is it
incompatible with American support for the nuclear Nonproliferation Treaty and a comprehensive ban on
nuclear testing. This nuclear hedge strategy is complemented by a program to develop a ballistic missile
  defense system that could be deployed to protect the continental United States from limited attacks
should a strategic threat to our nation arise from intercontinental ballistic missiles in the hands of hostile
                                                rogue states.

      Another way we hedge against potential future threats is by maintaining selected critical and
irreplaceable elements of the defense industrial base, such as shipyards that build nuclear submarines.
  With the end of the Cold War and the defense downsizing, the need for large numbers of major new
ships, aircraft and armored vehicles has declined significantly. Allowing these defense-unique production
facilities to shut down or disappear completely, however, would curtail the nation's ability to modernize or
prepare for new threats down the road. Therefore, the department will selectively procure certain major
systems, such as the Navy's Seawolf fast-attack submarine, in limited quantities to keep their production
         capabilities warm, until we are ready to build the next-generation nuclear submarines.

    Maintaining strong alliances with our traditional allies in Europe and the Asia-Pacific, maintaining
constructive relations with Russia and China, and reaching out to new democracies and friends are key
                                     elements of our defense posture.

 In Europe, NATO is the foundation of our security strategy, and we continue to play a leadership role
within NATO. There are those who allege that NATO is now obsolete, but in fact, NATO has provided a
zone of stability for Western Europe for 40 years, and all 16 members have reaffirmed the importance of
 the alliance. Indeed, NATO has received requests from new nations wishing to join, to be a part of this
                                              zone of stability.

NATO's Partnership for Peace program is already extending a zone of stability eastward across Europe
  and Central Asia by promoting military cooperation among NATO countries, former members of the
   Warsaw Pact and other countries in the region. This cooperation takes place at many levels, from
      frequent meetings between defense ministers to officer exchanges at schools and planning

The highlight of PfP, though, is the joint exercise program, focusing on peacekeeping training. In August
  1995, the United States hosted one of these exercises, Cooperative Nugget, at Fort Polk, La. Such
    exercises have had a remarkable effect on European security by building confidence, promoting
  transparency and reducing tensions among nations that have, in many cases, been at odds for long
periods of Europe's history. PfP is also the pathway to NATO membership for those partners that wish to
                                              join the alliance.

In fact, the positive effects of PfP resonate far beyond the security sphere. Since political and economic
 reforms are a prerequisite to participation in PfP or membership in NATO, many partner nations have
  accelerated such changes. In addition, many partner nations are starting to see value in actual PfP
   activities, irrespective of whether they lead to NATO membership. The lessons learned and values
                           fostered through the program are intrinsically useful.

  PfP is one of the most significant institutions of the post-Cold War era. Like the Marshall Plan in the
1940s, PfP today is creating a network of people and institutions across all of Europe working together to
preserve freedom, promote democracy and free markets, and cooperate internationally -- all of which are
                      critical to expanding the zone of stability in Europe in our day.
It is critical that this zone of stability in Europe include Russia. Key to this is Russia's active membership
    in PfP, NATO's development of a special security relationship with Russia and Russia's integral
   involvement in broader European security issues, as in Bosnia and Herzegovina.Open, productive
security relations with Russia are an essential element of our approach to advancing security in Europe
                              and ultimately limiting the potential for conflict.

Recognizing that Russia remains a major world power with global interests and a large nuclear arsenal,
 the United States seeks a pragmatic partnership with Russia whereby we pursue areas of agreement
and seek to reduce tensions and misunderstandings in areas where we disagree. Our successful efforts
 to include a Russian brigade in the U.S. sector of the NATO-led peace implementation force in Bosnia
                             and Herzegovina readily reflect this partnership.

  In addition to cooperative threat reduction efforts, such as the Nunn-Lugar program, we also seek to
foster greater openness in the Russian defense establishment and to encourage Russia to participate in
   global nonproliferation activities and regional confidence-building measures by participating in the
                U.S.-Russian Commission on Economic and Technological Cooperation.

 The commission, established by Vice President [Al] Gore and Prime Minister [Viktor] Chernomyrdin in
1993, seeks to build confidence by forging a better economic relationship between the United States and
Russia. The Defense Department is part of an interagency effort sponsored by the commission focused
 on finding, facilitating and helping finance investments in the region by American business enterprises,
 targeting a wide range of opportunities from defense conversion to space exploration to prefabricated
 housing. The commission's activities benefit Russia's attempts to achieve a market economy, benefit
               American companies and benefit American security interests -- a triple win!

 In the Pacific, the United States and Japan have entered into a new era in our regional relationship as
   well as in our global partnership. A stronger U.S.-Japanese alliance will continue to provide a safe
 environment for regional peace and prosperity. Our alliance with South Korea not only serves to deter
war on the peninsula, but also is key to stability in the region. These security alliances and the American
  military presence in the Western Pacific preserve security in the region and are a principal factor in
                                     dampening a regional arms race.

 We are also fully participating in multilateral security dialogues, such as the Association of Southeast
Asian Nations Regional Forum, which help reduce tensions and build confidence so that tough problems
 like the territorial dispute over the Spratly Islands in the South China Sea can be resolved peaceably.

    Central to our efforts to prevent conflict in the Asia-Pacific region is our policy of comprehensive
   engagement with China, a major power with a nuclear capability. The United States will not ignore
China's record on human rights, political repression or its sale and testing of dangerous weapons, but we
                            also will not try to isolate China over these issues.

We want to see China become a responsible, positive participant in the international arena, and the best
way to encourage this is to maintain a vigorous dialogue over a wide range of issues -- including security
            issues -- so that we can pursue areas of common interests and reduce tensions.
In South Asia, the United States has restarted a bilateral security relationship with Pakistan and begun a
new security dialogue with India. These ongoing dialogues can help all three countries focus on areas of
    common interest, such as international peacekeeping, and could in time provide the confidence
  necessary to address more difficult problems, such as nuclear proliferation and the long-simmering
                                            conflict over Kashmir.

In our own hemisphere, we are witnessing a new era of peace, stability and security. From Point Barrow
  to Tierra del Fuego, all 34 nations except Cuba have chosen democracy, and economic and political
    reforms are sweeping the region. This historic development paved the way for the first Defense
   Ministerial of the Americas last summer, at which delegations from all 34 democracies gathered in
 Williamsburg, Va., to consider ways to build more trust, confidence and cooperation on security issues
   throughout the region. Following on the success and progress at Williamsburg, the nations of this
  hemisphere already are planning for the second Defense Ministerial in Argentina in the fall of 1996.

     Like the Partnership for Peace in Europe, the Defense Ministerial of the Americas provides an
       opportunity to build a zone of stability in a region once destabilized by Cold War tensions.

In the Americas, as in Europe, the tools for building stability include joint training and education programs
   that promote professional, civilian-controlled militaries as well as personal interactions; information
 sharing on national military plans, policies and budgets; and confidence-building measures. In Europe,
     these activities are led by the United States and NATO. In the Americas, they are emerging by
consensus and encouraged by the United States. But ultimately the result is the same: more democracy,
                 more cooperation, more peace and more security for the United States.

In each of the regions discussed, the United States has military-to-military relationships and is conducting
joint exercises with a much wider range of countries than ever before. These activities promote trust and
 enable forces from different countries to operate together more effectively, which is essential given the
 increasing prevalence of combined operations. In the Gulf War, for example, some 40 countries made
military contributions. Nearly three dozen countries are participating in the peacekeeping force in Bosnia
                         and Herzegovina, including many non-NATO countries.

 Another important part of preventive defense is our effort to promote democratic civil-military relations.
 One such program, conducted jointly with the State Department, is the International Military Education
   and Training program, which has now trained half a million foreign officers in the fundamentals of
civil-military relations over the last several decades. Similarly, recently established regional training and
study centers like the Marshall Center in Germany and the Asia-Pacific Center for Security in Hawaii are
designed to promote contacts between regional military officers and civilian defense officials and to foster
                               the principles of civilian control of the military.

No security strategy is better than the forces that carry it out. Today, the United States has forces that are
well-trained, well-equipped and most of all, ready to fight, as their performance over the past year in the
    Persian Gulf, Haiti and Bosnia and Herzegovina illustrates. The department has maintained this
                         readiness in spite of a drawdown of historic proportions.
Drawdowns create turbulence in the force, which historically has undermined readiness. Recognizing this
history, we have taken unprecedented steps to maintain readiness while reducing our forces in the wake
of the Cold War. By the end of 1996, the drawdown will be nearly complete, which means an end to the

 In the meantime, though, the department continues to maintain near-term readiness at historically high
      levels through robust funding of the operations and maintenance accounts. This remains the
department's top budget priority. Manifesting this priority, the department's FY [fiscal year] 1995 and FY
1996 budgets and the FY 1997 budget request are at historically high levels of O&M funding (normalized
                                               to force size).

  Medium-term readiness depends on attracting top-quality people and retaining them after they have
 developed technical and leadership skills. To do so, we must offer not only challenging and rewarding
      work, but also an appropriate quality of life, a term used to encompass the entire package of
  compensation and benefits as well as the work and living environment for military service personnel.
Protecting quality of life is not only the right thing to do for the men and women who serve and sacrifice
                 for their country, it is also critical to preserving medium-term readiness.

  Last year, President Clinton approved an increase in defense spending of $25 billion over six years
largely aimed at improving the quality of military life. This includes a commitment to ensure that military
personnel receive the full pay raise authorized by law through the end of the century. It is also directed at
 extensive improvements in military quality of life programs, including housing, a key concern to service

This past year, a distinguished panel led by former Army Secretary John Marsh looked beyond existing
DoD efforts to identify quality of life problems and suggest high-leverage, affordable solutions. The panel
  concentrated on three major areas: housing, personnel tempo, and community and family services.
   Action on the panel's recommendations is being incorporated into the department's overall effort to
                                          preserve quality of life.

To ensure military readiness in the long term requires the department to modernize the armed forces with
 new systems and upgrades to existing systems to maintain America's technological advantage on the
 battlefield. For the past five years, the department has taken advantage of the drawdown and slowed
modernization in order to fully fund those expenditures that guarantee near-term readiness -- spare parts,
                                        training and maintenance.

 As a result, the modernization account in FY 1997 will be the lowest it has been in many years, about
one-third of what it was in FY 1985. At the same time, the average age of our military equipment has not
increased, because as the forces were drawn down, the older equipment was weeded out. But now that
         the drawdown is nearly over, the modernization reprieve from aging is nearly over, too.

 So beginning in FY 1997, the department is planning a modernization ramp-up, which will be critical to
   the readiness of the forces in the next century. By the year 2001, funding to procure equipment to
modernize our forces will increase to $60.1 billion in current dollars -- over 40 percent higher than what it
                                         is in the FY 1997 budget.
 This five-year plan will focus on building a ready, flexible and responsive force for a changing security
environment. The force will continue to maintain our technological superiority on the battlefield by seizing
      on the advances in information-age technology, such as advanced sensors, computers and
 communication systems. At the same time, the modernization program will focus on bread and butter
 needs, such as airlift and sealift, and the everyday equipment ground forces need in the field, such as
                  tactical communications gear, trucks and armored personnel carriers.

This five-year modernization plan is based on three assumptions. First, that the defense budget topline
will stop its decline in FY 1997 and begin to rise again (as proposed in the president's five-year budget).
    Second, that the department will achieve significant savings from infrastructure reductions, most
     importantly from base closings. The third assumption of our modernization program is that the
 department will achieve significant savings by outsourcing many support activities and overhauling the
                                       defense acquisition system.

 The base realignment and closure process is directly linked to modernization and long-term readiness.
   As we downsize the military force, we must also reduce our Cold War infrastructure. Our efforts to
manage this process have been aimed at saving money while ensuring that troops have the training and
 equipment they need to be ready in the future. While the department has made significant progress in
    base closings, many BRAC [base realignment and closure] recommendations have not yet been
          implemented, and an imbalance between force structure and infrastructure remains.

 Until we fully execute the BRAC process, money will be tied up in nonperforming real estate, draining
funds from our modernization efforts and other programs. While base closing initially costs money -- the
 FY 1996 budget included $4 billion allocated to base closing costs -- there will be significant savings in
 the future. In the FY 1999 budget, the department projects $6 billion in savings from closing the bases,
thus allowing a $10 billion swing in savings. These and future savings from base closing will be devoted
                                            to modernization.

Completing the BRAC process quickly is not only key to saving money, it also is the right thing to do for
the communities involved. The department is helping these communities find imaginative ways to put the
                    excess defense property to productive use as quickly as possible.

When base closure is done right, it can leave communities better off, with a more diverse economy and
   more jobs. The key is early community involvement and planning. For example, when Louisiana's
England Air Force Base was slated for closure, the Alexandria Chamber of Commerce worked with the
 Air Force to develop a base reuse plan. Months before the base did close, small business enterprises
           had already signed leases, resulting today in hundreds of new jobs for Alexandria.

Over the past two years, the department has undertaken the most revolutionary changes in its acquisition
      system in 50 years and is looking for ways to further reform the system through privatization.

 ... The department discarded the system of military specifications, or milspecs, which spelled out how
     contractors must design and produce military systems, supplies, and services. In its place, the
   department will use commercial and performance standards. These will call for the highest quality
standards available in the commercial market or if there are no relevant commercial standards, will use
 functional specifications which describe how the equipment is to perform -- and challenge suppliers to
                                 meet that standard any way they want.

   The second major change in the defense acquisition system began on Oct. 1, 1995, when the new
 federal acquisition streamlining regulations were published. These regulations, in effect, will allow the
Defense Department to buy from the commercial marketplace more often and buy more like commercial
                                                 firms do.

 Defense acquisition reform is important not only because it will help pay for the defense modernization
program, but also because of a phenomenon called "technology pull." This phrase describes the demand
                for advanced technology to give the United States battlefield superiority.

Technology pull has its roots in the U.S. military experience in Operation Desert Storm. Before Operation
    Desert Storm, many U.S. military commanders and outside experts were skeptical of advanced
                                      technology applied to combat.

 For example, they questioned the concept of the reconnaissance strike forces, developed in the 1970s
  and deployed in the 1980s. This concept combined stealth aircraft, precision-guided munitions and
   advanced surveillance technology to offset superior numbers of Soviet forces. But there was great
concern that such advanced technology was too delicate or that it would not work in the fog of war. But in
Operation Desert Storm, the same reconnaissance strike forces crushed the Iraqi military force with very
                                             low U.S. losses.

  Skeptics became believers. Advanced technology proved itself, and military commanders are finding
   myriad uses for it -- not just smart weapons, but also smart logistics, smart intelligence and smart
 communications. Military commanders are revising their doctrine and tactics to take advantage of this
                    technology, and they want to pull it faster into their war planning.

The key technology they want is information technology, and it is being developed at a breathtaking pace,
        but not by the Defense Department. It is being developed by commercial computer and
 telecommunications companies, dual-use (defense-commercial) technology firms, and small high-tech
  businesses and universities. The department cannot pull this technology from these sources without
acquisition reform, because the current system limits access to these sources either directly by throwing
  up regulatory barriers or indirectly by slowing the ability to purchase and employ new generations of
                                       technology in a timely way.

The department not only needs to do more business with commercial industry, it also needs to act more
                                        like commercial industry.

There are numerous examples of private sector companies turning to outside suppliers for a wide variety
  of specific, noncore goods and services. By focusing on core competencies, they have reduced their
                      costs by lowering overhead and improved their performance.

Major opportunities exist for the department to operate more efficiently and effectively by turning over to
  the private sector many noncore activities. For example, private-sector companies are already under
contract to perform some commercial activities on bases around the world. This type of outsourcing can
                                                 be expanded.

    To implement this strategy, the department has been systematically examining opportunities for
  privatizing, as well as reviewing both institutional and statutory obstacles to its full utilization. Early in
1996, work groups engaged in these efforts will provide reports on how privatization can be better used
                           to lower DoD costs while enhancing its effectiveness.

In the uncertainty that has followed the Cold War, the United States has not only the opportunity, but also
the responsibility to help ensure a safer world for generations of Americans. President Clinton has said:
 "As the world's greatest power, we have an obligation to lead and, at times when our interests and our
                                   values are sufficiently at stake, to act."

   The Department of Defense is supporting American leadership in this new era. As the department
 completes the transition to a post-Cold War military force, it has undertaken policies and programs to
prevent threats to our security from emerging and to maintain well-trained, ready forces able to deter or
                  respond quickly to a range of potential threats and seize opportunities.

 The world has changed dramatically over the past few years, but one thing remains constant: A strong
military force made up of the finest American men and women is the nation's best insurance policy. Each
  element of the defense program described in this report supports this fundamental, indisputable fact.
         DoD-Sponsored R&D Centers Still Critical,
                                       Worth Keeping
  Prepared statement of Paul G. Kaminski, undersecretary of defense for acquisition and technology,
 before the Research and Development Subcommittee, House National Security Committee, March 5,

Mr. Chairman, members of the subcommittee and staff: Thank you for the opportunity to appear before
you today to discuss the specifics of the department's initiatives to strengthen the management and focus
 of our federally fund[ed] research and development centers and university affiliated research centers.

We are taking these actions to deal with concerns, both real and perceived, that these centers have not
been right-sized, that they are working in areas beyond the core interests of the department and that the
centers are using their special status to gain an unfair competitive advantage over commercial firms. The
department has scrutinized the operations of our FFRDCs and our university affiliated research centers
 over the past year. We have conducted numerous independent studies and reviews,and we have now
  introduced four major initiatives designed to manage these organizations more effectively, including:

            Limiting the program content of these R&D [research and development] centers to core work;
             Establishing stringent criteria for the acceptance of noncore work by an R&D center's parent
            Chartering an independent advisory committee to review the department's management and
                                          oversight of FFRDCs and UARCS;
            Developing a new set of guidelines to ensure that the management fee provided to FFRDCs is
                                                based on justified need.

We believe these initiatives, along with the support of Congress, will effectively address concerns about
  FFRDC and UARC management and are paving the way for continued use of the critical capabilities
 provided by these centers. As the department downsizes, they have become increasingly important as
                           centers of independent technical expertise and support.

 For nearly a half century, the department has invested heavily in the growth of a strong research and
development establishment within the United States to help sustain the technological supremacy of U.S.
  forces. Today, the Department of Defense sponsors 12 not-for-profit, federally funded research and
                              development centers to accomplish the following:

                 Maintain long-term strategic relationships with their sponsoring DoD organizations;
             Perform research, development and analytic tasks integral to the mission and operations of
                                         sponsoring agencies within the DoD;
                Maintain core competencies in areas important to the DoD sponsors and employ these
         competencies to perform high-quality, objective work that cannot be carried out as effectively by
                                                   other organizations; and
                      Operate in the public interest, free from real or perceived conflicts of interest.

Three different types of FFRDCs have evolved over time to help the department accomplish its mission.
Seven studies and analyses centers provide DoD decision makers with objective evaluations of complex
issues. Two systems engineering and integration centers provide experienced engineering and technical
support to several DoD research and engineering centers. And finally, three research and development
centers execute key, leveraging basic research and advanced development programs in support of their
                                DoD sponsors' material development missions. ...

    FFRDCs have played a key role in this nation's defense since World War II. For example, MIT's
  [Massachusetts Institute of Technology] Lincoln Laboratory was originally formed in 1952 to build a
 prototype air defense system against Soviet attack. By the late 1970s, Lincoln Laboratory's extensive
  experience and core competencies in radar clutter phenomenology, measurement and data analysis
 played a key role in the successful development of U.S. cruise missile systems capable of penetrating
 Soviet air defenses. This expertise also provided a foundation of knowledge critical to establishing the
    models and simulations needed for employment of low-observables systems such as the F-117.

   Similar contributions have been made to this nation's defense over the years by each of the seven
   studies and analysis FFRDCs. In 1956, the Institute for Defense Analyses was formed to help key
 decision makers in the Office of the Secretary of Defense address important national security issues,
particularly those requiring scientific and technical expertise. Over the past year, IDA analysts have been
 instrumental in providing independent, objective assessments of the department's heavy bomber force
 needs, a comprehensive tactical utility analysis of the C-17 and nondevelopment airlift aircraft and an
                                  ongoing study of deep attack weapon systems.

And finally, the Aerospace Corp. -- a system engineering and integration center -- was founded in 1960 to
  provide the U.S. Air Force with the technical support needed to acquire and operate space systems,
  including the related launch and ground systems. Over the past 10 years, the Aerospace Corp. has
  conducted independent launch readiness verification assessments for over 94 space launches and
    achieved a 98 percent launch success rate, compared with an 80 percent success rate for U.S.
                                   commercial launches over the same period.

 In addition to the FFRDCs, the DoD sponsors six not-for-profit, private and state university integrated
                                                  laboratories that:

                    Maintain long-term strategic relationships with their DoD sponsoring organizations;
                Receive DoD sole-source funding in excess of $2 million annually to establish/maintain
         essential research, development and engineering capabilities defined as core (contract funding
         awarded under the authority 10 USC[United States Code] Section 2304(c)(3)(B), that allows the
           use of noncompetitive procedures in order to establish or maintain an essential engineering,
                                   research and/or development capability); and
                 Operate in the public interest, free from real or perceived conflicts of interests.

    Each of the DoD sponsored university affiliated research centers, like the FFRDC research and
development centers, perform basic research, design and development activities in support of their DoD
                                            sponsor's missions.

  The UARCs have maintained a long-term relationship with their DoD sponsor and have contributed
greatly to the nation's defense needs. Johns Hopkins University APL [Applied Physics Laboratory] -- the
   largest of the DoD-sponsored UARCs -- invented the concept of satellite navigation that has led to
                                  modern global positioning capabilities.

Johns Hopkins also played a pivotal role in inventing, developing and prototyping the Navy's Cooperative
Engagement Capability, a technological and operational breakthrough that shares information between
  battle groups in real time, so that an entire battle group can fight and respond to threats as a single,
                                        integrated combat system.

Penn State University ARL [Applied Research Laboratory] is responsible for the design of 21 advanced
 propulsors and hydrodynamics devices for Navy surface ships, submarines and torpedoes. PSU ARL
conceptualized and demonstrated the key enabling technologies and supporting research for advanced
                                         ship self-defense decoys.

  The University of Washington APL solved the torpedo influence exploder problems that had plagued
Navy torpedoes and is currently directing research at understanding the physics of ocean processes to
                          better predict the performance of underwater systems.

     The University of Texas ARL developed the ground station equipment used to track TRANSIT
    (navigation) satellites and is building the prototype of the MAXUS sonar which will replace mine
                                 avoidance sonar on attack submarines.

   Utah State University SDL [Space Dynamics Laboratory] designed and built the Midcourse Space
   Experiment's Spirit III telescoped infrared sensor and functionally demonstrated the feasibility of a
  Space-based Infrared low-earth-orbit surveillance concept, now in development as part of the Space
                                         Missile Tracking System.

The Georgia Tech Research Institute designed and constructed the world's largest compact antenna test
 range for the U.S. Army. The range has allowed the Army to map and test microwave antenna patters
  installed on vehicles as large as the M-1 [Abrams] tank which greatly enhanced the ability to reduce
                                 interference and maximize performance.

The core work that our centers perform is vitally important to our national security. Over the past year, the
 department has carefully reviewed its relationships with FFRDCs and UARCs. I formed a senior-level
 DoD advisory group to examine the issue and chartered an independent review by a Defense Science
Board task force of the department's FFRDC management and employee compensation practices. The
primary question I posed to both groups was, "Do we still need these organizations?" The answer was a
                                        clear and emphatic "yes."

The Defense Science Board felt that "The FFRDCs should be retained on the strength of their quality and
 the special relationships they have with their sponsors on matters which are of great importance to the
   Department of Defense." Our internal advisory group reached a similar conclusion after reviewing
                                   alternatives to FFRDCs and UARCs.

The bottom line is that we believe -- and this belief is held widely in the department, both by civilian and
military leaders -- that FFRDCs are doing high-quality, high-value technical and analytic work that could
 not be provided as effectively by other means. Let me assure you that the people who complain about
FFRDCs are not the users of their services or the recipients of their products. FFRDCs and UARCs are
                              doing their jobs for DoD and doing them well.

   The essence of their value to DoD lies in the qualities that I mentioned previously, starting with the
long-term strategic relationship FFRDCs and UARCs maintain with the department. I might note that this
is one area where DoD has been in front of the commercial sector in its acquisition practices. Successful
  commercial firms are moving increasingly toward establishing long-term, strategic relationships with
 trusted suppliers. They have found the result is often a higher-quality product at lower overall costs, in
 contrast to the previous practice of changing suppliers based on low bids. DoD has long realized this
                                    benefit from FFRDCs and UARCs.

I am not arguing that competition is inappropriate. The department uses competitive processes to obtain
the overwhelming majority of the goods and services it requires. But there are some circumstances and
some kinds of work for which the value provided by a strategic relationship outweighs the potential gains
                                              of competition.

I also asked the DoD advisory group to assess the management of FFRDCs and UARCs, and as a result
of this review, I approved a DoD Management Action Plan to ensure the most effective and prudent use
 of the centers while providing measures to guard against misuse. I forwarded that plan to Congress in
May 1995. Since that time, we have introduced a number of initiatives designed to manage these centers
               more effectively. I will describe four that I believe to be the most important.

First, we have implemented a core work concept for managing the workload of the FFRDCs and UARCs.
This core concept is what I would describe as a "stick to your knitting" approach in terms of maintaining
 the capabilities and competencies that are at the core of the strategic relationship. In doing this, each
       FFRDC/UARC sponsor developed a statement defining what is core work for each center.

  In addition, each sponsor developed and applied specific core criteria to ascertain whether a task is
within the scope of the core statement. These criteria were applied to all ongoing fiscal year 1995 work
   and to each proposed task submitted for fiscal year 1996. As a result of the program assessment,
 sponsors identified a total of about $43 million as noncore in the FFRDCs and about $26 million in the
UARCs. These noncore tasks have been, or will soon be, transitioned out of the centers in a logical way
                     and be offered to the non-FFRDC private sector, as applicable.
Second, we have established stringent criteria for the performance of non-FFRDC work by the center's
 parent corporation. Basically, all non-FFRDC work is subject to sponsor review and/or approval and it
   must not detract from the performance of FFRDC work; must be in the national interest; must not
undermine the independence, objectivity or credibility of FFRDC work; and may not be acquired by taking
         advantage of access to or information available to the parent through its FFRDC/UARC.

 Third, we have an independent advisory committee, with membership of highly respected people from
 outside of the government, to review and advise on the department's management and oversight of its
  centers. The IAC has already begun its work and is expected to submit the first report this summer.

   Fourth, we developed a revised set of guidelines to ensure the management fees provided to our
 FFRDCs are based on need and FFRDC-provided justification. The new fee guidelines will recognize
that FFRDCs, like other defense contractors, incur business expenses that are not allowable charges to
 their contracts but are instrumental in providing FFRDCs the flexibility to remain centers of excellence
and sustain successful, high-quality operations. However, the new guidelines are expected to reduce the
amount of fee, through elimination from fee costs that are reimbursable and tighter controls of costs that
                      are nonreimbursable, but considered ordinary and necessary.

Together, FFRDCs and UARCs account for about 4.8 percent of the president's fiscal year 1996 RDT&E
 [research, development, test and evaluation] budget request (about $1.7 billion of a total $34.9 billion).
Funding for our FFRDCs has come down since the peak levels in fiscal year 1991 at about twice the rate
of the overall decline in the department's RDT&E budget. Another 10 percent of the RDT&E budget goes
   to in-house labs, and the remaining 86 percent goes to industry mostly via competitive processes.

At this point, it is important to underscore that FFRDCs cannot compete by governmentwide regulation
   and UARCs are precluded by contract from competing for a majority of the 86 percent. It would be
 inappropriate for organizations with the high level of access to information and close sponsor working
relationships maintained by FFRDCs and UARCs to compete with other firms that do not share this same
                                              level of access.

Given the mission of the FFRDCs and UARCs, staff years of technical effort is the best measure for core
  workload. For FFRDCs, the director, defense research and engineering will annually determine how
   many staff years of technical effort are required by each center based on several factors, including
    sponsor needs and the guidelines for determining workload for each category of FFRDC. These
  guidelines, to be applied by the FFRDC sponsor in projecting workload and funding requirements for
                                            each category, are:

         Studies and analyses centers shall maintain a relatively stable annual level of effort in order to
          support core competencies important to their sponsors and to avoid the loss of continuity and
           expertise that arises from major changes in staff levels. Their core workload will focus on the
          kinds of work that cannot be as effectively performed either in-house of by other private sector
                 Systems engineering and integration centers shall maintain a long-term, stable core
                competency when the sponsor has determined that no in-house or other private sector
           capability exists to perform the requirement as effectively. SE&I staffing levels will respond to
           changes in workload and funding consistent with the trend in the most relevant portions of the
           DoD budget (R&D and/or procurement) supporting the types of programs/systems within the
                                                FFRDC mission area.
              Research and development centers shall maintain the technical expertise and related core
           competencies necessary to address those essential requirements, priorities and objectives of
                 the FFRDC sponsors, the applicable DoD advisory/oversight group and the DDR&E.

  From the annual workload requirements provided by the sponsors, the DDR&E will allocate a dollar
  funding level for each center and maintain a five-year projection for planning purposes. Requests for
deviations from or exceptions to established annual funding levels will be submitted for resolution by the
                        FFRDC sponsor, with appropriate justification to the DDR&E.

   The process for UARCs is similar to the above, with its focus on ensuring that annual staff years of
  technical effort at each UARC represents those essential engineering, research and/or development
   capability defined in the core statement and awarded non-competitively per 10 USC 2304(c)(3)(B).

  As I earlier mentioned, funding for our FFRDCs has been on the decline since fiscal year 1991. This
decline has been consistent with the overall trends in defense downsizing and outsourcing. Its consistent
 with the trends in taking down the force structure as well as the overall budget. I believe we now have
reached steady state conditions and that further reductions beyond the core levels planned for fiscal year
1996 jeopardize the retention of essential core capabilities and therefore would be harmful to our national
                                              security interests.

 The department has responded to congressional direction from previous years. We are applying more
 management attention to FFRDCs, and we intend to continue doing so in the future. Our management
processes involve senior leadership of FFRDC sponsoring offices ... with broad oversight provided by my
office. The independent advisory committee will provide the department with an independent assessment
  of its management activities. The FFRDC program is now among the most intensely scrutinized and
                                         overseen in the department.

In sum, the department has gotten the message. We have implemented management reforms, and it is
now time to restore the normal process for fiscal oversight of FFRDCs and UARCs. Accordingly, we are
   requesting the four defense committees to discontinue the practice -- started a few years ago -- of
inserting special language in annual bills to limit DoD spending at FFRDCs and UARCs. Such measures
 are no longer needed, and they constrain unnecessarily DoD's ability to use FFRDCs and UARCs for
                                appropriate work. Let me offer two examples.

First, Lincoln Laboratories -- one of our research FFRDCs -- must frequently buy advanced components
   from industry for demonstrations and prototypes in support of defense programs. These technical
    subcontracts are in addition to the funding required to support laboratory personnel and ongoing
 research. Given the continuously decreasing fiscal ceilings provided by Congress, we could only fund
these technical subcontracts by reducing some other part of the laboratory program or by cutting another
                                  FFRDC. Neither alternative is desirable.

  Second, several FFRDCs are being called upon for technical assistance and analytic support for our
Bosnia deployment. These efforts were not planned at the beginning of the fiscal year, and to make room
within the fiscal ceilings, we would have to defer other needed FFRDC work. Again, this is not desirable,
                                  and it is not good management practice.

   As an interim measure for fiscal year 1996, I ask that the committee support an amendment to the
appropriations bill that exempts the following FFRDC expenditures from counting against the fiscal year
1996 FFRDC ceiling: major procurements from industry for demonstrations and prototypes, and technical
                        assistance and analytic support for our Bosnia deployment.

My general point is that no overall fiscal ceilings are imposed on any other class of DoD contractor. In all
 other cases, the department is free to select the best mix of contractors to meet our changing needs,
 consistent with program priorities and funding provided by the Congress. The additional constraints on
 DoD FFRDCs and UARCs are not required. They inhibit the department's ability to allocate resources
flexibly to get the most efficient mix of technical and analytic support. I would appreciate the committee's
       support in allowing DoD to manage its FFRDCs without externally imposed fiscal ceilings.

On a separate, but related issue of high interest, I want to reiterate the department's general support for
the MITRE Corp's. split into two separate, nonaffiliated companies, with no common trustees, officers or
 staff . The MITRE Corp. will continue to operate its two existing FFRDCs (the C3I [command, control,
    communications and intelligence] FFRDC for DoD and the Center for Advanced Aviation System
      Development FFRDC for the FAA [Federal Aviation Administration]). The new entity will be a
          not-for-profit corporation formed out of the two non-FFRDC divisions from the old MITRE.

    The department believes that the split will focus the MITRE Corp. on its FFRDC operations and
neutralize any concern about the use of FFRDC status to gain unfair advantage over commercial firms.
   The department did not specifically mandate the split, but it did establish firm new rules regarding
                        non-FFRDC activities, and the split was MITRE's response.

       To summarize the department's initiatives to strengthen FFRDC and UARC management:

            The work content and the operations of each of these centers have been closely scrutinized
                over the past year. FFRDCs and UARCs are sized consistent with essential sponsor
                     requirements, defense acquisition reform initiatives, strategies and budgets.
             We have strengthened our management controls, including managing the workload of our
            centers to the core concept; transitioning ongoing work that is noncore out of the centers; and
                                 developed consistent management fee guidelines.
            We have established new stringent criteria for the performance of non-FFRDC work by the
                                          parent corporation of an FFRDC.
         The independent advisory group is operating as a source of judgment to help communicate to
                     the Congress and the public the adequacy of DoD management actions.

In closing, let me underscore my own sense and that of the entire team here. The FFRDCs and UARCs
are critically important national assets. They have provided key contributions in the past and will address
critical needs now and in the future. Proactive management on the part of the department will ensure the
sustainment of these contributions. These assets are the kind that take a long time to develop and their
   long-term care is of the utmost importance to all of us -- we need the Congress' continued support.

  Mr. Chairman, thank you for this opportunity to report on the DoD-sponsored FFRDCs and UARCs.
         DoD's Ballistic Missile Defense Strategy
 Prepared statement of Paul G. Kaminski, undersecretary of defense for acquisition and technology, to
                         the Senate Armed Services Committee, March 6, 1996.

Mr. Chairman, members of the committee and staff, thank you for the opportunity to appear before you
 today to discuss the specifics of the department's ballistic missile defense strategy. For all of our adult
   lives, most Americans have lived with a dark cloud hanging over our heads--the horrific threat of a
 nuclear war that would end our way of life and civilization as we know it. Now, with the end of the Cold
       War, that dark cloud is beginning to drift away. The whole world is breathing a little easier.

But that cloud is not yet gone. The world's nuclear powers still hold thousands of nuclear weapons, along
with many hundreds of missiles to deliver them. And many other countries, some of them rogue nations
to which the calculus of deterrence does not apply in the same way, are acquiring the means to deliver
 weapons of mass destruction -- nuclear, biological and chemical. Many of these nations have obtained
ballistic missiles -- short-range ballistic missiles -- and some are in the process of acquiring longer-range
                                              ballistic missiles.

 The proliferation of short-range ballistic missiles in the world today poses a direct, immediate threat to
 many of our allies and to some U.S. forces deployed abroad in defense of our national interests. Over
        time, the proliferation of longer-range missiles will pose a greater threat to the U.S. itself.

For these reasons, active defenses are playing a central and vital role in U.S. defense planning well into
the next century. The resource-constrained environment of the '90s, together with the complex nature of
 the security challenges facing us, necessitate that we deploy the right capabilities at the right time for
                   achieving the highest overall level of security for the United States.

  To do so, we must consider the role of missile defense within the nation's broader national security
 strategy. Active defenses can never be considered in and of themselves a panacea for countering the
     proliferation of ballistic missiles and weapons of mass destruction. We have a broader strategy
    encompassing a full range of tools in a national "kit" of options. Our strategy has three different
 components: preventing and reducing the threat, deterring the threat and defending against the threat.

For example, we have adopted the Nonproliferation Treaty, the Framework Agreement with North Korea,
 the INF [intermediate-range nuclear forces] treaty, the MTCR [missile technology control regime] and
export controls as ways of preventing or reducing the threat to our allies and U.S. forces deployed abroad.
   The threat to the United States has been reduced significantly through the START [strategic arms
reduction talks] treaty, and it will be reduced even further through the START II treaty if Russia ratifies it.

Additionally, we have an extensive program for actually dismantling the warheads and the missiles that
  had been directed against us in a Cooperative Threat Reduction program supported by Nunn-Lugar
    funds. This is our first line of defense against ballistic missiles and weapons of mass destruction
                                   --preventing and reducing that threat.
The second line of defense is deterrence. In the case of the long-range missile threat to the United States,
  either from land-based intercontinental ballistic missiles or submarine-launched ballistic missiles, our
strategic nuclear forces have been a bulwark of deterrence for nearly a half-century. That will continue.
We have smaller nuclear forces now than we did a decade ago, but they are still very powerful and quite
  capable of carrying out the strategic deterrence mission. In the case of deterring short-range missile
     threats, our theater nuclear forces and very powerful conventional forces provide some level of
                                deterrence against limited nuclear attacks.

 To the extent that these first two components, reducing the threat and deterring the threat, are not fully
successful, we have to be prepared to defend directly against a threat. In the case of the strategic threat
   to the United States from rogue states or from accidental/unauthorized launch, the national missile
defense program is America's ultimate insurance policy. For our deployed forces, we are developing and
  fielding both lower-tier and upper-tier theater missile defenses to counter regionally oriented missile

     The theater threat to our allies and U.S. forces deployed abroad is real and growing. We saw it
  demonstrated in the Gulf War. Besides Iraq, we know there are many ballistic and cruise missiles in
many countries. Many thousands of short-range missiles are deployed today with hundreds of launchers
in as many as 30 different countries -- some of these countries are quite hostile to the United States. This
           threat is here and now. It is widely dispersed, and it has to be taken very seriously.

In addition to the short-range missile threat, we see a medium-range threat emerging. Some nations are
   developing their own medium-range missiles; in particular, North Korea is developing the No Dong
  missile. Other nations, some of them rogue, are buying these missiles or trying to buy them. Iran is a
                                               case in point.

  In addition to missiles with conventional warheads, we have a threat today from missiles armed with
 chemical and biological warheads. We now know what we suspected during Desert Storm -- Iraq had
chemical warheads that could have been put on Scud missiles. It is still an open question as to why Iraq
  did not use them during that war. Our strategy for deterring the use of weapons of mass destruction
appears to have worked, possibly because they feared an overwhelming response from our conventional
    forces or possibly a response with nuclear weapons. Whatever the reason, we do know that that
            chemical threat existed and the Iraqis were deterred from using those weapons.

We believe that Iran, North Korea and Libya all have extensive chemical weapon programs. In addition,
 we anticipate a nuclear threat being possible in the future. We know, in retrospect, that Iraq was very
close to a nuclear operational capability at the time they started the Gulf War -- fortunately, they were not
all the way there. We know that North Korea was close last year. But their program is now stopped by the
Framework Agreement. And we understand that Iran is working to achieve a nuclear weapons capability,
but we believe they are many years away. We will keep a close eye on the nuclear threat from so-called
                            rogue nations armed with theater ballistic missiles.

   In the case of strategic missiles, Russia and China have a significant capability for delivering these
 weapons with strategic weapon delivery systems -- land-based and submarine-launched missiles and
     long-range aircraft. We do not see these systems as posing a threat to the United States in the
   foreseeable future. That is, we do not see an intent that goes with the capability. Even should that
               situation change, we will continue to field a significant U.S. deterrent force.

 We do not see a near-term ballistic missile threat to U.S. territory from the so-called rogue nations, but
we cannot be complacent about this assessment. However, the threat of long-range missiles from rogue
nations could emerge in the future. The intelligence community estimates that this threat would take 15
  years to develop, but could be accelerated if those nations acquired this capability from beyond their
borders. This is why our counterproliferation programs are important and why the role of missile defense
      within this broader national strategy must be carefully integrated into U.S. defense planning.

 Over the last year, the department's missile defense programs have been criticized from two different
directions. Some members of Congress have criticized the department for spending too much money on
   missile defense; others believe we are not spending enough. Some have criticized the department
 because we are moving the programs too quickly. Some think we are not moving the programs quickly

The Joint Requirements Oversight Council criticized the department's ballistic missile defense programs
 from two different points of view. First, our BMD program was funded at a level too high compared to
 other higher-priority, pressing modernization and recapitalization needs. Second, we were not focused
                        sharply enough on dealing with the here-and-now threat.

  With all of this criticism, some of it appropriate, the secretary of defense decided we needed to look
intensively into the department's whole set of missile defense programs and look for a restructuring of the
program portfolio to produce a source of funds for othr modernization priorities. During the past several
months, we have identified what I believe is a more balanced missile defense program, one that is more
 affordable, and one that has better prospects for successful execution. It is also better matched to the
 missile threats we will be facing. This new plan makes use of all of the funds that were appropriated in
fiscal year 1996 for missile defense -- both the funds that were requested by the president as well as the
                                 funds that were added by the Congress.

 Our review reaffirmed the fundamental priorities in our missile defense program. The first priority is to
defend against theater ballistic missiles and cruise missiles. Within the theater missile defense mission
area, the review broke some new ground on defining the underlying subpriorities. The first subpriority is
  to field systems to defend against the existing short- to medium-range missiles -- our lower-tier TMD
systems. The next subpriority is to proceed at a prudent pace to add wide area defenses and defenses
    against the longer-range theater missiles as that threat emerges -- the upper-tier TMD systems.

 Our second priority is to develop a capability to defend against intercontinental ballistic missiles -- our
national missile defense program -- and the cruise missiles which may threaten the United States in the

 Finally, our third priority is developing a robust technology base to underlie these two programs -- both
  the TMD program and the NMD program -- to be able to develop and deploy more advanced missile
     defense systems over time as the threat systems they must counter become more advanced.
We dealt with our No. 1 priority -- theater missile defense-- by first assessing the situation in the theater
 today. Two systems are fielded -- the Marine Corps Hawk system and the Patriot Advanced Capability
  2/Guidance Enhanced Missile system. The Hawk capability is very limited. The PAC-2/GEM system
 contains a guidance upgrade that significantly improves the lethality and coverage of the basic PAC-2
                               system used in combat during Desert Storm.

 Although the PAC-2/GEM system provides a more robust capability than that which we had fielded in
Desert Storm, it is still not sufficiently robust capability to deal with the threat. The program that emerged
      from our review and that was incorporated in the fiscal year 1997 budget request reflects the
departmentÕs commitment to put Òrubber on the rampÓ for these TMD systems for which the threat has
                                             already emerged.

Our first theater missile defense priority is to enhance the capability of our lower-tier systems beyond that
   we now have deployed. Our intent is to strengthen our effort to field a capability to defeat short- to
                       medium-range theater ballistic missiles as soon as possible.

    We will do this by building on existing infrastructure and prior investments in ongoing programs;
    expanding the capability of Patriot and Aegis/Standard Missile systems; and improving our battle
management/command, control and communications capability. We are also beginning, in a cooperative
  program with our allies, the project definition/validation phase of the Medium Extended Air Defense
System, a highly mobile system intended to provide our maneuvering forces with a 360-degree capability
                                 against both ballistic and cruise missiles.

 We have two systems, the PAC-3 and the Navy Area Defense system, in development to give us our
 core lower-tier capability. Neither of these programs involves a significant technology risk at this point.
The risks ahead for these programs are related to program execution. Our task is to ensure that we have
a robust program to proceed with both systems and to field this capability as early as possible. The mix of
  PAC-3 and Standard Missile-2 Block IVA interceptors eventually purchased to perform the lower-tier
              mission will depend on their relative prices and performance, and the threat.

   The first of the advanced lower-tier systems to be fielded is the PAC-3. It is a much more capable
 derivative of the PAC-2/GEM system in terms of both coverage and lethality. The PAC-3, in fact, has a
new interceptor missile with a different kill mechanism -- rather than having an exploding warhead, it is a
  hit-to-kill system. During the review, we found that the PAC-3 program had a high degree of risk for
completion. There were some fact of life slips in the schedule, and the program was not funded at a level
                   commensurate with our near-term priority to field a robust capability.

Even though a major objective of the review was to reduce the missile defense budget, we added about
   $240 million for the PAC-3 through the Future Years Defense Program and established a realistic
     schedule to lower the program execution risk by extending the engineering and manufacturing
   development phase of the program by up to 10 months. System performance will be improved by
  rephasing the missile and radar procurements, upgrading four launchers per battery with enhanced
           launcher electronics systems and extending the battery's remote launch capability.
We also looked at fielding the PAC-3 system. We had originally planned to upgrade nine missile defense
battalions with the PAC-3 system. We decided, instead, to defer the upgrade of three battalions pending
 availability of the Medium Extended Air Defense System. PAC-3 low-rate initial production will begin in
 the first quarter of fiscal year 1998, and the first unit equipped date is planned for the fourth quarter of
                                              fiscal year 1999.

 The second of the lower-tier systems, the Navy Area Defense system, consists of Standard Missile-2
  Block IVA interceptors deployed aboard Aegis ships. The capability provided by this system has the
            advantage of being able to be brought into theater without having forces on land.

Although to a lesser degree than PAC-3, we found similar executability risks in this program. We will use
   the $45 million added by Congress in the fiscal year 1996 appropriation to compensate for system
                   engineering and design efforts not fully funded in fiscal year 1995.

     We also added about $120 million to this program through the FYDP to make the program fully
executable on a moderate risk profile. These funds will cover delays in risk reduction flights and adjusted
 cost estimates for test targets and lethality efforts. This will allow us to proceed expeditiously with the
                              EMD program and LRIP missile procurement.

  The program plans provide for fielding a User Operational Evaluation System capability in fiscal year
2000 and a first unit equipage in fiscal year 2002. Thereafter, operational units will use the legacy UOES
system for continued testing and as a contingency warfighting capability. This will maintain our baseline
                       development and procurement schedules for the program.

The last of the lower-tier systems is the Medium Extended Air Defense System, formerly the Corps SAM
   [surface-to-air missile] program. This system will provide fundamental enhancements in flexibility,
  mobility and deployability. For example, the PAC-3 system is oriented in a particular threat direction.
MEADS provides 360 degrees of coverage. It is a highly mobile system that is designed to be deployed
           with our forward and maneuvering forces. It will be transportable on C-130 aircraft.

 MEADS will provide advanced capabilities against theater ballistic missiles, cruise missiles and other
    air-breathing threats. This system would replace Hawk and would ultimately replace Patriot. As
 discussed above, we are holding equipage of three Patriot battalions in reserve pending a decision on
                          development and deployment of this MEADS system.

   We are cooperating on this program with Germany, France and Italy, who together will provide 50
   percent of the funds. I soon expect to sign a memorandum of understanding with our international
partners to begin the next phase of this program. We added about $80 million over the FYDP to fully fund
the U.S. share of the cooperative project definition/validation phase. This increase brings our funding to a
rate of about $30 million per year and fulfills our international commitments at this time. We will make a
                            decision to enter development in fiscal year 1998.

 Our second theater missile defense priority is the upper-tier systems. These systems are necessary to
   defeat longer-range ballistic missiles, to defend larger areas and to increase effectiveness against
                                       weapons of mass destruction.
The department's plan for upper-tier systems contains the development of the Theater High-Altitude Area
Defense system for our ground forces. In addition, our upper-tier approach moves the Navy Theaterwide
  system from the status of advanced capability exploration to system assessment and demonstration.

The THAAD system will provide extended coverage for a greater diversity and dispersion of forces and
the capability to protect population centers. But the principal additional capability provided by this system
is the ability to deal with our longer-range theater missile threats as they begin to evolve and emerge over
time. THAAD also reduces the number of missiles that the lower-tier systems must engage and provides
     us with a shoot-look-shoot capability -- the ability to engage incoming missiles more efficiently.

 THAAD is the most mature upper-tier system. We were funding this program at about $900 million per
year going into this review. We have made a significant adjustment to this program, keeping on track our
 capability for early contingency deployment of the system, but making outyear adjustments to focus on
              the nearer-term threat, reduce technical risk and lower the rate of investment.

We believe it was important to keep in place the UOES concept and schedule. This provides us with the
 capability for a limited contingency deployment of the THAAD system in fiscal year 1998 to counter a
  near-term threat. This would include about 40 missiles and two radars, which would be used for user
                     testing but which could be maintained in the theater if required.

 We made a conscious decision to keep the UOES portion of the program on track, but we restructured
 the rest of the program for the objective THAAD system, taking about $2 billion out of what was a $4.7
billion program through the FYDP. This restructured THAAD program is still funded at a level above the
                    "critical mass" required to maintain a productive contractor team.

The system to be initially developed and deployed will be with the UOES+, a better version of the UOES
  system, in lieu of the previously planned full-capability objective system for the THAAD program. We
  applied our cost-as-an-independent-variable approach to look at the enhancements for the objective
  system, what they cost and what they bought us. We concluded that the UOES+ will meet the most
                     important THAAD requirements at a substantially reduced cost.

  The UOES+ program will militarize the UOES design and upgrade certain components, such as the
  infrared seeker, the radar and the BM/C3. This program delays the production ramp-up and first unit
               equipage by a little over two years. We will begin LRIP in fiscal year 2002.

The Navy Theaterwide system is projected to add the same generic kind of terminal coverage capability
as the THAAD system, again providing longer-range coverage and protecting a wider area. This system
 also offers ascent-phase intercept capability in cases where the Aegis ship can be positioned near the
                     launch point, and between the launch point and the target area.

  The Navy Theaterwide system is less mature than the THAAD system. Prior to the review, we were
proposing funding this program in our fiscal year 1996 and 1997 budgets at a low level ($30 million per
year) to mature the key enabling technologies. The fiscal year 1996 appropriation added $170 million to
                                        our request of $30 million.
  We considered a number of approaches to the Navy Theaterwide system ranging from the program
  proposed in fiscal year 1996 president's budget to a full commitment to a major new start with $200
 million applied in fiscal year 1996. The recommended program begins technology demonstration and
                               concept definition starting in fiscal year 1996.

This recommendation was based on the lower priority of the upper-tier, lack of maturity of the technology
and the need to further develop the system concept to enhance robustness. There is also the opportunity
 to apply technology being developed for national missile defense to the NTW system. Likely areas of
 technology synergy include advanced sensors and seeker, propulsion, stabilization and the underlying

We plan to apply the $170 million added in the fiscal year 1996 appropriation over a two-year period, as
                           well as adding about $570 million through the FYDP.

We considered several approaches for fielding a boost-phase intercept capability against theater ballistic
missiles. Obviously, it is desirable, if possible, to intercept an enemy missile while it is still boosting. The
   fiscal year 1997 budget request funds two primary BPI approaches. The Air Force has funded an
 airborne laser demonstration at about $775 million over the FYDP and expects to conduct several key
                                    engineering tests in fiscal year 1998.

  In parallel, the Ballistic Missile Defense Organization will fund concept definition studies to refine the
concept for an unmanned aerial vehicle with a kinetic energy interceptor at a rate of $10 million per year
 in fiscal years 1997 and 1998. This level of investment is sufficient to refine the concept and support a
  back-up path should problems develop with the airborne laser demonstration. A decision on the best
                  approach to fielding a BPI capability will be made in fiscal year 1998.

  Interoperability in BM/C3 is essential for successful TMD operations. A capable, joint, interoperable
BM/C3 underlies the three pillars of TMD, improving the effectiveness of active defense, passive defense
                                            and attack operations.

 We are actively pursuing three avenues to ensure effective BM/C3. These are improving early warning
   and dissemination, ensuring communications interoperabilityand upgrading command and control
  centers for TMD functions. From the joint perspective, the BMDO oversees the various independent
weapon system developments and provides guidance, standards, equipment and system integration and
 analysis to integrate the multitude of sensors, interceptors, and tactical command centers into a joint,
      theater-wide TMD architecture. The BMDO also conducts tests and demonstrations with the
 commanders in chiefs to verify this architecture meets the requirements and supports the warfighters'

   These BM/C3 initiatives provide several benefits to active defense. Effective BM/C3 conserves the
   number of interceptors required by improving weapon system fire distribution and coordination and
  through sensor fusion. It provides multiple information paths between sensors, shooters and control
  locations to combat sensor outages and jamming. BM/C3 weapon cueing information also increases
battlespace and depth of fire, improves defense against long-range threats and increases the defended
   area. For attack operations, BM/C3 helps locate the threat and improve probability to shooting the
 shooter first. BM/C3 also supports passive defense measures by providing greater early warning and
                                          faster reaction times.

This integrated BM/C3 architecture also sets a foundation for other BM/C3 intensive initiatives, such as
cruise missile defense. Finally, the improvements to the architecture, procedures and interoperability pay
                                 direct dividends in all warfighting areas.

       The department plans to spend about $200 million per year on enhancements to the battle
management/command, control and communications capabilities of our theater missile defense forces.
 This amount includes embedded funding in the Patriot and Aegis programs. It also covers the amount
 required for the departmentÕs TMD C3 core programs, such as the ADA [air defense artillery] brigade
upgrades; JTIDS [joint tactical information distribution system] procurement and TBM platform integration;
   datalink standards; combat information center upgrades; and TIBS [tactical information broadcast
                   service]/TDDS [tactical defense dissemination system] integration.

   The department's second overall missile defense priority is national missile defense. Our intended
program is to position the United States to respond to a strategic missile threat as it emerges. Because
there is no threat that warrants it, we have made a decision not to commit to deploy a NMD system today.
  But we are shifting our national missile defense emphasis from a technology readiness program to a
                                     deployment readiness program.

 Secretary [of Defense William J.] Perry in his testimony last year described a three plus three program
   under consideration by the department at that time. By moving from a technology to a deployment
readiness posture, we have made the decision to proceed with the first three years of the three plus three
                                program that Secretary Perry described.

   Under this approach, we plan to develop and begin testing elements of an initial NMD system and
 preserve thereafter a capability to deploy within three years. If after three years we encounter a threat
 situation that warrants a deployment, then an initial operational capability for a NMD system could be
                                achieved in another three years, by 2003.

  To implement this approach, the department plans to spend the additional $375 million added by the
Congress in the fiscal year 1996 appropriation over two years to initiate the NMD deployment readiness
program. As a result, we will be spending more on NMD early in the 1996-2001 FYDP and less later. We
 have increased our budget in NMD by about $100 million per year in both 1997 and 1998. We plan to
   reduce our funding for NMD by a commensurate amount in the out years of the FYDP -- so the net
change for NMD funding over the 1997-2001 FYDP ends up being about zero. Once the NMD technology
base is built up over the next three years, the NMD deployment readiness posture can be sustained at a
                                          reduced funding level.

      This approach enhances the technological foundation of our NMD program in two ways: The
 performance of the national missile defense we would deploy will be considerably improved over time;
  and the timeliness of response to field an operational capability to counter an emerging threat will be
                                 shortened from six years to three years.
If the decision is made to deploy an NMD system in the near term, then the system we could field in 2003
  would provide a very limited capability. If we can avoid deploying a system in the near term, we will
  continue to enhance the technology base and the commensurate capability of the NMD system that
                             could be fielded on a later deployment schedule.

The issue here is to be in a posture to be three years away from deployment, so that we can respond to
  the emergence of a threat. It does not make sense to make a deployment decision in advance of the
threat, because we would be making investments prematurely, resulting in a system that would be less
 capable when it is really needed. In the absence of a threat, it is more sensible to continue to enhance
  the capability of the system that could be deployed when it is needed. This approach fields the most
                 cost-effective capability that is available at the time the threat emerges.

  The development program that will be executed over the next three years will be a treaty compliant
 program. The system components that are ultimately fielded, should a deployment decision be made
    after three years, might comply with the current treaty or might require modification of the treaty,
depending on what the threat situation required. At this point, it is important to underscore that there is no
  commitment today to deploy an NMD capability. The funds to deploy an NMD system are not in the
                                      department's 1997-2001 FYDP.

The department plans to test a ground-based interceptor exoatmospheric kill vehicle in fiscal year 1998
and conduct the first integrated system flight test of a ground-based interceptor, prototype ground-based
radar, upgraded early warning radars and improved BM/C3 in fiscal year 1999. In addition, the Air Force
 is funding and developing the Space and Missile Tracking System as part of the Space-based Infrared
System program. A low earth orbit SMTS would provide 360-degree over-the-horizon sensing throughout
                                    the trajectory of an enemy missile.

   Many TMD sensors, BM/C3 and weapons also have an effective capability to counter the growing
 land-attack cruise missile threat. In particular, the lower-tier PAC-3, Navy Area Defense, and MEADS
  systems operate in the same battlespace and will have capability against the cruise missile threat. In
  addition, the NMD BM/C3 architecture will be designed to promote interoperability and evolution to a
                     common BM/C3 system for ballistic and cruise missile defense.

The department also has a number of initiatives outside the BMD program to improve the ability of U.S.
   forces to detect and defeat cruise missiles in theater or launched against the United States. These
 initiatives include advanced technology sensors to detect low observable cruise missiles, upgrades to
existing airborne platforms to improve beyond-the-horizon detection capability against cruise missiles, an
advanced concept technology demonstration of a new aerostat sensor platform and upgrades to existing
                                        missile interceptor systems.

   The last element of the department's ballistic missile defense program is the technology base. This
  program underpins both the TMD and the NMD programs by continuing to advance our capability to
counter future and possibly more difficult threats. The BMD technology base allows us to provide block
upgrades to our baseline systems, to perform technology demonstrations for reducing risk and providing
   a path to speed technology insertion and to advance some of our basic underlying technologies to
 provide a hedge against future threats -- including research into advanced concepts, such as directed
                               energy systems capable of global coverage.

In summary, the department is committed to protecting the United States, including U.S. forces deployed
abroad, and our allies against ballistic missile, cruise missile and weapons of mass destruction threats.
 We have a comprehensive national security strategy for countering such threats, including preventing
  and reducing the threat, deterring the threat and defending against it. Active defense against ballistic
                        missile attack is an important component of that strategy.

Our BMD priorities remain as they were in the past and are reflected in the new budget that includes $2.8
 billion in fiscal year 1997. Across fiscal years 1997 through 2001, the department has budgeted $13.5
    billion for ballistic missile defense. This represents about a $3 billion reduction from the baseline
 established by the presidentÕs fiscal year 1996 budget request in order to support even higher-priority
needs in other parts of the defense budget. Our first priority, theater missile defense, deals with the threat
     that exists today. The second priority is national missile defense. And the third is to support the
                                        underlying technology base.

 I believe the changes adopted by the department during the BMD review respond to the threats, to the
 priorities expressed by the Joint Staff, and also to fact-of-life changes in the program status. The TMD
program fully supports deployment of early operational capabilities for the high-priority lower-tier systems,
  and provides the ability to deploy upper-tier systems in response to the threat and the availability of
                                         funding for those systems.

 Our NMD program shifts from a technology readiness posture to a deployment readiness posture. The
initial development portion of the program will comply with the Anti-ballistic Missile Treaty and enable the
 United States to develop within three years elements of an initial NMD system that could be deployed
  within three years of a deployment decision. This approach would preserve thereafter a capability to
deploy within three years, while allowing the United States to continue the advancement of technology,
                   add new elements to the system and reduce deployment timelines.

   The NMD system would have the purpose of defending against rogue and accidental/unauthorized
  threats. It would not be capable of defending against a heavy deliberate attack. Decisions about the
treaty compliance of potential NMD systems would be made by the Department of Defense (on advice of
the Compliance Review Group). The current program is proceeding, however, in the expectation that a
         deployment of 100 GBI and one GBR at Grand Forks, N.D., would be treaty compliant.

     The last element of the ballistic missile defense program is the technology base program. The
department will continue to advance the critical technologies to deal with future threats as they develop.

  Mr. Chairman, I thank you for this opportunity to appear before the committee and shall be happy to
                                   answer any questions you may have.
             Defining Missions, Setting Deadlines
   Prepared remarks of Anthony Lake, assistant to the president for national security affairs, George
                           Washington University, Washington, March 6, 1996.

    I want to speak with you today about the most difficult issue any president has to face: the use of
American force abroad. This is a good time for this discussion. Six weeks from now, the last of more than
 20,000 American troops assigned to the U.N. mission in Haiti will come home. About an equal number
 are serving in Bosnia to help keep the hard-won peace there. Both missions reflect answers to difficult
                    questions about when to use force -- and especially how to use it.

                          Let me start by putting my thoughts in a larger context.

Halfway between the end of the Cold War and the start of a new century, we're living a moment of hope.
 Our nation is secure. Our economy is strong. All around the world more people live free and at peace
                                              than ever before.

  But the promise of this moment is matched by its perils, as the desperate and despicable acts of the
 enemies of peace in the Middle East so sadly remind us. Old threats like ethnic and religious violence
and aggression by rogue states have taken on new and dangerous dimensions, and no one is immune to
a host of equal opportunity destroyers: the spread of weapons of mass destruction, terrorism, organized
   crime, drug trafficking, environmental degradation. Individually, each could undermine our growing
                    security. Together, they have the potential to cause terrible chaos.

 Faced with both the promise and the problem of our time, there are those on both the left and the right
          and in both political parties who would have America retreat from its responsibilities.

Some proclaim that America must stay engaged, but then would deny us the tools and the resources to
 match their rhetoric. These backdoor isolationists would stop us from working with others to share the
 risks and the costs of engagement. They would gut our diplomatic readiness and cut our assistance to
 those who take risks for peace. They fail to recognize that the global trend toward democracy and free
markets, and the opportunities it creates for our people, is neither inevitable nor irreversible. It needs our
                                support, our resources and our leadership.

 Others, call them neo-know-nothings, argue that with the Cold War won, it's safe to withdraw behind a
 Fortress America. It is not the American way to retreat or refuse to compete. We can't build a wall high
enough or dig a moat deep enough to keep out the threats to our well-being or to isolate ourselves from
   the global economy. As President Clinton said in his State of the Union address this year, we must
          confront these challenges now -- or pay a much higher price for our indifference later.

The history of our century makes this truth very clear. After World War I, America withdrew from the world,
a vacuum that was filled by the forces of hatred and tyranny. After World War II, we stayed involved, we
  worked with others, and we led, patiently, persistently and pragmatically. And we helped create the
       institutions that secured half a century of security and prosperity for the American people.
For the past three years, the Clinton administration has built upon this bipartisan legacy of leadership by
 reducing the nuclear threat, supporting peacemakers, spreading democracy and opening markets. I'm
                proud of the results, for our own people and for people around the world.

We stayed engaged with Russia and the other states of the former Soviet Union despite our differences
 because it is in the interests of the American people that we do so. Now there are no Russian missiles
pointed at our cities and citizens. Ukraine, Belarus and Kazakstan are giving up the nuclear weapons left
 on their land when the Soviet Union collapsed. We are safeguarding nuclear materials and destroying
  nuclear weapons so they don't wind up in the wrong hands, and we have taken the lead in securing,
 extending or promoting landmark arms control agreements: START [Strategic Arms Reduction Talks] I
    and II, the [nuclear] Nonproliferation Treaty, the Comprehensive Test Ban Treaty, the Chemical
                                          Weapons Convention.

 We applied steady, patient pressure to North Korea. Now it has frozen its dangerous nuclear weapons

We're waging a tough counterterrorism campaign with stronger laws; increased funding, manpower and
training for law enforcement; sanctions against states that sponsor terrorism; and closer cooperation with
  foreign governments. Now those responsible for the World Trade Center bombing are behind bars.
 We've foiled attacks on New York City and on our airliners. We've tracked down terrorists and brought
                                    them to justice around the world.

   We sent our troops, ships and planes to the Persian Gulf when Saddam Hussein moved his forces
      towards the Kuwaiti border. Now Kuwait remains safe and the world's energy supply secure.

   We backed diplomacy with force in Haiti. Now the dictators are gone. Haiti has celebrated the first
     democratic transfer of power in its history, and the flood of refugees to our shores has ended.

   Our troops are standing up for peace in Bosnia. Now its playgrounds are no longer killing fields. A
dangerous fire at the very heart of Europe is not raging as it had been for four years. The Bosnian people
                                  have their first real chance for peace.

             We are standing with those taking risks for peace through good times and bad.

  Now in Northern Ireland, the determination of [British] Prime Minister [John] Major and [Irish] Prime
 Minister [John] Bruton is pushing the peace process back on track with a date certain for negotiations
                                     and, we hope, a new cease-fire.

In the Middle East, we know that fanatics will stop at nothing to kill the hope for peace. As you know, the
 president has ordered a series of steps to express our complete support for the peacemakers there as
                                           they fight terrorism.

 We must also not lose sight of the tremendous progress that has been made toward a comprehensive
  settlement or the fact that the overwhelming majority of people want peace. We will not rest until that
                                         desire becomes reality.
And we negotiated a better deal for America as we opened markets abroad. Now our exports are at an
 all-time high, and hundreds of thousands more Americans have jobs at home. With Japan alone, this
administration has completed 20 separate trade agreements. The sectors covered by those agreements,
  from auto parts to medical equipment, have seen their exports increase by 80 percent. That's almost
                twice as much as exports from other sectors, which are also growing fast.

Not one of these achievements came about easily or automatically. They happened because we kept our
 military strong while adapting our alliances to new demands; because we acted with others where we
could and alone where we had to; because we were patient enough to stick with diplomacy, but prepared
to use force; because we rejected isolationism, but recognized that we cannot be the world's policeman;
because in each and every instance, we brought together our interests and values, and we acted where
                                       we could make a difference.

   Some people, in a curious bit of nostalgia for the Cold War, complain that our policy lacks a single,
 overarching principle --that it can't be summed up on a bumper sticker. But while we are operating in a
 radically new international environment, America's fundamental mission endures. The same ideas that
were under attack by communism and before that by fascism remain under attack today. Now, as then,
  we are defending an idea that has many names -- tolerance, liberty, civility, pluralism --but shows a
constant face: the face of the democratic society. Now, as then, our special role in the world is to defend,
                      enlarge and strengthen the community of democratic nations.

In pursuing this mission, our interests and ideals converge. We know from experience that democracies
   rarely go to war with one another or abuse the rights of their people. They make for better trading
  partners, and each one is a potential ally in the struggle against the forces of hatred and intolerance
whether those forces take the shape of rogue nations, ethnic and religious hatreds or terrorists trafficking
                                     in weapons of mass destruction.

What we have left behind are the certitudes and simplifications of the past, and that's not necessarily a
bad thing. During the Cold War, policy makers could justify every act with one word: containment. We got
the big things right -- our policy of containment won the Cold War. But even the best policy can become
          the worst straitjacket if it is pursued too rigidly and reflexively, as we saw in Vietnam.

   Now we have the opportunity to think anew about the best ways to protect and promote America's
    interests and ideals. Our tools of first resort remain diplomacy and the power of our example, but
sometimes we must rely on the example of our power. We face no more important questions than when
and how to use it. From our experience in countering traditional aggression, as in the Persian Gulf, and
  contending with more novel crises, as in Haiti and in Bosnia, there are some principles on the use of
                                force that I would like to discuss with you.

 First, let me cite one underlying and enduring principle: We will always be ready to use force to defend
     our national interests. Until human nature changes, power and force will remain at the heart of
                                           international relations.

This begs the question of just what those interests are. I would cite seven circumstances which, taken in
            some combination or even alone, may call for the use of force or military forces;
                    To defend against direct attacks on the United States, its citizens and its allies;
                                                  To counter aggression;
              To defend our key economic interests, which is where most Americans will see their most
                                    immediate stake in our international engagement;
             To preserve, promote and defend democracy, which enhances our security and the spread of
                                                         our values;
             To prevent the spread of weapons of mass destruction, terrorism and international crime and
                                                       drug trafficking;
              To maintain our reliability, because when our partnerships are strong and confidence in our
                             leadership is high, it is easier to get others to work with us; and
             For humanitarian purposes, to combat famines, natural disasters and gross abuses of human

  Not one of these interests by itself, with the obvious exception of an attack on our nation, people and
 allies, should automatically lead to the use of force. But the greater the number and the weight of the
interests in play, the greater the likelihood that we will use force once all peaceful means have been tried
and failed, and once we have measured a mission's benefits against its costs in both human and financial

In Haiti, when we saw democracy stolen from its people, a reign of brutality take hold in our hemisphere,
a flood of refugees to our shores, international agreements consistently violated and efforts to resolve the
impasse through negotiations and sanctions fail, the case for intervention was compelling. In Bosnia, the
  worst atrocities in Europe since World War II, a dangerous fire at the very heart of the Continent, our
   commitments to our NATO allies and a peace agreement the parties were calling on us to secure
                                                 required us to act.

  But more than the "when" of using force, Haiti, Bosnia and some other recent interventions highlight
                              principles that get at the "how" we should use force.

    First, threatening to use force can achieve the same results as actually using it, but only if you're
prepared to carry through on that threat. The best trained, best equipped and best prepared fighting force
    in the world has a unique ability to concentrate the minds of our adversaries without firing a shot.

In Haiti, when the military regime learned that the 82nd Airborne literally was on the way, it got out of the
way. In the Persian Gulf, as soon as President Clinton moved American forces in the region, Iraq moved
its troops away from Kuwait. And by backing diplomacy with the presence of U.S. forces to deter attack
      on the South, we convinced North Korea to freeze its dangerous nuclear weapons program.

A second principle is that the selective but substantial use of force is sometimes more appropriate than
   its massive use, provided that the force is adequate to the task, and then some. President Clinton
 refused to engage our troops in a ground war in Bosnia because he knew that no outside power could
 force peace on the parties. To do so would have risked a Vietnam-like quagmire. But this summer, the
combination of NATO's heavy and continuous air strikes, Bosnian and Croat gains on the ground and our
 determined diplomacy convinced the Bosnian Serbs to stop making war and start making peace. Now
our troops are in Bosnia not to fight a war, but to secure a peace they produced through the deliberate,
                                           calibrated use of force.

A final principle is this: Before we send our troops into a foreign country, we should know how and when
we're going to get them out. Sounds simple, even obvious, but carefully defined exit strategies for foreign
  interventions have not been a hallmark of our foreign policy. Now they are, and that makes sense for
                              America and for the people we're trying to help.

 I don't want to be doctrinaire in asserting an exit strategy doctrine. When it comes to deterring external
aggression, as in the Persian Gulf or the Korean Peninsula, or fighting wars in defense of our most vital
security interests, a more open-ended commitment is necessary. But increasingly, our interests require
  that our military keep peace in the wake of internal conflicts. For these operations to succeed, tightly
                   tailored missions and sharp withdrawal deadlines must be the norm.

  The first step is to give our armed forces a clear mission with achievable military goals, as President
                                    Clinton did in both Haiti and Bosnia.

  In Haiti, we asked our armed forces to return the elected government to power and restore a secure
        climate so that civilians could train a police force, hold elections and begin reconciliation.

 In Bosnia, our soldiers are overseeing the implementation of the military side of the Dayton accords --
separating the armies, maintaining the cease-fire, securing transferred territory -- while civilian authorities
help the Bosnian people rebuild their lives and their land. In both places, our troops are highly trained and
heavily armed, with very clear rules of engagement. And the executive branch and Congress are united
    in their commitment to our military's goals and success, as they were in Operation Desert Storm.

Contrast these operations with Vietnam, Lebanon and Somalia. There, clear and achievable missions for
our military were not defined. In Vietnam, our society blamed our soldiers for a defeat that was not theirs.
Because we neglected to ask the right questions and establish clear military goals from the start, the men
and women of our armed forces paid a terrible price both in Vietnam and on their return home. We must
                               never put them in that position again. Never.

The next step is to set deadlines for withdrawal based on the mission's goals. In Haiti, our military leaders
  informed the president that our troops could complete their military tasks in a year and a half and in
                                  Bosnia in about one year, and they will.

Here's why setting deadlines is so important: Neither we nor the international community has either the
 responsibility or the means to do whatever it takes for as long as it takes to rebuild nations. There are
                                           many reasons for this.

First, providing a security blanket without making clear it's on loan, and not for keeps, only gives those we
are helping the comfort to evade their own responsibilities. It creates unreasonable expectations that the
                               hard work will be done for them, not by them.
 Second, assuming too much responsibility for a nation's future tends to undercut the very government
you are trying to help. In Vietnam, the more we assumed responsibility for a weak Saigon administration,
   the more dependent it became and the more open to charges it was a puppet regime beholden to
      foreigners. Unless you make clear that your mission is limited in scope and duration, you risk
                        delegitimating a government in the eyes of its own people.

 Third, overstaying one's welcome ultimately breeds resentment of our presence and provides an easy
                      target for blame when things go wrong. That target will be us.

 By carefully defining the mission and clearly setting a deadline, we serve notice that our only goal is to
  give governments and people the breathing room they must have to tackle their own problems. This
    "tough love" policy may sound harsh to some. It may strike others as a gamble, but consider the
  alternative: self-defeating efforts to take on responsibilities that are not ours to create unsustainable
           dependencies instead of giving nations a chance to make their way independently.

It is a dangerous hubris to believe we can build other nations. But where our own interests are engaged,
                we can help nations build themselves and give them time to make a start.

            I believe we can see the benefits of our exit strategy doctrine in Haiti and Bosnia.

Given the chance, the Haitian people quickly focused on the ballot, not the bullet; on trade, not terror; on
   hope, not despair. In just a year and a half, with our civilian help, they have completed presidential
 parliamentary and local government elections, trained a police force, dramatically improved the human
              rights situation and begun to reverse the economic decline of the coup years.

Haiti remains the poorest nation in the Americas. There is no guarantee democracy will ever take hold or
the economy will prosper. But its people now have a real chance to build a better future for themselves
 and their children. And for the U.S. forces who are leaving when we promised they would, we can say
                                          "mission accomplished."

  The same logic applies in Bosnia. Its people understand they have a window of opportunity that our
military opened to decide their future in peace: to freely choose their own leaders; to begin to rebuild their
 roads and schools, their factories and their hospitals; to reunite children with their parents and families
with their homes. At the end of this year, when our troops leave, we can reasonably hope that the people
of Bosnia will have developed a greater stake in the peace than war, that peace will have taken on a life
                                            and logic of its own.

  But let me make one point absolutely clear: The breathing room our military is providing in Haiti and
Bosnia must be filled with the oxygen of reconstruction assistance. What we call civilian implementation
is the vital and necessary companion to any peacekeeping operation. Our allies agree. That's why they
 are providing about 80 percent of the civilian assistance for Haiti and for Bosnia. The sooner people in
  conflicted countries recover the blessings of a normal life, the surer the chances our troops will leave
                                 behind them a legacy of peace and hope.
 That's why Congress should unfreeze the modest amount of outstanding development assistance for
Haiti to fund primary education, child care and immunizations. Now. And that's why we are working with
  Congress on our request for $200 million to assist civilian reconstruction in Bosnia -- money that will
  support economic revitalization and reform, the deployment of international police monitors and our
                               demining efforts -- money that is needed now.

 In both Haiti and Bosnia, our armed forces are doing everything we have asked of them and more. We
should live up to their example. Their missions will only succeed if the civilian side can do its part. Holding
  back the dollars we need for relief and reconstruction doesn't serve our soldiers, it doesn't serve the
                  people we're trying to help, and it doesn't serve our nation's interests.

 One of the great privileges of my job is to travel around the world and to see firsthand the respect our
 nation enjoys. People look to us for leadership not only because of our size and our strength, but also
because of what we stand for and what we're willing to stand against. Now, perhaps more than any other
time in our history, America has a unique ability to make a difference for our own people and for people
                                              around the world.

  Our duty is to help use this power as wisely as possible, to steer by the stars of our interests and our
ideals. As President Clinton has said, we can't be everywhere. We can't do everything. But where those
 interests and ideals demand it and where we can make a difference, we must not hesitate to lead. We
                                           haven't, and we won't.

   You must not hesitate, either. Many of you here today are embarking on careers in foreign policy.
  Whether you do so as teachers or researchers, government officials or journalists, you will have an
opportunity to weigh in on the great foreign policy questions of our time. Weigh in with passion, weigh in
    with argument, but above all, weigh in. America needs to hear your voices. It needs to feel your

Right now, no question is more fundamental and no outcome more important than America's role in the
world. We can succeed only if we continue to lead. That is the lesson of what has come to be called the
American Century. If we heed its call, we can remain a force for freedom and progress around the world
  and for real security and prosperity at home. And the next century will be an American century, too.
  Tying Together the Best Individual Intellectual
 Address by Emmett Paige Jr., assistant secretary of defense, command, control, communications and
intelligence, at the Software Technology Management Conference, Santa Barbara, Calif., March 6, 1996.

It is indeed a pleasure to be asked to speak with you this morning. Software technology management is a
  field ripe with opportunities for improvement and advancement of the state of the art and the state of

I can think of nothing more important than improvement in software development today as we reach out
to exploit the electronics technology that the revolution continues to thrust into our hands. It challenges
us -- as no other field has ever before -- to tie together in a cohesive and coherent fashion the efforts of
                      the best individual intellectual efforts from around the world.

Your selection of speakers, except for me, and topics selected for this conference reflects these massive
and advanced efforts. What I would like to speak about are the expectations that DoD has of the software
     industry as a whole, and I include academia as a vital partner with industry in this matter. Our
expectations are high, but I found out long ago that you should never lower your expectations to the level
   that can readily be attained. It takes perseverance and ingenuity and a willingness to depart from
                                             traditional ways.

An individual who exemplified high expectations was President Franklin D. Roosevelt. He challenged us
"to move forward to greater freedom, to greater security for average (folks) than (they) have ever known
 before in the history of America." The financial safety net that he put into place has saved the lives of
                      many of our poor and our elderly. That was then, this is now.

 It behooves us to move on with all due speed to put into place an information safety net to improve our
   economy, advance the educational opportunities for individuals from all walks of life and keep our
 citizens informed. Improving our software development and the reliability of that software will go a long
  way in helping us to build and maintain a competitive advantage in the world market and continue to
                         provide a competitive advantage to our military forces.

  The national information infrastructure efforts, led by Vice President [Al] Gore, are just the tip of the
iceberg when it comes to being able to share knowledge. All parts of our government must work together
                                with industry to make this dream a reality.

  I am very pleased with the recent enactment of telecommunications reform. In his State of the Union
    address this year, President Clinton urged Congress to pass this legislation. I was pleased when
                                    Congress responded so positively.

 The telecommunications act breaks down old, artificial barriers between information service providers.
  The way we have been doing business has been based on laws that have been on the books for 62
years. The new law will open up information technologies as never before for consumers and business
   customers -- and DoD is about the biggest single customer that American business will ever have.

 We all know what comes from increased competition. It usually means improved service at lower cost,
                                   and we in DoD can use more of both.

For the foreseeable future, we in DoD will be called upon to perform more numerous and varied missions.
And we will continue to face resource levels that are, at best, austere. And we will be called upon more
  than ever before to enter into coalitions with other nations to achieve our goals, be they economic or
  military. Our telecommunications and information infrastructure must be open and flexible enough to
                                  meet these international requirements.

But we all know that it doesn't matter what the private sector can offer if DoD can't get to it. This has been
                  particularly frustrating when it comes to new information technologies.

   Secretary [of Defense William J.] Perry has given reform of the acquisition process a high priority.
Unneeded military standards hopefully will soon become a thing of the past. We are not there yet, but I
                    am here to tell you that we are indeed serious to make it happen.

 We need your help to make it happen. We need you, the people out on the line where the rubber meet
the road, to challenge military specifications and standards whenever you see them in any of our RFPs
   [requests for proposal]. Together, we can decrease the cost of maintaining our military as the best
 equipped, most modern, most potent fighting force in the history of mankind. President Clinton and Dr.
 Perry are determined to maintain our fighting forces as the best equipped, best trained military force in
                                                  the world.

   I am working with the undersecretary of defense for acquisition and technology and the director of
   operational test and evaluation to streamline the DoD acquisition oversight process. And we are all
  working with the Office of Management and Budget and Congress to get legal roadblocks removed.

The DoD Authorization Act for FY [fiscal year] 1996 is an example of what can be done when all parties
 work together for the common good. Contained within the Defense Authorization Act is the Information
                                   Technology Management Reform Act.

The reform act applies to all federal agencies, not just the Department of Defense. It repeals the Brooks
Act. It does away with the GSA [General Services Administration] Board of Contract Appeals. It allows for
        modular acquisition and implementation of large information systems. It is long overdue.

This is not to say that anarchy will reign. For DoD, I can tell you that this will not be the case. We will not
     replicate the oversight system that is being abolished. We will rather use common sense and a
                    departmentwide approach to information technology acquisitions.

Just to clarify the scope of what I'm talking about, we in DoD include development as part of acquisition.
So I anticipate that the new legislation will have great impact in the way that DoD buys and that vendors
                          provide software and hardware products and services.
    There will be a learning curve on both sides. We will need to retrain our downsized government
   acquisition work force, and vendors face a similar retraining task. This will not just be retraining on

  We all need to work towards the real cultural change of improving mutual trust. We absolutely must
encourage and foster increased communications between vendors or industry and our defense program
                managers for all of the software and hardware systems that we acquire.

 Each of [us] must work together and be practical visionaries -- to strive to do the best we can do, while
pushing and pressing toward common goals. In the case of DoD, our goal is to provide the best possible
support for our warfighters. We cannot ever lose sight of that goal, and I would like to talk about the role
                                     of software in reaching that goal.

 Within the realm of managing software efforts, we absolutely must have mature software development
processes. And we also need from industry a commitment to increased predictability concerning software
products. By that I mean that we need to get quality software deliverables on time, at reasonable costs,
                                    with the required level of reliability.

 Software systems development and life-cycle maintenance continue to be among the most costly and
difficult tasks that we have to cope with. It is not something that plagues DoD any more than it does the
 commercial sector and other federal, state or local government agencies. We all suffer from the same
                                           afflictions in software.

The development task always costs more money and takes more time than initially estimated, with rare
  exceptions. The operations and maintenance phase of the life cycle always costs more than initially

So it is very important that we continue to try and focus more management attention to software than we
 have today and improving the process. There are no "silver bullets," or at least none have been found

  What we would like to find are more commercial off-the-shelf software products that are secure and
       reliable. Whenever DoD must acquire software, COTS software is always our first choice.

I maintain that our best posture is to insist that market- driven, commercial off-the-shelf software be used
  by DoD whenever and wherever we can adapt it or adapt to it in terms of our operating or business
                                         processes to do our jobs.

We must use it smartly so that we can continue to evolve as that commercial market driven application is
  improved. We can then relieve ourselves of most of the life-cycle operations and maintenance costs.

However, when we must bear the expense of developing software applications and maintaining that code
  over the life cycle of our systems, which are typically long, we should use ADA -- as we have found
nothing else that does a better job of reducing our operations and maintenance costs while improving the
                                       overall quality and portability.
 Quality includes security. We are placing higher priority on our information security initiatives, and this
increased emphasis is shown in our increases in funding levels for these programs for the immediate and
foreseeable future. Security, like quality, is something that must be designed and built into our systems. It
                       cannot be achieved at a reasonable cost as an afterthought.

    Protection of information is a high priority, and so is harmonization. We have set into motion the
  mechanism to establish a single, unifying DoD technical architecture that will become binding on all
   future DoD C4I [command, control, communications, computers and intelligence] acquisitions and
                                           development efforts.

 We need to have systems that are born joint and interoperable. Achieving true jointness of our military
 systems, which includes weapon systems and information systems, is a major hurdle in implementing
                                 many of our national security strategies.

  We in DoD expect that industry will increase the availability of reusable assets, and I am personally
 convinced that we have not scratched the surface in terms of the possibilities for software reuse. This
    includes software architectures, designs and code. Our software must be platform- independent.

   As Secretary Perry has pointed out, our fighting forces in the field have enough on their hands with
    military missions. They do not have the time or resources to handle learning how to use or repair
software packages that differ from military service to military service or from one machine line to another.
 Our joint national security strategies include preventing wars as well as being prepared to win them, if
need be. Our road in DoD is the road to peace, but that road must be blazed and paved by warfighters.
              Peace is only enforceable when backed by the clout of warfighting capability.

As you all know, we are using our warfighting capabilities to enforce the peace in Bosnia. Thanks to our
military strength and the cooperation of our longtime allies and others, the children of Bosnia can go back
 to concerning themselves more with their homework and less with whether their home will be bombed.

Defense imagery data was instrumental in achieving the Dayton peace accords. The leaders of the three
  rival factions were taken on computer-generated tours of the country. The lines of the peace accord
maps were drawn up after the negotiators had taken an almost-firsthand look at what the effects would

 In one instance, the negotiators thought that a two-mile- wide access corridor would be sufficient. But
after a 3-D tour of the area by way of computer simulation, they found that hilly terrain made a five-mile
 corridor more suitable. This averted a potential flashpoint during implementation of the peace accords.

 The peace in Bosnia is a fragile one. But then, all human life is fragile in the face of today's weapons.

I would like to leave you with some words that FDR [Franklin D. Roosevelt] never spoke, for he died the
day before he was to have delivered them. Among the words that he planned to leave us with were these:
                "More than an end to war, we want an end to the beginnings of all wars."
He was right. Wars are often based on lack of understanding -- not just of initial intentions, but also what
                                       the consequences might be.

 Each of us here has the ability to add to the world's ability to exchange information, which will lead to
  more knowledge, which will lead to mutual understanding. And understanding is a key to ending the
                                           beginning of war. ...
   Initiative Underwrites Private Sector Housing
Prepared statement of Robert E. Bayer, deputy assistant secretary of defense for installations, before the
  Military Installations and Facilities Subcommittee, House National Security Committee, Washington,
                                                March 7, 1996.

Mr. Chairman and distinguished members of the S.ubcommittee on Military Installations and Facilities, it
is a pleasure to appear before you today ... . The quality of life of our service members and their families
    continues to be one of [Defense] Secretary [William J.] Perry's highest priorities. Today's service
members are a force of volunteers who joined the military for a career, not a two-year tour of duty. Over
the past three decades, the percentage of military members who are married and the percentage of time
 they spend deployed away from home have steadily increased, whereas the quality of their housing --
     and associated support such as schools, recreation, day care, etc. -- has failed to keep pace.

Secretary Perry recognizes the importance of housing as a key element in the quality of life of our service
members and their families. He is determined to improve their living conditions to maintain high morale
                                              and a ready force.

His quality of life budget increase last fall was a significant first step. Secretary Perry added $2.7 billion
over the Future-Years Defense Program for several areas of quality of life including quarters allowances,
housing maintenance and recapitalization. As an integral part of this initiative, he chartered the Defense
                   Science Board's Quality of Life Task Force -- the Marsh Task Force.

The task force members spent several months taking an independent look at the quality of life of service
members. Key to this effort was extensive travel and interviews with service members and their families.
In its October 1995 report, the task force confirmed disconcerting downward trends in perceived quality
 of life. The panel warned that readiness and morale are in jeopardy. In the panel's view, continuing to
 neglect these issues risks eroding the force because even the most dedicated service members may
                                              leave the service.

   The task force recommended several ways the department could improve the quality of life for our
service members. One of its top recommendations was to use private expertise and capital to accelerate
 improvement of government-owned housing, unaccompanied and family housing, and encourage the
                      development of more affordable housing in local communities.

As the task force stated, "Well-equipped forces have the instruments to win war, and forces satisfied with
  their quality of life are motivated to fight." It is our job to make sure our forces are satisfied with their
 quality of life. We know that military deployments require service members' full attention in order to be
effective and safe. We want to minimize anxieties about their families during these stressful periods that
                                     come all too often in today's world.
The department currently faces three significant housing problems. First is the condition of DoD-owned
 family housing. Today's military families are living in yesterday's houses. DoD currently houses about
one-third of our families in over 300,000 government-owned family housing units located both on and off
base. About two-thirds of these units need to be renovated or replaced because over the past 30 years,
                       they have not been sufficiently maintained or modernized.

    Using the traditional military construction approach, it would cost taxpayers nearly $20 billion to
    accomplish this task and it would take 30 to 40 years to solve this problem. Neither the costs nor
timelines of the current system of housing construction and modernization meet the challenge we face.
                            We cannot afford a business-as-usual approach.

The second problem relates to the other two-thirds of our service families. They live in local communities
 because of DoD's policy to rely first on the private sector to provide suitable family housing. We do not
intend to change this overall strategy. However, we recognize that the majority of service members living
in local communities are enlisted personnel whose compensation is at the lower end of the military pay
  scale. Their income makes it difficult for them to find quality, affordable housing within a reasonable
  commuting distance. Some of the communities around our installations simply do not have enough
                affordable, quality rental housing to accommodate our service members.

 Finally, our barracks are in desperate need of improvement. Renovation or replacement of barracks is
   the largest single functional category within the MILCON [military construction], and the repair and
  maintenance portion of the Operations and Maintenance budget. This resource commitment reflects
   Secretary Perry's continuing five-year commitment to improving the quality of life for single military
 members. Additional funding by Congress for FY [fiscal year] 96 increases both RPM (by $322 million)
and revitalization of barracks (by $212 million). We plan to track these expenditures to ensure that these
                                additional funds are used to improve barracks.

  In November 1995, the department established the 1+1standard for new, permanent party barracks
construction. This standard prescribes an 11 square meters (118.4 square feet) standard, similar to the
design the Army has been using under a waiver for several years. These quarters include two individual
           living/sleeping rooms with closets and a shared bath and kitchenette service area.

  This module will normally house two E-1 to E-4 [enlisted] members or one member E-5 and above.
Exceptions are approved so a service can modify this arrangement where mission or overall conditions
dictate. This standard is optional for barracks outside the continental United States funded by other than
 the United States or constrained by site conditions. The services will begin to phase in adoption of this
                                      standard with the FY 96 program.

 The department is extremely pleased with the broad new authorities provided in the National Defense
   Authorization Act for fiscal year 1996. They will help us attract private capital to solve our housing
problems much more quickly. The new authorities in this Military Housing Privatization Initiative permit:

                                 Guarantees, both for loans and rental occupancy;
                             Conveyance or lease of existing property and facilities;
             Differential payments to supplement service members' BAQ/VHA[Basic Allowance for
                                       Quarters/Variable Housing Allowance];
                     Investments, both limited partnerships and stock/bond ownership; and,
                                                      Direct loans.

These new authorities can be used individually or in combination. We believe they will allow us to attract
 private capital and leverage military construction dollars by at least 3-to-1. Establishment of the Family
 Housing Improvement Fund, with its initial appropriation of $22 million in fiscal year 1996 and transfer
    authority, provides an effective mechanism to fund the selected projects. We have requested an
additional $20 million for this purpose in fiscal year 1997. As military construction projects are converted
to projects financed using the new authorities, we expect to use the MILCON savings to fund additional
 projects. The notification and reporting requirements in the law provide congressional visibility, at key
                                           steps, as we proceed.

There is no single magic bullet to efficiently and economically revitalize our housing stock or encourage
the private sector to meet DoD needs. In real estate, one size does not fit all. Each location, each project
 and the terms of each deal will vary according to market conditions, market penetration, land cost and
availability, developer capabilities and our housing renovation or construction requirements. Approaches
 that work in one location may fail dismally at another. Therefore, the department needed, and received
     from you, a "kit bag" of tools and flexibility to take advantage of each installation's and civilian
                                   community's unique circumstances.

  I believe this new housing initiative is the beginning of a mutually beneficial relationship between the
Department of Defense and the private sector. For the department, it will result in faster construction of
   more housing built to market standards. We expect to save substantially compared to the military
construction alternative process. Commercial construction and operation is not only faster and less costly
    than military construction, but private sector funds will also significantly stretch and leverage the
department's limited housing resources -- achieving more improved housing from the same funding level.

There will also be significant investment opportunities in defense housing for developers and financiers in
     the private sector. The initiative opens the military construction market to a greater number of
development firms. It stimulates the economy beyond traditional MILCON investments through increased
private sector building activity because we can build more and in some cases put more property on local
                                                    tax roles.

Because DoD wants the private sector to use more of its own funds to build or renovate housing and to
work with us in leveraging our scarce funds, we must plan, program, budget and execute projects more
like a private entity. That is precisely what we are in the process of doing. Based on these new authorities,
                       we are trying to think and act more like private developers.

Secretary Perry has given his complete support to this new initiative [1996 strategy]. In October 1995, in
  anticipation of enactment of these authorities, he established a joint Housing Revitalization Support
 Office, the HRSO, representing all services and augmented with consultant support. At his instruction,
 the office is staffed with 13 full-time housing and real estate experts from each of the services and the
                                       Office of the Secretary of Defense.

The HRSO serves as a catalyst for our housing modernization efforts and uses consultant assistance to
    develop best practices and a common approach to analyzing private sector proposals. One of its
 near-term goals is to test as many of the authorities as possible. The HRSO is the department's focal
point of knowledge and expertise necessary to implement this program. It will also manage the Housing
                                               Improvement Fund.

 All relevant information and resources are shared with each of the services. Together, the HRSO and
services evaluate each initial site; determine which authorities, singly or in combination, will benefit each
site; and jointly lead procurement teams that will ultimately negotiate commercial agreements. Ultimately,
 the services will use their resources and contracting authority to execute these agreements. Lastly, we
   plan to gradually incorporate the HRSO authorities into the services' housing acquisition process.

  The HRSO has developed a site data collection protocol and a financial feasibility model to evaluate
  proposals for all services, addressing all kinds of markets and requirements. It has worked with the
military departments to prioritize about 40 potential sites and together with the services has selected 14
for initial evaluation. Over the past months, members of our staff, along with service representatives and
DoD consultants, were in the field visiting 11 of these sites. They have accelerated this process, visiting
  five additional sites in the last week. Our target is to have about 8-10 projects with up to 2,000 family
   housing units awarded within the next year. These projects will serve as prototype sites to test the
 authorities, validate approaches and, frankly, learn how we can take best advantage of these powerful

 Two projects, one in Corpus Christi, Texas, and the other in Everett, Wash., have already gone out for
    bid, and the contract awards are pending. As we learn how to efficiently contract with these new
authorities, we expect it will take about 21 months from the time a site is identified until families are able
to move into the new or renovated housing. This represents a vast improvement over our current military
 construction process, which averages 36 to 48 months from project definition to beneficial occupancy.

At potential sites our teams visit with a variety of people to get a good portrait of the housing market and
opportunities. These people include military housing personnel, lenders, community development agency
  staffs, state housing finance agency staffs who could issue bonds and implement publicly supported
  housing programs, and staff of associations that represent real estate professionals, developers and
                      property managers. Specifically, these site investigations are used to:

            Inform installation commanders about the new authorities and discuss opportunities to satisfy
                                              military housing requirements;
                  Open lines of communication with local governments and the business community;
                Gather and verify information about the local housing market and the installation housing
                         Identify the nature of and reasons for the local housing shortage; and,
              Determine which authorities, if any, are most relevant and potentially most effective for
                              providing quality, affordable housing for military families.

Site visits also determine major potential obstacles to the government in pursuing development, issues
such as financial, organizational or political risks; or community and neighborhood concerns. The visits
also identify how these risks might be mitigated or otherwise overcome to create a viable project. Finally,
the site evaluations result in a "go, no-go" recommendation and, if appropriate, provide the foundation for
                                           initial solicitation plans.

  Although the new authorities are flexible, no single authority is likely to be effective for every housing
requirement or market condition. We are working with the services to decide which authorities are likely
  to best satisfy specific housing requirements so that solicitations can focus on the avenues likely to
 achieve best value for the government. On-site visits by experts from the public and private sector will
determine the least costly tool or tools to best accomplish our goal. In some situations, there may not be
                                a better alternative than traditional MILCON.

For example, each authority has a different cost to the government. When we use the financial feasibility
   model, we estimate the income that would be generated in the form of service members' rent and
determine whether this sum is enough to cover the cost of construction, maintenance and financing. We
will look at the reasons why the private sector has not met the needs of the military. Is it because the local
             economy is too dependent on the base and that lenders are fearful of downsizing?

If service members' income is enough to cover the cost of the project, the only tool we may need to offer
might be a mortgage guarantee against risks associated with base closure. Therefore, we would use our
 guarantee tool, rather than funding up to 45 percent of the development cost with our joint partnership
    tool. In this particular example, the guarantee tool would save the taxpayers' money because the
guarantee would be scored as an outlay based upon an anticipated default rate, not on the amount of the
                                         mortgage guarantee itself.

Ultimately, the HRSO approach requires a basic cultural change in our own business practices. DoD is
working diligently to find our way in this new culture. We are learning how to act more like a commercial
entity to take advantage of opportunities when they present themselves. Of course, this is not easy. We
are not accustomed to delegating authority and relying on consultants. However, we are beginning to do

  We can succeed, and when we do, the rewards can be enormous. With our new authorities, we are
  working to remedy our housing deficiencies faster and less expensively than would ever be possible
under the traditional military construction process. We appreciate that this new approach has also called
 for changes in your committee's oversight mechanisms. You have met us halfway, and we appreciate

             I have three points which I would like to address before I conclude my testimony.

  First, we need to maintain at least the same level of military construction funding as we are currently
receiving. Our primary goal in establishing the Military Housing Privatization Initiative and in developing
 our new authorities is to solve a 30-year problem in about 10 years within the resource levels currently
                              planned for housing during that 10-year period.

 This goal is difficult, even with these new authorities, but the more quickly we act, the more quickly we
benefit. By acting quickly, we will improve the quality of life of our service members and their families, the
  department will retain more of our quality service members, and that in turn will sustain a ready force
                             while reducing recruiting and training expenses.

  We need our current level of funds in order to successfully implement these projects with the private
sector. If our current level of funding is not maintained, we will not speed the improvement of our housing.
  Rather, we will more likely solve a 30-year problem in 30 years or longer because we will limit funds
available for the private sector to leverage. Key to service plans to solve their housing shortfalls is their
 commitment to continue to program resources at about the fiscal year 1996 level of $784 million. The
                            fiscal year 1997 budget request totals $734 million.

   Second, as you know, Secretary Perry intends that the privatization tools be applied to solving the
  serious housing modernization needs of our unaccompanied personnel. While this may prove more
  challenging, we want to use these authorities to improve our barracks. We are proposing a technical
   modification to the appropriations committees that will allow us to carry out the intent of last year's
   authorization act to apply the privatization authorities to unaccompanied as well as family housing.

 Finally, the Marsh Panel recommended that the department seriously consider transferring its housing
operations to a military housing authority. At Secretary Perry's direction we are determining how we could
broaden our current housing privatization "kit bag" and improve our housing situation even more rapidly
 by enabling each military department or service to create its own military housing corporation. We are
   examining this option and hope to provide you a legislative proposal in this area in a few weeks. ...
           Preserving Educational Benefits in the
                                 All-volunteer Force
 Prepared statements of Army Lt. Gen. Samuel E. Ebbesen, deputy assistant secretary of defense for
military personnel policy, and Al Bemis, deputy assistant secretary of defense for reserve manpower and
 personnel, before the Education, Training, Employment and Housing Subcommittee, House Veterans
                                     Affairs Committee, March 7, 1996.

     Ebbsen. I am pleased to appear before you today in the first year of the second decade of the
Montgomery GI Bill to discuss this vital program. There is little doubt that the MGIB has met or exceeded
  the expectations of its sponsors and has been a major contributor to the success of the all-volunteer

  The original GI Bill of Rights, created at the end of World War II, gave returning service members a
comprehensive package of benefits to compensate for opportunities lost while in the military and to ease
their transition back into civilian life. We recently celebrated the 50th anniversary of this legislation. The
 noted economist Peter Drucker described the GI Bill by saying, "Future historians may consider it the
most important event of the 20th century." Perhaps the most far-reaching provision of the GI Bill was the
                   financial assistance it made available for veterans to attend college.

Today's MGIB traces its lineage directly to this milestone program, with one important change. While all
 earlier GI Bill programs were designed to ease the transition to civilian life from a conscripted military
                     force, since 1973, we have defended this nation with volunteers.

 Thus, the MGIB has as one of its purposes "to promote and assist the all-volunteer force program and
 the Total Force concept of the armed forces by establishing a new program of educational assistance
based upon service on active duty or a combination of service on active duty and in the Selected Reserve
   to aid in the recruitment and retention of highly qualified personnel for both the active and reserve
                                     components of the armed forces."

So the MGIB is not only designed to aid in recruiting, but also for the first time recognizes the vital role of
    the reserve components in our defense and extends educational benefits to these itizen-service
members." My testimony will cover the MGIB for active service. Mr. Al Bemis, deputy assistant secretary
   of defense for reserve manpower and personnel, will discuss the MGIB for the Selected Reserve.

  The department continues to be successful both in the number and quality of accessions. During FY
[fiscal year] 1995, all services met their recruiting objectives, accessing 168,010 first-time enlistees with
    excellent recruit quality. Ninety-six percent of new recruits were high school diploma graduates,
                       compared with 93 percent in 1985, the first year of the MGIB.

 Even more dramatic is the change in above-average aptitude recruits (Categories I-IIIA): 71 percent of
new recruits scored above average on the enlistment test in FY 1995, compared with 62 percent in 1985.
   Moreover, in FY 1985, 7 percent of new recruits scored in the lowest acceptable aptitude category
              (Category IV); in FY 1995, we accessed fewer than 1 percent in this category.

Through the first four months of FY 1996, the services met their numeric goals, and the quality of enlisted
accessions remained high. Ninety-five percent of new recruits were high school diploma graduates, while
 68 percent scored above average on the enlistment test. Incentive programs, such as the Montgomery
      GI Bill, are vital to our success in attracting bright and well educated people into the military.

 The Montgomery GI Bill enrollment rates have continued to rise each year since its inception, with 95
percent of eligible recruits choosing to enroll in FY 1995. Enrollment in the active duty program has risen
from only 50 percent in the first year, 1985, to the current 95 percent. A total of 2 million men and women
   from an eligible pool of 2.7 million have chosen to participate in the MGIB since July 1, 1985. Such
           participation rates clearly demonstrate the attractiveness of the Montgomery GI Bill.

 To ensure enlistees fully understand the structure and benefits of the program, and the requirement to
  disenroll if electing not to participate, they are briefed at military entrance processing stations during
  in-processing and again at recruit training. It is here, within two weeks after enlistment, that the final
decision is made whether to participate in the Montgomery GI Bill program. Finally, at separation, eligible
    individuals again are briefed on the MGIB and encouraged to take advantage of the educational
                                          opportunities it provides.

  The 1990s saw America's armed forces facing a significant reduction in size as the Cold War ended.
  Unfortunately, as with any major strength reduction, the lives and career expectations of many in the
  work force became uncertain. However, unlike the last major drawdown of forces after Vietnam, we
     wanted to ensure that all affected service members were treated with the respect, dignity and
  appreciation they deserved. Your subcommittee was instrumental in this with the extension of MGIB
eligibility to those who either chose to leave service voluntarily or were involuntarily separated as a result
                                             of the drawdown.

  Those individuals participating in the Voluntary Separation Incentive and Special Separation Benefit
programs were offered the opportunity to participate in the Montgomery GI Bill if they had not previously
    enrolled during their initial enlistment. In all, over 41,000 separating service members have taken
advantage of this opportunity. Over 18,000 service members separating under VSI or SSB enrolled in the
  MGIB program, and over 11,000 of them have gone on to use their benefit. Of the service members
          involuntarily separated since February 1991, over 23,000 have enrolled in the MGIB.

The following figure presents the percent of average four-year college costs offset for each of the years
the Montgomery GI Bill has been in effect. The offset declined from nearly 97 percent of the cost of tuition
 and fees in school year 1985-86 to 70 percent by school year 1993-94, as average annual tuition and
 fees for a four-year program rose by 43 percent. With the early 1990s increase in MGIB benefits from
   $300 to $400 per month and the provision to annually adjust the benefit for inflation, the offset has
                           leveled after reaching a low in school year 1990-91.

 Given our recent recruiting successes, current basic benefits appear to be adequate as an enlistment
   incentive. However, if college costs, especially tuition and fees, continue to rise significantly above
inflation, the offset provided by the Montgomery GI Bill benefits will require close monitoring to keep the
program competitive. Recognizing the tight resource climate we all face, we welcome the opportunity to
work with your subcommittee to seek innovative ways to keep the existing MGIB stipend at satisfactory
               levels both to attract new recruits and to help pay for a college education.

 The department is making attempts to maximize existing educational programs, which are used during
service as an effort to give separating service members a "leg-up" on their educational goals. As part of
its off-duty voluntary education effort, the department operates a number of programs that allow service
members to receive academic credit without enrolling in traditional college and university courses. Two of
these programs, the Military Evaluations Program and the Examinations Program, produce college credit
             at considerable cost savings to both the service member and the government.

  Under the Military Evaluations Program, the American Council on Education, under contract with the
department, develops recommendations for the award of college credit based on its evaluation of military
  training (formal courses and on-the-job training) and work experience. These recommendations are
 published in the "Guide to the Evaluation of Educational Experiences in the Armed Forces," commonly
                                      referred to as the ACE Guide.

Many colleges and universities award college credit based on these recommendations. For example, the
   guide recommends three semester hours in supply management, three semester hours in clerical
  procedures and one semester hour in interpersonal communication for a sailor attending the Navy's
  eight-week storekeeper class-A course. For an Army information systems operator separating at the
   completion of one term of service, the guide recommends three semester hours in introduction to
      computers and computing and three semester hours in introduction to computer operations.

 The Examinations Program provides service members with a means of earning college credit through
   college placement testing. Through contracts with the College Board and the Educational Testing
Service, tests in more than 100 academic subjects are available to service members at no cost. Colleges
   and universities grant academic credit based on acceptable scores on these tests. Credits earned
through testing cost considerably less than if earned in resident courses for which tuition would be paid.
For example, one $35 test could produce the same three credits that might otherwise cost $300 or more
                                                 in tuition.

  The above programs effectively maximize the limited dollars available for helping service members
achieve academic advancement and earn college degrees. Service members are counseled to take full
                                      advantage of these programs.

 The continued success experienced with the Montgomery GI Bill is in large part the result of emphasis
 placed on the program by service recruiters, to include military advertising, and recognition across the
nation that education plays a vital role in today's workplace. Montgomery GI Bill information continues to
                      be prominently featured in our direct mail recruiting literature.

Every 18-year-old male who registers with the Selective Service System receives a full-color information
brochure explaining the benefits of the MGIB program. Approximately 1.8 million young men are reached
 in this manner each year. An expanded version of the brochure is distributed to the services for use at
              recruiting stations and also is provided to high school guidance counselors.

Another important advertising initiative was a painting by Michael J. Deas, a now-prominent artist who is
best known for his rendition of Marilyn Monroe on a U.S. postage stamp. The painting, which has been
made into both a print advertisement and a poster to be displayed by recruiters in their stations, depicts
Uncle Sam with the tagline, "If You Can't Get Money For College From Your Parents, Get It From Your

  We also produce and distribute a magazine for use by high school seniors and guidance counselors
   which contains the new MGIB Uncle Sam print advertisement and individual ads from each of the
 services. The magazine, called "Futures," is mailed to 3.3 million students and over 21,000 guidance
                                          counselors every year.

In the past, this subcommittee has expressed concern about the timeliness and accuracy of automated
 data flow between the services, the Defense Manpower Data Center and the Department of Veterans
      Affairs. We recognize that data accuracy is a key objective of smooth payment to veterans.

 Two years ago, when over 15 percent of the records in the MGIB data base did not contain sufficient
  information to identify participants' eligibility, we told you we had established a goal of reducing the
 "unknowns" rate to less than 5 percent. This was an ambitious goal, but as of January 1996, only 3.5
                             percent of MGIB records are coded "unknown."

 Data exchanges, such as the one between DMDC and DVA are regulated by the various provisions of
the Privacy Act of 1974, including subsequent amendments dealing with computer matching. There is a
     significant administrative burden associated with the need to frequently renegotiate matching
agreements between and among agencies for programs which are long-term and continuing. Increasing
 the life of a matching agreement from 18 months with one 12-month renewal to perhaps a number of
    12-month renewals would significantly decrease administrative burden for this and other similar

     Before I conclude, I want to take the opportunity to pay tribute to Congressman G.V. (Sonny)
Montgomery, the man for whom the MGIB was named. With his pending retirement from Congress, this
may well be his last formal hearing on the MGIB, and I believe it imperative to let him know how grateful
    we have been for his support. In July 1995, Secretary of Defense William J. Perry presented Mr.
  Montgomery with the Department of Defense Medal for Distinguished Public Service in a ceremony
commemorating the 10th anniversary of the MGIB. I would like to read the citation from this award into
                                                the record:

    "The Department of Defense Medal for Distinguished Public Service is awarded to G.V. (Sonny)
   Montgomery for exceptionally distinguished service to the Department of Defense and the military
 services as the sponsor and proponent of the Montgomery GI Bill, from July 1985 through July 1995.

 "Mr. Montgomery's commitment to this legislation grew from his recognition that the military services
   faced enormous difficulty in recruiting during the early years of the all-volunteer force. He drafted,
sponsored and ensured passage of this sweeping educational program which was designed to enhance
the ability of the armed services to recruit and retain high-quality people, while at the same time assisting
                      in the readjustment of former service members to civilian life.

  "The resultant program became the Department of Defense's most effective recruiting tool. Nearly 2
million active duty military personnel and 360,000 Selected Reservists have participated since enactment.
       The quality of recruits entering active duty was exceptional. The proportion of recruits with
    above-average aptitude who also held a high school diploma expanded from about half to nearly
  two-thirds of the enlistees -- an extraordinary accomplishment that is substantially attributable to Mr.
                             Montgomery and the modern GI Bill he created.

 "Mr. Montgomery's vision in conceiving this program, coupled with his tenacity in ensuring enactment,
represents the highest traditions of government and public service and reflects great credit upon himself,
   the Department of Defense and the Congress of the United States. For these and his many other
  contributions in support of America's armed forces, I take great pleasure in presenting G.V. (Sonny)
            Montgomery the Department of Defense Medal for Distinguished Public Service."

        Mr. Chairman, I thank you, our armed forces thank you, and America's youth thanks you.

  Significant improvements have been made in military manpower over the past 10 years. Today, our
volunteer military stands ready, willing and able to defend our nation and its values and principles around
the world. Credit for success in attracting and retaining high quality personnel belongs in no small part to
Congress and this subcommittee for providing us with the MGIB program. Largely as a result of the MGIB,
we have been able to increase and then sustain recruit quality despite a shrinking pool of eligible youth in
                                        a period of fiscal austerity.

    Bemis. ... The Montgomery GI Bill-Selected Reserve is a noncontributory program that provides
   educational assistance to Selected Reserve members who enlist, re-enlist or agree to serve in the
Selected Reserve for six years. To qualify for benefits, members must have completed requirements for
               award of a high school diploma before completing their initial entry training.

  To be eligible for educational assistance under the vocational or technical programs, the enlistment,
re-enlistment or agreement to serve must be on or after Oct. 1, 1990. Those who continue their service in
the Selected Reserve have up to 10 years within which to use the entitlement. Benefits are payable for as
          long as 36 months of education at the rate of $197.90 per month for full-time pursuit.

Unlike previous GI Bill programs and the Montgomery GI Bill for the active components, the Montgomery
     GI Bill-Selected Reserve provides for receipt of benefits before the qualifying military service is
   completed. Also, unlike the previous GI Bill, the reserve program is a recruiting and retention tool.

Evidence of this program's effectiveness is reflected in high overall participation. During fiscal year 1995,
  more than 97,000 Selected Reservists received Montgomery GI Bill educational benefits. Since the
inception of the program, 378,000 National Guard members and reservists have applied for educational

   Studies conducted by the Sixth Quadrennial Review of Military Compensation and the Rand Corp.
confirms that the MGIB-SR continues to be one of the most important recruiting and retention incentives
  for the reserve components. It has been particularly important with respect to retention. Information
collected during the 1986 DoD Reserve Components Survey indicated that the Montgomery GI Bill was a
 major or moderate contributing factor for remaining in the Guard and Reserves for 40.4 percent of the
  service members. In the 1992 DoD Reserve Components Survey, that percentage had risen to 48.2.

Despite the expenditure and recipient growth, the value of the Montgomery GI Bill-Selected Reserve in
covering college tuition and fees has declined since it was first offered to our service members. In 1996
dollars, the percent of offset in total education costs has dropped from 23 percent in school year 1985-86
   to 18 percent for school year 1993-94. The percentage for tuition and fees has decreased from 45
   percent of a student's bill in school year 1985-86 to 33 percent of the cost in school year 1993-94.

   While we are talking about the recruitment value of the MGIB-SR, I want to thank the Congress for
  including the two "kicker" programs in the 1996 Defense Authorization Act. This legislation allows for
payment of a "kicker" up to $350 per month for Selected Reservists in addition to their MGIB-SR benefits
if they are serving in critical specialties or units as designated by the service secretaries. A "kicker" of up
to $350 was also authorized to be given in conjunction with the active duty Montgomery GI Bill to service
  members who have separated from active service and have affiliated with the Selected Reserve in a
                                    designated critical unit or specialty.

We have begun working with the services on an implementation plan for these "kickers." Important items
      for this working group to address in the plan are establishment of critical units or specialties,
consideration of levels or bands for kicker payment amounts, and identification of funding for the service
budgets. We anticipate a trial period beginning in fiscal year 1997 with full implementation in fiscal year

   To supplement the recruitment value of the MGIB-SR, the reserve components have been strong
  supporters of nontraditional education programs. Because the Montgomery GI Bill-Selected Reserve
    program does not meet the full costs of education, these programs have been very important in
                                stretching the Reservist's education dollar.

    In May 1994, the assistant secretary of defense for reserve affairs, Ms. Deborah Lee, formed the
Reserve Component Education Panel. The panel's charter was to help focus program efforts that can be
       most beneficial to the reserve components by enhancing awareness of Defense Activity for
Nontraditional Educational Support Activity educational opportunities and access to these opportunities.
                                       The panel meets twice a year.

DANTES is a great friend of reservists. It has offered them support equal to that of active duty members.
The services and service members, through awareness programs generated by the RCEP, have realized
significant benefits through the voluntary education services such as DANTES credit by examination and
  credit by evaluation. These time-saving programs are successful methods of cost avoidance through
  accelerating a student's academic progress by awarding credit for what the student already knows.

In 1995, the Florida Pilot Testing Program was begun, which authorized all Selected Reservists in Florida
   to take the DANTES Standard Subject Tests or the College Level Examination Program exams at
 approximately 25 National Testing Centers at participating colleges and universities in that state. This
   allowed reservists to drive to the nearest NTC instead of being forced to travel to a distant reserve
                                      education center for the exams.

The service member is required to pay an $8 fee to the NTC, and DANTES pays for the exam. This test
   program will extend through December 1996, when it will be evaluated to determine if it should be
continued or expanded. Use of NTC helps to maximize the educational assistance available to reservists,
         but it still does not help the reservists keep up with the rapidly rising cost of education.

 I would like to take this opportunity to thank the Congress for extending the deadline for the MGIB-SR
annual report. This will grant us more time to collect the end-of-year data needed for review and analysis.
 The final result will be a better evaluation of the MGIB-SR program and the opportunity to provide you
                          and the services with a better report of the evaluation.

  I thank you again for this opportunity to discuss this vital recruiting and retention tool for our reserve
  Providing a Cost-Effective Health Care System
Prepared statement of Dr. Stephen Joseph, assistant secretary of defense for health affairs, to the House
                        National Security Committee, Washington, March 7, 1996.

 Mr. Chairman, distinguished members of the committee: It is an honor for me to be here this afternoon
   and to present to you an overview of military medicine, particularly our strategy for a cost-effective,
everyday health care delivery system and alternatives we are developing for our retired beneficiaries and
                                               their families.

   Military medicine exists to support the men and women in uniform, especially when they deploy in
   response to our national security policy decisions. Today, our armed forces are serving the NATO
peacekeeping mission in Bosnia; military medicine is there. This mission, while peacekeeping in nature,
 is fraught with dangers to the health and safety of our troops. The environmental health threats to our
force in Bosnia range from the severe cold weather, poor to nonexistent public works such as sanitation,
                   to endemic diseases and the presence of innumerable land mines.

      The medical preparations we have taken with this deployed force are different from previous
   deployments. These differences are a result of the progress we have made in placing tremendous
    emphasis on our readiness posture and of implementing changes to improve our approaches to
                     deployment, many arising from our experience in the Gulf War.

  Prior to deploying, we conducted medical screening of all personnel, we have pointedly informed our
troops regarding the environmental health risks they may encounter and offered information and training
       on how to stay healthy. Plus, we are capturing demographic data for all those who deploy.

 During this deployment, we have preventive medicine and combat stress teams to accompanying the
force. Other very specialized teams will deploy at the call of the commander in coordination with the U.S.
  European Command surgeon to address specific potential hazards. Additionally, we have detailed a
    preventive medicine officer to the staff of the U.S. European Command surgeon. The deployed
   preventive medicine teams in Bosnia will assess all aspects of disease and environmental threats,
 establish geographic-specific medical surveillance systems, investigate disease outbreaks, implement
          preventive medicine measures and document environmental and combat exposures.

  Prior to or shortly upon their return, service members will be screened for identified health concerns.
  Once home, service members will receive information handouts, individual counseling and medical
 referrals when indicated. Additionally, rosters of all deployed personnel will be stored in an accessible
                            data base to allow for future review and screening.

       The medical contingent deployed in support of our peacekeeping efforts in Bosnia includes
 hospitalization, dental, veterinary services, laboratory and medical evacuation assets. In Hungary we
   have a larger hospital capability, and for further, more specialized care, patients will be medically
                     evacuated to the Army Medical Center at Landstuhl, Germany.
  Most medical units in Bosnia deployed from Europe, notably the 30th Medical Group as the medical
   command and control headquarters; the 212th Mobile Army Surgical Hospital, a 56-bed capability,
situated in Bosnia; and the 67th Combat Support Hospital, a 120-bed capability, located in Hungary. As
of March 4, our medical units had admitted 487 patients, performed 26 surgeries, seen 5,596 ambulatory
patients and evacuated 218 out of the theater of operations. Virtually all patients sought medical attention
                                    for diseases or nonbattle injuries.

We are in the process of establishing a telemedicine network within Bosnia linking all of our medical units,
 then linking these units to the hospitals in Hungary, Germany and here in the U.S. Additionally, we will
connect the USS George Washington in the Mediterranean Sea on this medical net. What telemedicine
means in Bosnia is that, real-time, very specialized health care in the form of diagnoses and consultation
  can be projected forward to the patient. It means very high quality, sophisticated care for the patient,
  often without having to transport the patient hundreds, even thousands of miles from his or her unit.

 Our nation believes it is important to ensure the health of our men and women in uniform and to have
     medical attention readily available in the event of injury or disease, anywhere, anytime. These
 expectations mean the armed forces need a health care component that can do as they do; they need
                           Army medicine, Navy medicine, Air Force medicine.

Health care deployed in support of the armed forces, medical research, education, primary, specialized
and follow-up care, and prevention and health promotion are all elements of a strong military health care
                 delivery system that is responsive to the needs of the people it serves.

It is my responsibility to develop the policies and design the programs to enable the men and women of
 the military health services system to do their jobs. It has been my practice to closely coordinate these
                       decisions with the surgeons general of the military services.

A perennial debate to which the MHSS is again joined concerns the appropriate size of the medical force
 -- just how many physicians should be on active duty, what is the correct size of the MHSS itself, how
          much more capability can be added or subtracted, based on cost-benefit analyses?

 The current assessment, directed by the deputy secretary of defense, is a major update to the original
Section 733 study, "The Economics of Sizing the Military Medical Establishment." The Section 733 study
      was directed in the FY [fiscal year] 1992 and FY 1993 National Defense Authorization Acts.

Mr. William Lynn, director of program analysis and evaluation, testified before this committee on April 19,
1994, on the results of that landmark study, which seriously questioned the size of the current MHSS to
  support wartime requirements. This update was directed because of the controversy caused by the
original study; the subsequent renewed interest in the issue by this committee, Section 745 of FY 1996
National Defense Authorization Act; the recommendations of the Commission on the Roles and Missions
     of the Armed Forces; and, the secretary's reply to Congress on the CORM recommendations.

 Mr. William Lynn and I are co-chairing a senior level steering committee that is overseeing this update
               study. We have three working groups reporting to the steering committee.
                   Working Group No. 1 -- Wartime Requirements -- will determine the number of medical
              personnel needed to support the current planning scenarios involving two almost simultaneous
                                                     major regional conflicts.
                  Working Group No. 2 -- Sustainment and Training -- will determine the number of medical
              personnel needed in the sustainment and training base to support the wartime and operational
                 Working Group No. 3. -- TRICARE Cost Savings -- will analyze the full cost savings potential
                   from implementing utilization management, propose metrics to monitor the progress of the
              department's TRICARE program and consider the proposal of a fourth option, such as access to
                        the FEHBP [Federal Employee Health Benefit Plan], for the TRICARE program.

The current schedule calls for our study to be completed by the end of this month. While it is still too early
for the final results, the deliberate approach being taken this time is designed to ensure that all interested
 parties have an opportunity to participate and that all relevant issues are evaluated. I am confident this
    effort will provide the department and ultimately this committee with an valuable new baseline for
                                     evaluating the appropriate size of the MHSS.

It is not possible to maintain a trained and prepared medical force ready to deploy on short notice without
the MHSS. It is in the everyday operation of the MHSS -- caring for patients of all ages -- that our medical
personnel increase their skills as health care professionals. And very importantly, it is where our medics
 and independent duty corpsmen receive the patient care training they need to do their most vital jobs.

 An underlying strength of the MHSS is having practitioners who are themselves members of the U.S.
 military. These health care professionals, like their military professional counterparts, need to maintain
their technical skills. Our health care personnel do this by practicing medicine in military medical facilities
every day. They also need to understand the military system, its plans, doctrine and operating systems.
To gain that understanding, they must use their health care skills in the military operational environment
                          of their service: field, transportable or shipboard medical facilities.

Participation in readiness training exercises is one means that offers military health care professionals an
opportunity to learn how field medical units or the medical facilities on board ship might operate during a
 deployment. This training experience is essential in order that our military medical personnel are fully
                         prepared for military commitments which involve a force deployment.

Bosnia is today's deployment, and it is one cloaked in risk to the health of our men and women who are
          there. We are committed to minimizing that risk and sustaining the health of our people.

 TRICARE increases flexibility for the MHSS, which affords our military medical personnel the ability to
      maintain their personal readiness while assigned to a base hospital or clinic. This flexibility is
  demonstrated in the unprecedented collaboration among the military medical departments and in the
partnerships we are building with civilian health care companies. These initiatives, joint service sharing
                    and strong public-private partnerships, contribute to the survival of the MHSS.
         Survival also means changing: improving operations, controlling costs, becoming more
    beneficiary-friendly, enhancing the quality of the care provided and always continuing to support
                  readiness. The outcome of these changes are the goals of TRICARE.

Implementation of TRICARE across the country is very much on schedule. We began TRICARE Prime in
 the Northwest Region, Region 11, in March of last year. Prime services began in Region 6, Oklahoma,
                  Arkansas, most of Texas and most of Louisiana, in November of 1995.

The contract has been awarded for Regions 9, 10 and 12, California and Hawaii, with services scheduled
                                            to begin next month.

 In the Southeastern United States, Regions 3 and 4, covering the states of Alabama, Florida, Georgia,
  Mississippi, South Carolina, Tennessee, southeast Louisiana and a small part of Arkansas, we have
                     awarded the contract, and services will begin in July of this year.

   We expect to award the contract for Regions 7 and 8, the North Central and Desert States regions,
shortly with services to begin by the end of this year. The contracts for the remaining Regions, 1, 2 and 5,
                                  will be awarded by the end of this year.

So far, we have been successful in tackling a variety of difficulties and obstacles, from enrollment glitches
 to contract award protests. While the protests are likely to continue with each new award, many of the
 implementation difficulties are being minimized through the sharing of information among lead agents.

In the regions where Prime enrollment has begun, the trend is that anticipated numbers of enrollees have
   been far exceeded very early, leading to slowdowns in the enrollment process and even backlogs.
           Despite the bottlenecks, the message is clear that beneficiaries want to join Prime.

In Region 11, enrollment of retirees and family members began in March 1995, and, as of Feb. 20, their
numbers totaled 137,911. This more than doubles the estimated number of enrollments projected for the
   whole first year. The experience is similar in Region 6, where, in the first four months of operation,
enrollment numbers of retirees and family members now total 132,315 (as of Feb. 20). This exceeds the
                                 number projected for the entire first year.

   Among the public-private partnerships contributing to the strength and flexibility of the MHSS and
 TRICARE are the managed care support contracts. Through these contracts, military hospitals expand
their ability to offer the full range of health care services to beneficiaries depending on the MHSS for their
care. The managed care support contracts assist military medical facilities by establishing a network of
    civilian providers to complement the military's capabilities, operating a health care finder service,
                      conducting beneficiary services, processing claims and more.

These partnerships also will afford us the opportunity to test the prospect of offering TRICARE Prime to
our active duty families assigned to locations far distant from military medical facilities, such as recruiters
and those in ROTC assignments. We are finalizing the details of this demonstration and hope to have it
                                      begin in Region 11 this summer.
   We have awarded three managed care support contracts covering Regions 6, 9, 10, 11 and 12 to
Foundation Health Federal Services, Inc. Humana Military Healthcare Services is the winning contractor
                                              for Regions 3 and 4.

   Last year, the Congress commended the department on its efforts in moving towards a nationwide
   managed health care system for the military, TRICARE. Existing law at the time mandated that the
   TRICARE program be fully implemented by Sept. 30, 1996. The Congress was concerned that the
department had accelerated the process in order to meet this statutory deadline and felt that there would
be great benefit from additional time in meeting the complex requirements of TRICARE. Therefore, they
             extended the deadline for implementation of the TRICARE program by one year.

We have taken advantage of this new authority. We delayed the start of the procurement process for the
   Region 1 and Regions 2 and 5 managed care support contracts. While we still plan to award these
    contracts by the end of this calendar year, the delay has afforded us the opportunity to complete
 development of the Composite Health Care System interoperability and to evaluate various alternative
  financing methodologies to allow the military medical facilities to manage and be accountable for all
                                          health care of its enrollees.

  The new financial approach that we selected will significantly clarify military medical facility financial
  responsibility for the Prime enrollees while retaining a partnership with the contractor. There will be a
  continued sharing of risk for all CHAMPUS eligibles not enrolled with the military medical facility and
 more frequent bid price adjustments to improve the real-time cost impact of management decisions by
                                   the military medical facility commanders.

By clarifying the military medical facility's financial responsibility, we strengthen that facility's incentives to
manage utilization. Both of these enhancements are included in the requests for proposals for Region 1
                                             and Regions 2 and 5.

  One of the management initiatives that has afforded us the ability to make a significant philosophical
change in health care delivery is capitation financing. Medical treatment facility commanders have been
provided the information and incentive to manage all of the DoD resources expended within their areas of
  influence, which is considered to be the user beneficiary population in their respective catchment (or
                                             health service) areas.

   For the past two fiscal years, the three military departments have provided their commanders with
 specific information concerning the expenditure of CHAMPUS funds as well as the dollar value of the
 military staff participating in patient care activities. By taking this integrated approach to health delivery
planning and execution, commanders and their staffs have realized significant improvements in utilization
                 patterns and better coordination of required services for our beneficiaries.

 In short, our shift in external emphasis from process-oriented workload counts to healthy beneficiaries
 has begun to enable clinicians to concentrate on developing strategies to encourage healthy lifestyles,
 emphasize preventive measures and return sick and injured patients to full health and functionality as
                                      efficiently and quickly as possible.
The development of our capitation model for determining resource requirements has revolutionized the
     budgeting and programming for the Defense Health Program. With recent refinements such as
 adjustments for differences in age/sex mix, we have a very dependable way to forecast our per capita
resource requirements. As a result, we are better able to identify real opportunities for improvements in
                                        efficiency and effectiveness.

We continue to evolve TRICARE in our efforts to make it the best health care plan in the country. In doing
   so, we must work within the constraints of our budget and to the extents of our legal authorities. By
congressional direction, TRICARE shall not increase the department's health care costs, and at the same
                           time the costs to our beneficiaries shall not increase.

  This tug-of-war with dollars has caused many of our retirees to be unhappy with the enrollment fees
  required of them and their families, should they elect to join TRICARE Prime. The FY 1996 Defense
Authorization Act, granting priority use of the military treatment facilities for enrollees, serves to alleviate
                                         some of that unhappiness.

Still, there remains one very significant issue: care for our Medicare-eligible beneficiaries. This committee
      was an advocate for legislation last year that would have allowed the Health Care Financing
      Administration to reimburse DoD for care that military facilities provide for these dual-eligible

There are many options for resolving this issue. One alternative is to allow these patients to continue on a
    space-available basis in our military medical facilities. However, space is becoming less and less
available as our military medical facilities are closed through the base realignment and closure process
and as the competition for military medical facility access increases. Gradually, if no other action is taken,
Medicare will probably be responsible for an increasing share. At present, DoD estimates that it provides
                                     $1.4 billion in care to dual eligibles.

  A second alternative is to have HCFA reimburse DoD for those dual eligibles who enroll in TRICARE
  Prime. Historically, the CBO [Congressional Budget Office] has scored this alternative as increasing
                            entitlement dollars without an off-setting decrease.

In response to the 1995 Defense Authorization Act, we proposed to HCFA conducting a demonstration
 whereby military medical treatment facilities may be reimbursed as providers under existing Medicare
                                     health maintenance organizations.

   Discussions are currently under way within the administration to determine the feasibility of a new
 demonstration where DoD would maintain its current level of effort and would expend those funds first,
then turn to HCFA to cover additional dual-eligible beneficiaries who choose to enroll in TRICARE Prime.
We would like to see this demonstration begin as soon as technical and demographic specifications can
                                               be agreed upon.

   A third alternative would be for DoD to continue to pay for medical care for Medicare eligibles. We
   currently budget to provide space available care to a growing number of our beneficiaries who are
Medicare-eligible. However, providing care under TRICARE for these beneficiaries could be excessively
                                               costly to DoD.

 Recently, it has come to our attention that the Congressional Budget Office has made cost analyses of
the concept of a Medicare reimbursement demonstration. It is our recommendation that the CBO analyze
                                     specific authorization language.

Some of the associations which represent our beneficiary populations have examined a variety of health
care options and are seeking consideration for access to the Federal Employees Health Benefit Program
            as an option to TRICARE. We are examining this alternative at the present time.

  I strongly believe, as do each of the surgeons general, that any potential modification of the military
health benefit must be developed in close coordination with our committees of jurisdiction. In that regard,
we pledge to work with our committees to explore all reasonable possibilities, while ensuring the viability
of the Military Health Services System and our commitment to meeting our primary responsibility to care
                            for the armed forces when operationally deployed.

   We are focusing our study on active duty families assigned to areas where TRICARE Prime is not
available rather than retirees, their family members and survivors. This is because DoD already assumes
the vast majority of health care cost for active duty families, whereas many CHAMPUS-eligible retirees
               have other primary health insurance and are not reliant on DoD at present.

  There is a risk that beneficiaries who are currently not reliant on the government for their health care
   coverage could be induced to drop their non-government coverage, resulting in new costs to DoD,
 estimated at up to $500 million. A parallel circumstance exists for Medicare-eligible DoD beneficiaries.
  DoD provides space-available care in military facilities for many of these beneficiaries, but costs for
private-sector care [are] reimbursed by Medicare. Offering FEHBP coverage to DoD Medicare eligibles
              would require additional, new funding for DoD, estimated at up to $1.9 billion.

  In closing, Mr. Chairman, I want to stress to you the fact that our armed forces are participating in far
more operational deployments than just 10 years ago. These are not wars nor combat actions. They are
 currently peacemaking and peacekeeping operations, humanitarian and disaster assistance efforts. It
   means that we have our service members on the move frequently, temporarily living in makeshift
accommodations around the globe. It means we have a tremendous need for rapidly deployable, highly
qualified medical personnel to ensure the health and safety of these men and women. What we learned
from Desert Storm, the Sinai, Somalia, Rwanda, Haiti, Macedonia, Guantanamo we are applying today in

 Being prepared for the next deployment demands an actively engaged, strong Military Health Services
       System, one which constantly strives to find better, more effective ways to meet its myriad
                   responsibilities. I believe we are doing exactly that with TRICARE.
      Making DoD's Temporary Duty Travel User
   Prepared statement of John J. Hamre, undersecretary of defense (comptroller), to the Oversight of
   Government Management and the District of Columbia Subcommittee, Senate Government Affairs
                                                 Committee, March 8, 1996.

   Mr. Chairman, members of the committee, it is my pleasure to be here once more to address you
   concerning the status of the Defense Travel Re-engineering Initiative. Nearly one year ago, I came
   before you to describe how the Department of Defense would begin to take apart our old, outdated
  business travel system and build an entirely new one, employing the best business travel practices

 Our vision was a seamless, paperless system that meets the mission needs of travelers, commanders
and other travel resource managers; reduces the cost of travel; and provides superior customer service.
Today, I am happy to report to you that we are much farther along the path to that new travel system. We
 have made great progress in many areas, ranging from fundamental cultural changes to cutting-edge
  technological improvements. Although we have made major improvements in the travel system, the
                                           journey, however, is not yet complete.

I then spoke to you about 10 guiding principles that we were to integrate throughout this change initiative.
                 Briefly those principles that are embodied in our concept of operations are:

                                 Travelers and supervisors are honest and responsible;
                   Allow the supervisor to control his or her travel budget and approve vouchers;
                                          Implement simple clear rules to govern travel;
                                 Rely on one-stop shopping at a commercial travel office;
                                  Consolidate the process into a single piece of paper;
                                           Eliminate bureaucratic burdens on travelers;
                                              Ensure prompt payment by government;
                                                Minimize bookkeeping requirements;
                                              Use best industry financial practices; and
                                              Continuously reassess for improvements.

 These principles can be categorized into these three major areas: simplify the rules, delegate authority
and use best industry practices. All of the improvements we have made are based upon the fundamental
            premise that our travelers and supervisors are honest customers of the system.

In order to test these principles in an operational environment, the department has embarked upon a pilot
testing process at 28 different sites representing each of the services and several defense agencies. In
   June 1995, we had a conference with all of the pilot test organizations to begin the test process by
 providing them a general orientation to the new concept of operations as well as the specific guidance
                                      they would employ in their tests.

  In September 1995, we invited representatives from industry to demonstrate vendor capabilities for
personnel from the pilot test organizations. Personnel from the pilot organizations were able to examine
  the available software enablers and begin to finalize their test plans. It was very clear that even the
private sector did not yet have all of the answers; we were clearly charting some unexplored territory. At
 the conference, vendors developed new partnerships among themselves, consolidating their areas of
                       expertise, to be able to meet the needs of our new concept.

A third conference with pilot organizations was held in January 1996 to review their progress to date and
 begin to resolve barriers they had encountered. Most of the pilots were actively engaged in testing key
travel system attributes such as the delegation of travel approval authority, reimbursement via electronic
                               fund transfers and random audit of vouchers.

Most of the pilots had selected one of five major commercial computation software programs to test. Pilot
 organizations also reported that the seven commercial vendors currently providing travel arrangement
                    services would also be supporting their tests of the new concept.

The barriers most commonly reported by the pilots were electronic signature capability, receipt retention
 by the traveler, the validation of software enablers and educating managers and travelers about their
                               responsibilities under the new travel system.

  The value of the pilot testing process is that it will provide us with an accurate baseline of the current
  travel process from which we will be able to assess the impact of the changes we want to implement
 across DoD. In other words, the pilots will serve as the means by which we establish proof of concept.
   Our performance measures are direct costs, indirect costs, accomplishment of mission needs and
                                           customer satisfaction.

 The department is establishing baseline data for the current travel process at each of the 28 pilot test
organizations. The measured process begins with the initiation of a travel order and travel arrangements,
                     and it ends with reconciliation and payment of a travel voucher.

 Preliminary data collected and reported by several organizations suggests that the number of steps for
  preparing and approving travel orders and for preparing, computing and reconciling vouchers varies
  across organizations. The number of people, amount of time and associated cost to prepare and to
                              process travel orders and vouchers also vary.

Raw data reported by pilot organizations that are just beginning to implement travel reforms and software
solutions indicate the current process takes -- excluding the traveler's time -- an aggregate of roughly two
 to five hours to complete with estimated labor costs of about $45 to $115. Reporting and verification of
             baseline data for the current travel process should be completed by May 1996.

 The total expected monetary investments in technology and training to achieve a fully automated and
integrated DoD-wide travel system have not been established. However, costs will be estimated as part
  of the acquisition planning process. Although total monetary investments for the new defense travel
system have not been established, planned costs for the 28 pilot organizations to fully implement and test
   the re-engineered TDY [temporary duty] travel concept are estimated at $4.1 million. This estimate
 includes the costs to acquire hardware and software, and to train approximately 32,000 travelers and
                               users served by the pilot test organizations.

 We intend to collect the best data possible for our current and our new processes before implementing
                                          the new travel system.

 Let me now discuss with you the progress we have made to date in each of the major areas described
         above, the remaining barriers and the steps we have planned toward implementation.

Last year, ... you noted that waste most often occurs due to rigid rules and archaic procedures, not due to
ill motives. We have taken that advice to heart. I then provided you a copy of our simplified entitlements.

  We have reduced a large, complex body of regulations down to those 17 pages of plain English that
 focuses on mission, provides discretion and places accountability with a person we call the authorizing
  official, who is the manager in the field responsible for the traveler's mission. The use of all of these
entitlements is currently authorized only for the 28 pilot organizations until the new defense travel system
becomes a reality. However, we have been able to implement some of these simplifications throughout
                             DoD beginning fiscal year 1996. These include:

                     75 percent M&IE [meals and incidental expenses] First and Last Day.

Rather than go through complex computations about time of departure and return on the first and last day
 of travel, we now authorize 75 percent of the M&IE as the standard reimbursement. The traveler now
      knows what to expect in terms of reimbursement, and we have simplified the computations.

                                             $75 Receipt Threshold.

We no longer require the traveler to retain receipts for travel expenses less [than] $75 with the exception
  of lodging receipts, thanks to the IRS [Internal Revenue Service] change in policy. This reduces the
                                         burden of recordkeeping.

                                        Paper Nonavailability Statement.

 One of the most common frustrations of the DoD traveler has been the requirement to obtain a paper
       nonavailability statement from installation billeting offices when not staying on post. It is a
time-consuming and bureaucratic process that is unnecessary in an age of electronic reservations. Last
   fall, I approved a policy change which eliminates this requirement if the traveler cannot establish a
                           reservation with the billeting office prior to departure.

                                              Per Diem Delivery System.

   Closely related to the simplified entitlements that I have just discussed are the timely and accurate
 posting of travel per diem rates throughout the federal government. This is a joint responsibility of the
       Department of State, the General Services Administration and the Department of Defense.

Currently, the distribution of this important rate information is paper-based, time-consuming, error-prone,
 and it will not support electronic updates of the automated computation systems we envision. We are
working with these federal agencies to be able to electronically process per diem rate information. This
new system will minimize errors due to the rekeying of data and ensure travelers are provided accurate
                 per diem entitlements in a much more timely manner governmentwide.

The current practice in many DoD organizations today is to control the funding authority for official TDY
travel centrally. Commanders who direct and authorize travel do not always have accurate management
  information on funding availability and therefore cannot make informed choices on the use of those
resources for travel in support of mission requirements. Furthermore, missions directed by the Joint Staff
or other outside taskings resulted frequently in a two-step process with fund citations to support a mission
      coming at a later time than the tasking. This disconnected procedure introduces last minute
                              administrative delays and paperwork foul-ups.

 To overcome this problem, we issued a policy directive that henceforth the authority to obligate travel
  funds will be delegated to the level consistent with the authority to approve travel in the department.
Authorizing officials will be given their own travel budgets to manage. For the first time, line managers will
          have both the responsibility and the resources to actually manage the travel function.

   To make this work, we are planning ... to provide timely and accurate management information on
  funding availability status electronically to those supervisors who authorize and manage TDY travel.
 Secondly, in the case of taskings from external organizations, funding guidance or a fund citation must
 now be provided along with that direction. This will prevent a paperwork-intensive and time-consuming
    reconciliation process after the fact. We believe that these initiatives will effectively enhance the
   responsible use of travel resources and eliminate some of the burdens that infect the current travel

 Effective fiscal year 1996, we have also simplified the accounting practices associated with our travel
   expenses. DoD replaced 30 different accounting codes with just one or two codes. This makes the
 budget process more user friendly for authorizing officials and eliminates the complexity of our current
 accounting procedures. This facilitates the delegation of budget authority to authorizing officials by not
 requiring them to act as budget clerks in determining which object class code is appropriate for every
                                            travel request approved.
   In our survey of best industry practices it became clear that one-stop shopping for services with a
commercial travel office was the preferred approach. These services include the one-time entry of data;
  the use of a single document used for both travel authorization and voucher approval; electronic or
 paperless processing; and the automatic computation of both a "should cost" pre-travel estimate and
                                  post-travel "did cost" voucher request.

We have two challenges here. The first is to produce an integrated travel system that provides for these
services. There are commercial software products or enablers available that with some modifications will
                                   allow us to perform these functions.

  The second challenge is to provide a single channel of information to travelers for all arrangements
          including government lodging/messing facilities, per diem rate information and other
 government-furnished information required to make travel arrangements. The pilots are helping us to
                 determine the extent of industry capabilities to perform these functions.

The emphasis is on obtaining those services that the commercial travel industry currently provides to its
best private sector customers, not on developing unique DoD system requirements. We want to remain
  sufficiently flexible to take advantage of the new products and services being offered commercially,
             rather than lock into requirements that do not evolve with industry innovations.

The best practices we studied in corporate America indicate the use of a corporate travel charge card is
 essential. This gets the employer out of the business of maintaining an overhead structure to provide
travel advances to the traveler and ultimately a corporate card makes the travel process much easier for
                                                the traveler.

   We have issued policy to maximize the use of the government-sponsored travel card, currently the
American Express card, for all expenses associated with official business travel. DoD travelers will use
the card to obtain cash advances from ATM [automatic teller] machines as well as to charge their hotels,
                                 rental cars, meals and other expenses.

This has been a significant cultural change for a population of travelers used to traveling with cash. We
   have also developed and implemented a training program for all travel card holders to ensure they
                                 understand the proper use of the card.

Best practices also demand we use to the greatest possible extent automated computation capabilities
   with built-in policy compliance checks that ensure reimbursement of travelers. Prompt payment of
    travelers will help ensure that the travel charge card vendor is paid on time. These initiatives are
                    designed to exploit the fullest potential of electronic transactions.

                Electronic Funds Transfer. The Department of Defense now requires that travel
           reimbursements be paid to the traveler by an electronic funds transfer to his or her financial
           institution; just like their paychecks. EFT allows us to both reduce the costs associated with
            reimbursements but also to speed up the reimbursement to the traveler. This policy was
                                     effective Oct. 1, 1995, for DoD personnel.
         Where systems are capable of paying by EFT, our percent to travel reimbursements have gone
         up from 25 percent to 47 percent over fiscal year 1995. We anticipate this figure to increase to
         90 percent by the end of this calendar year as system changes are made to accommodate EFT
         Split Disbursement. Much like EFT, split disbursement is where the traveler can elect to have
          the finance office electronically pay the government travel card vendor directly for the charges
            that are on his or her travel card, the balance of the reimbursement would be transferred
            electronically to their personal financial institution. This will greatly simplify a process that
           requires the traveler to wait for the reimbursement before sending a check to the travel card
             Our finance centers are developing implementation requirements for the testing of split
            disbursements at our pilot sites. We have been working with the current vendor, American
                      Express, to ensure that financial data will be exchanged appropriately.
                                                  Third Party Pay.

  A third and final electronic funds transfer initiative that we are testing concerns having a commercial
vendor make payments directly to the travel card company. DoD would then reimburse a single invoice.
This would cut yet another step from the payment process by relieving the government finance office of
                                          making those payments.

Our finance centers have prepared the necessary test procedures. If this proves to be a viable course of
                action, third party pay throughout DoD could result in privatized payment.

Another major improvement initiative was to establish procedures for the random examinations of travel
  vouchers in lieu of examining 100 percent of the vouchers. Effective Oct. 1, 1995, disbursing offices
   within the department began to move to random examinations. These quality assurance reviews,
together with other audits as needed for oversight and control, should yield stronger controls at a reduced

   Achieving the accomplishments to date has been a collaborative effort across government. I must
commend to you the GAO [General Accounting Office], GSA [General Services Administration] and IRS
    for their support and cooperation in overcoming regulatory barriers and adopting better business

   Many of these barriers were built for the best of intentions at the time they were constructed. The
dismantling of them can run quickly into some plausible reasons for their continued existence. Reasoning
 our way through the changes needed to bring them up to date can be a tortuous process for both the
                               regulators as well as those being regulated.

     We still have some outstanding requests to IRS, GAO and the National Archives and Records
   Administration that will enable us to support a paperless process and reduce bureaucratic burden.
However, the regulatory agencies on the whole have worked very hard with us to ensure the necessary
controls yet allow us the necessary flexibility to ensure the travel mission is conducted more efficiently. I
     also commend the work of the Joint Financial Management Improvement Program in providing
       governmentwide leadership to simplify and modernize travel management in government.

    Now for the future: I am very happy to report that in order to move out on this initiative, DoD has
  established a project management office headed by Col. Albert Arnold for the defense travel system.
  This office will take all recommendations from the DoD Re-engineering Task Force and coupled with
lessons learned from the pilot sites, implement a DoD-wide solution that utilizes best industry practices.

A draft standard DoD solicitation was released on Dec. 7, 1995, that asked for industry comment to help
us refine our requirements in accordance with these best industry practices. We feel that the best way for
  DoD to implement evolving travel management services is for us to take advantage of the wealth of
                                        nongovernment experience.

The travel industry is evolving, and it makes good sense for DoD to capitalize on this evolution and build
  a partnership with industry that will last well into the 21st century. In that light and because we have
  received such an extensive amount of positive comments in response to our draft solicitation, we are
               conducting a thorough review of our requirements and acquisition strategy.

It's too early for me to tell you the outcome, but I can assure you that we are listening to what industry has
to say. They are the experts. They are the ones who will provide us solutions for our travel management
         challenges so DoD can put its streamlined resources to work in the appropriate areas.

It is clear that we have done much already. However, as I stated in the beginning, we are not there yet,
and some significant challenges remain. They fall within three major areas: legislative, technological and

  We have requested the amendment of the following statute that pertains to DoD civilian travelers: 10
                                    United States Code, Section 1589.

We propose the repeal of statutory language that prohibits DoD from paying a lodging expense to a DoD
    civilian employee who does not use adequate available government lodgings while on TDY. The
 statutory language does not permit flexibility by the resource manager to determine on a case-by-case
                basis the most efficient and cost-effective utilization of total travel dollars.

  For example, it does not allow consideration of car rental costs between government lodging and the
  TDY mission locations; it does not consider the total costs of providing government lodging, such as
 building construction, maintenance and utilities. These costs are paid by other DoD appropriations that
                  are not visible either to the traveler or to the local resource manager.

  I would also like to underscore that many of the reforms offered by the Joint Financial Management
Improvement Program initiative to provide broader or governmentwide improvements require legislation.

 Electronic Signature. A seamless, paperless system is our vision. An essential element to accomplish
  this vision is to ensure that the necessary data integrity is maintained since this system will result in
disbursement of public funds. Electronic signature technology appears to provide a method that can be
used to provide the necessary integrity and allow us to comply with requirements of the False Claims Act.

 We are currently studying how we can achieve the necessary level of data integrity in a cost-effective
   manner. In order to reduce development risks and costs, we are working closely with the General
  Accounting Office, National Institute of Standards and Technology and the Department of Energy to
          develop the necessary specifications for a standardized electronic signature system.

Although this system will be utilized for travel, it can also be used for a variety of other applications and is
based on the Digital Signature Standard. GAO has recognized that the issues surrounding data integrity
    in an effort such as ours is complex and specific features needed will continue to evolve as more
  experience is gained. In order to allow us to gain the information that we need to define the controls
necessary to achieve a paperless system, GAO has approved our testing of some commercially available

Industry issues. Our pilot experience has underscored the need for a sophisticated understanding of the
capabilities and limitations of our communications and data processing infrastructure. Our future system
                will have to provide service in a wide variety of operational environments.

Our tests have demonstrated that some of our communications and data processing infrastructure is not
 adequate to utilize these modern techniques. One of our initiatives is to identify industry standards for
 electronic commerce and apply them to our new DTS. As industry progresses towards greater reliance
upon electronic commerce methods, the department must likewise remain flexible enough to move with

    One of the unanticipated technical barriers encountered during the pilot phase has been the time
required to update the software modules with new entitlement rules and to ensure that those changes are
 accepted for processing payments by our accounting systems. Since entitlement changes occur on a
                          regular basis, this is an issue that needs to be worked.

 Additionally, travel industry conditions are changing so rapidly that it is taxing our ability to predict the
costs of future travel services. For example, the commission structure of the travel arrangements industry
                  is changing, with potentially significant implications for our future costs.

  Beyond the specific legislative proposals and technological challenges that I have outlined, there are
   some "cultural barriers" that hamper our ability to achieve our travel re-engineering goals. Perhaps
foremost among these barriers is the oversight mentality that would have the department spend $100 in
  establishing rigorous internal controls to oversee a $10 problem. We need to emulate private sector
   practice of systems control, random audit and supervisory accountability. We need to ensure that
 requirements such as signatures add value to the process. Best practice in industry for filing vouchers
    does not require -- or pay for -- fail-safe or multiple signatures as a condition for reimbursement.

    Here is where congressional leadership can help to set the tone by applying cost/benefit analysis
principles and common sense to oversight and internal control requirements. By treating the DoD traveler
and his/her supervisor as honest customers, we have deliberately designed a system that is not oriented
                             around stopping the 2 percent "bottom feeders."

 The costs and systems complexity required to target that population should not be allowed to drive the
  features of the defense travel system. Here again, the pilots will help us to assess the strength and
viability of the internal control features of the new system. The lessons learned from their experience will
  provide an invaluable tool with which we can develop rational and cost-effective control alternatives.

I would like to conclude my testimony today on a very positive note. The Department of Defense remains
 highly committed to this important re-engineering effort. We have made significant progress in a very
   short period of time. Given the scope and complexity of the operations in this department and the
 changes underway in the travel industry itself, I would go even further to characterize the progress as
 extraordinary! I will admit to you, however, that this change effort has been much harder than we had
anticipated. Change is always difficult, but the anticipated as well as those unanticipated barriers in the
                 areas of policy, technology, and culture have been challenging indeed.

 I would ask for the continued support of this committee, and I count on the support of the other federal
 agencies I have mentioned today as we come closer to the actual implementation of our new defense
                       travel system. I would be happy to now take any questions
      Staying Prepared Against Ballistic Missiles
Prepared statement of Lt. Gen. Malcolm R. O'Neill, USA, director, Ballistic Missile Defense Organization,
to the House National Security Committee, March 7, 1996, and Strategic Forces Subcommittee, Senate
                               Armed Services Committee, March 25, 1996.

Mr. Chairman and members of the committee, it is my privilege to appear before you today to present the
            department's Ballistic Missile Defense program and budget for fiscal year 1997.

    As you are aware, the department has recently completed the BMD program review, which was
  conducted by Dr. Paul Kaminski, the undersecretary of defense for acquisition and technology. The
    program review established specific guidance for the BMD program over the next several years.

The most significant result of the review was a reaffirmation of the department's fundamental priorities for
    missile defense. The first priority remains defense against theater-class ballistic missiles, which
 represent a threat that is here and now. This next priority is to develop the capability to defend against
     longer-range ballistic missiles that could threaten the U.S. after the turn of the century. Finally,
  technology base programs to support both TMD [theater missile defense] and NMD [national missile
                           defense] round out the department's BMD program.

The total fiscal year 1997 budget request for BMD is $2.798 billion. The department is requesting $1.794
billion for theater missile defense RDT&E [research, development, test and evaluation] and $268 million
for TMD procurement efforts. The National Missile Defense Deployment Readiness RDT&E program is
 budgeted for $508 million. Support technologies budget request is for $226 million. ... Of the total BMD
    budget request for fiscal year 1997, TMD accounts for roughly 74 percent, NMD 18 percent and
                                           technology 8 percent.

   As the committee is aware, BMDO [Ballistic Missile Defense Organization leads the Department of
 Defense team that executes the BMD program. My staff and I work closely and cooperatively with the
services as we seek to develop and acquire BMD systems. In this regard, BMDO interacts with the CinCs
[commanders-in-chief] to ensure that as we develop BMD systems we respond to the specific needs of
                                               the warfighter.

    BMDO works closely with the service program executive officers to execute key BMD acquisition
programs and put real capability into the hands of our military forces. ... Using the total fiscal year 1997
  dollars allocated to the services and BMDO for BMD programs, you can see that the Army executes
roughly 60 percent of the BMD programs, while BMDO executes 17 percent, the Navy 16 percent, the Air
                          Force 5 percent and other defense entities 2 percent.

 The important lesson to draw from these percentages is that the BMD program is a joint program that
 requires well-coordinated management and execution. We strongly benefit from the services' technical
  and programmatic expertise. Meanwhile, BMDO ensures that BMD programs are advocated during
    budget debates, prevents duplication of BMD program efforts across the services, sponsors joint
development of BMD systems, ensures focus on joint warfighter needs, and concentrates on near-term
                 acquisition programs while judiciously investing in far-term technologies.

    Of special significance, BMDO is responsible for designing the appropriate battle management,
command, control and communications that will ensure BMD systems are fully integrated. I am pleased
to report that this approach to BMD program management has succeeded in combining the strengths of
 the services and BMDO, which enable us to develop and acquire improved BMD systems and further
                                   develop critical military technologies.

The TMD program continues to focus on three sequential efforts to bring increasingly capable defenses
                                              to the warfighter.

  First, we have completed our near-term improvements to existing air and missile defense systems to
 allow them to defend against short-range tactical ballistic missiles. Prime examples of this activity are
  deployments of Patriot PAC-2 Guidance Enhanced Missiles and U.S. Marine Corps Hawk upgrades.

Our tests have shown that a modified TPS-59 radar, combined with the Hawk missile system, is effective
against short-range ballistic missiles. Delivery of the upgraded systems to operational Marine Corps units
will continue during this fiscal year. This program delivers a real military capability against the short-range
                                  missile threat for a modest investment.

Last year, we began producing the PAC-2 GEM system for the Army as the principal improvement to our
existing TMD capability until the PAC-3 system begins deployment in fiscal year 1999. The PAC-2 GEM
improvements increase the Patriot's defended area and improves its lethality over its capabilities during
                                          Operation Desert Storm.

   The GEM's improved seeker performance allows the interceptor to more precisely locate the target
 missile. Meanwhile, a faster-reacting warhead fuze contributes to a more optimal dispersal of warhead
 fragments on the target. Just as important, we have deployed significant improvements to our ability to
         provide early warning information of ballistic missile launches to U.S. forces overseas.

 Last year, the Air Force activated the Attack and Launch Early Reporting to Theater squadron with the
                 BMDO-developed Talon Shield system at Falcon Air Force Base, Colo.

 The Joint Tactical Ground Station, also developed by BMDO, is a complementary tactical mobile DSP
     [Defense Support Program] ground station for use in the theater. The Army has deployed two
prototypical units, one in Germany and one in South Korea, to support the warfighter. Five of these units
                        will be produced and fielded in fiscal years 1996 and 1997.

Following these and other near-term improvements, the department will continue efforts to develop and
acquire a set of core TMD programs. The department's program review established the TMD lower-tier
 systems -- the PAC-3 [Patriot Advanced Capability-3] and Navy Area Defense programs -- as the first
priority to ensure we enhance our defensive capabilities against short- to medium-range ballistic missiles
                                           as quickly as possible.
    We will do this by building on existing infrastructure and prior investments in ongoing programs,
expanding the capabilities of the Patriot and Aegis/Standard Missile systems, adding funds to deal with
cost increases and development delays, exploring a concept for cooperative development with our allies
for a Medium Extended Air Defense System and improving our Battle Management, Command, Control
                                      and Communicationscapability.

 Neither the PAC-3 nor the Navy Area Defense programinvolves show-stopping technical challenges at
    this point. Rather, they involve engineering challenges. Nonetheless, the key issue is a matter of
        execution of the programs to complete the development and to field these two systems.

Our task is to ensure that we have a robust program to proceed with both these systems and to field this
important capability as early as possible. Therefore, the department increased the investment in PAC-3
 and Navy Area Defense to ensure that they are adequately funded to guarantee timely delivery to the

The PAC-3 program was increased by $345 million and the Navy Area Defense program by $196 million
  over the Future Years Defense Plan through 1997-2001. These increases will allow us to begin both
PAC-3 deployments and Navy Area Defense User Operational Evaluation System deployments in fiscal
 year 1999. The mix of PAC-3 and Navy Area Defense interceptors eventually acquired to perform the
lower-tier mission will depend upon their relative prices, performance and the status of the missile threat.

The PAC-3 system will represent a significant upgrade to an existing air and missile defense system to
 specifically handle stressing theater-class ballistic missile threats. The PAC-3 system, using hit-to-kill
    interceptors, will be highly lethal against ballistic missiles including those with weapons of mass

 Improvements to the system will result in increased firepower and lethality, increased battlespace and
    range, enhanced battlefield awareness, and improved discrimination performance. These critical
enhancements will be achieved by improvements to the missile as well as the radar and communications
     systems. Operational improvements, such as remote launch operations, will also increase the
battlespace and range of the PAC-3 system. These enhancements will mark a substantial improvement
                    over our Patriot TMD capabilities during Operation Desert Storm.

  The PAC-3 program is restructured to reduce program risk, adjust for schedule delays and improve
    system performance by extending the engineering and manufacturing development phase of the
program by up to 10 months; rephasing the missile and radar procurement, upgrading four launchers per
   battery with Enhanced Launcher Electronics Systems; and extending the battery's remote launch

 The program review also visited the issue of the number of PAC-3 battalions to be fielded. The original
 plan was to deploy nine battalions. However, the review decided to field six battalions, while deferring
      fully upgrading the three additional battalions pending the completion of the MEADS program
 definition/validation phase. PAC-3 low rate initial production will begin the first quarter fiscal year 1998,
           with the First Unit Equipped (date planned for the fourth quarter of fiscal year 1999.
    As the committee is aware, BMDO and the Navy have been working cooperatively to develop an
  enhancement to the Aegis/Standard Missile air defense system to provide a tactical ballistic missile
defense capability from the sea that is comparable to the defense provided by PAC-3. This represents a
critical TMD capability that can take advantage of the strength and presence of our naval forces and build
                          upon the existing Aegis/Standard missile infrastructure.

  Naval vessels that are routinely deployed worldwide are currently in potential threat areas or can be
 rapidly redirected or repositioned. A naval TMD capability can be in place within a region of conflict to
provide TMD protection for land-based assets before hostilities erupt or before land-based defenses can
  be transported into the theater. Our Navy Area Defense program focuses on modifications to enable
tactical ballistic missile detection, tracking and engagement with a modified Standard Missile 2, Block IV.

    We will use the $45 million added by Congress in the fiscal year 1996 Defense Authorization and
 Appropriations bills to compensate for system engineering and design efforts not fully funded in fiscal
year 1995. The program review added $186 million to Navy Area Defense through the FYDP in order to
make it fully executable on a moderate risk profile. These funds will cover delays in risk reduction flights
and adjusted cost estimates for test targets and lethality efforts. In turn,this will minimize the delays in the
                               EMD program and LRIP missile procurement.

  Our plan is to field a UOES capability in fiscal year 1999 and an FUE in fiscal year 2001. Thereafter,
operational units will use the legacy UOES system for continued testing and as a contingency warfighting

 Theater High-Altitude Area Defense is the more mature upper-tier system. During the program review,
the THAAD program was adjusted to maintain track on an early deployment of a UOES capability before
                                           the end of the decade.

Prior to the program review, its funding profile was on the order of about $700 million per year. However,
  it adjusted the program significantly, making outyear adjustments to our investment in the program.

  The department decided to keep the UOES portion of the program on track, which will entail fielding
about 40 THAAD missiles and the GBR [ground based radar] by fiscal year 1999. However, the program
review restructured the rest of the program for the objective THAAD system, taking about $1.9 billion out
                         of the $4.7 billion that was programed through the FYDP.

The THAAD system is the only core TMD system capable of engaging the full spectrum of theater-class
  ballistic missile threats. The THAAD system provides extended coverage for a greater diversity and
dispersion of forces or the capability to protect population centers. But the principal additional capability
 provided by this important system is the ability to deal with longer-range theater missile threats as they
                                   begin to evolve and emerge over time.

   Using THAAD as an overlay also reduces the number of missiles that the lower-tier systems must
   engage. The THAAD system will provide a unique capability for wide-area defense against tactical
ballistic missiles at higher altitudes and more attempted intercepts at longer ranges (a shoot-look-shoot
    capability) with a lethal hit-to-kill interceptor. This is a mission the PAC-3 and Navy Area Defense
systems cannot perform, The THAAD system consists of the TMD Ground-based Radar surveillance and
                           tracking sensor, interceptors, launchers and BMC3.

    The initial deployment will be with what the department calls a UOES plus system, essentially an
enhanced version of the UOES system, in lieu of the previously planned full capability objective system.
 This improved UOES capability will meet the most critical THAAD requirements. It will concentrate on
  militarizing the UOES design and upgrading certain components, such as the infrared seeker, radar
upgrades and BMC3 improvements. The resulting THAAD program delays the production ramp-up and
                                       the FUE by over two years.

  In fiscal year 1997, the THAAD program will conclude its demonstration/validation flight tests. These
tests are designed to resolve technical issues and demonstrate the system's capabilities. So far, BMDO
 and the Army have conducted four flight tests. The next flight test, which will attempt an intercept of a
        theater-class ballistic missile target, is scheduled to take place within the next few days.

The Navy Theaterwide system will bring a new, complementary capability to our other core programs by
providing ascent phase coverage where the mobility of Aegis ships allows such coverage. In addition, the
     system will add the same kind of terminal coverage capability as the THAAD system, providing
  long-range coverage and wide-area protection. As in the case with the lower-tier Navy Area Defense
system, the Navy Theaterwide system will operate free of sovereignty or host nation support issues, free
                    to be deployed instantly whenever our national interest requires.

The Navy Theaterwide system is the least mature of all our systems, not only of the upper-tier, but all the
TMD systems taken together. Prior to the department's review, we were proposing funding this program
 in our fiscal year 1996 and 1997 budgets at a very low level to mature the key enabling technologies.
This was at a level of about $30 million per year. During the review, however, Congress authorized and
                  appropriated a substantial increase -- $170 million -- to this program.

The program review decided to spend all the appropriated funds for fiscal year 1996 over two years and
not begin a full commitment to the Navy Theaterwide program at this time. A more deliberate pace was
selected, which will allow us to proceed to a system-level intercept flight test using a combination of the
             Aegis weapon system, the Standard missile and a kinetic kill intercept vehicle.

In parallel, the program is structured to conduct concept definition studies to determine what is the best
  configuration with which to proceed. There is much synergism among the technologies needed for a
robust Navy Theaterwide system, including seeker technologies being developed in the National Missile
                                            Defense program.

      The program review determined that the posture for this program is to conduct a technology
demonstration, leveraging maturing technologies and complete a concept definition study to confirm the
 interceptor configuration for the system. In order to accomplish this program approach, the department
 made a substantial increase to the funding profile. While starting out at a slow pace, we will add about
  $600 million through the FYDP to ramp up to a significant annual investment in Navy Theater-Wide.
We will continue developing the MEADS system during fiscal year 1997. This system is different from the
                  other lower-tier missile defense systems we are planning to deploy.

 For example, while the PAC-3 system is oriented in a particular threat direction, MEADS provides 360
degrees of coverage. It will be a highly mobile system and designed to be deployed with our forward and
    maneuvering forces. In this regard, MEADS is designed to respond to an important operational
requirement by providing protection for the combat maneuver force against shorter-range theater-class
           ballistic missiles, advanced cruise missiles and other air-breathing threats as well.

 This system will replace Hawk and also would ultimately replace the Patriot system. As I noted earlier,
 the department is deferring fully upgrading three Patriot battalions pending a decision on development
                                       and deployment of MEADS.

  Later this month, the U.S., France, Germany and Italy will sign a memorandum of understanding to
proceed jointly to develop the MEADS system. MEADS consolidates and harmonizes the efforts of NATO
 allies who had contemplated country-unique systems, such as the TLVS in Germany, Aster/Arabel in
                  France and Italy, and Corps SAM [surface-to-air missile] for the U.S.

    The agreement to pursue MEADS represents not only a new path for trans-Atlantic armaments
cooperation, but also a growing recognition of the risks to alliance security posed by the proliferation of
   weapons of mass destruction and their delivery systems. The cost share for the MEADS program
throughout the Program Definition and Validation phase (the U.S. equivalent of demonstration/validation)
               is 50/20/20/10 among the U.S., France, Germany, and Italy, respectively.

The department added $85 million over the FYDP to fund the U.S. share of the cooperative PDV phase,
 which concludes in fiscal year 1999. This increase brings our funding to a rate of about $30 million per
year and fulfills our international commitments at this time. We must make a decision by fiscal year 1998
                                    on the program's future direction.

Two U.S. companies, Lockheed Martin and a joint venture between Hughes Aircraft and Raytheon, have
    joined with their European counterparts (Daimler-Benz Aerospace and Siemens from Germany,
Aerospatiale and Thompson from France, and Alenia from Italy) to form two international teams that will
execute the PDV phase of the program. A single international team will be chosen to pursue design and
           development (EMD in the U.S.), with an in-service date scheduled for about 2005.

Joint TMD activities represent programs and tasks that are vital to the execution of joint BMD programs.
     These activities have been grouped together because they provide direct support across BMD
    acquisition programs which could not be executed without this important support. Therefore, we
introduce greater efficiency into the programs because they accomplish an effort once which otherwise
                  would have to be separately accomplished for each service element.

     These activities include architecture development and battle management, command, control,
communications and intelligence; test and evaluation support, including the development and fabrication
  of targets, threat analysis and support; model and simulation support; lethality and phenomenology
                      studies and analysis; and direct interface with the warfighter.
 Unfortunately, we did not adequately explain the importance of this key program element last year and
sustained a significant and painful reduction to its budget. This significantly reduced our ability to support
the core TMD acquisition programs. In some instances, critical target development and lethality analysis
had to be funded by the core programs themselves. These unexpected expenditures contributed to some
                     of the executability issues identified by the BMD program review.

 Therefore, I would like to outline just a few critical activities that are funded in the Joint TMD account.
Interoperability in BMC3I is essential for joint TMD operations. Accordingly, BMDO takes an aggressive
lead to establish an architecture that all the services can build upon and is actively pursuing three thrusts
                              to ensure an effective and joint BMC3I for TMD.

      The three thrusts are improving early warning and dissemination, ensuring communications
 interoperability and upgrading command and control centers for TMD functions. The primary goal is to
provide the warfighter with an integrated TMD capability by building in the interoperability and flexibility to
                               satisfy a wide range of threats and scenarios.

From its joint perspective, BMDO oversees the various independent weapon systems developments and
provides guidance, standards, equipment and system integration and analysis to integrate the multitude
    of sensors, interceptors and tactical command centers into a joint theaterwide TMD architecture.

While this may not seem to be as exciting as building improved TMD interceptors, it is absolutely critical
to the success of the U.S. TMD system. It is the glue that holds the architecture together and will ensure
                             that the whole is greater than the sum of its parts.

In addition to BMC3I, the other activities in this program element strongly support the TMD system and
 key acquisition programs. For example, BMDO test and evaluation responsibilities include oversight of
major defense acquisition program testing, sponsoring and conducting TMD family of systems integration
  and interoperability tests, development of common targets and providing for range and ground tests.

    My organization sponsors and conducts system integration tests to ensure inter- and intraservice
   operability and interoperability of the TMD family of systems with external systems. In addition, this
   program element funds a critical series of interactions with the warfighting CinCs. The CinC's TMD
  assessment program consists of operational exercises, wargames, and Warfare Analysis Laboratory
    exercises. Our WALEX programs, for instance, allow senior military leadership insights into TMD
                                   operational planning and employment.

    The CinC TMD assessments program enhances two-way communication between BMDO as the
  developer and the warfighting CinCs who are the users of TMD systems. These exercises allow the
    CinCs to assess their TMD capabilities and shortfalls so they may refine and articulate their TMD
            requirements, and improve their current and future TMD operational capabilities.

The program facilitates the development and refinement of TMD doctrine and concepts of operations as
part of the CinC's and Joint Staff's overall theater operations plans. We need to fully fund this important
    program element if we are to deliver on our promise of improved TMD systems to the warfighter.
 Israel has been involved in U.S. missile defense programs since 1987, when both countries signed a
memorandum of understanding on BMD participation. Israel's participation includes architecture studies,
   technology development and experiments, examination of boost-phase intercept concepts and the
                              development of the Arrow interceptor missile.

  As the secretary of defense has noted recently, the Arrow program advances our shared objective of
working together to develop effective ways to counter the threat posed by ballistic missiles in the Middle
 East and elsewhere. An agreement with the Israeli Ministry of Defense to continue involvement in the
development of the Arrow weapon system will be ready for signature between both our countries in the
                                                near future.

 The Arrow Deployability Program, as it is called, involves a total commitment of $500 million over the
next five years, with $300 million contributed by Israel and $200 million from the United States. This will
allow for the integration of the jointly developed Arrow interceptor with the Israeli-developed fire control
 radar, launch control center and battle management center. I am particularly pleased to report that on
   Feb. 20, the Arrow II missile completed its second successful flight test, which will lead soon to the
                               intercept of a target tactical ballistic missile.

System integration efforts will lead to a UOES-like Arrow system projected for fielding in fiscal year 1998.
    The U.S. continues to derive valuable data and experience through our participation in the Arrow
program. In particular, we are gaining important experience in establishing interoperability with U.S. TMD
                                 systems and the Arrow weapon system.

The agreement we have on participation in the Arrow program will be revisited in three years to evaluate
the synergies between Arrow and U.S. TMD programs and to ensure that worthwhile benefits continue to
flow to the U.S. programs. It is important to note that this cooperative program is also funded within the
                                       Joint TMD program element.

   Many TMD sensors, BMC3 and weapons also have an effective capability to counter the growing
  land-attack cruise missile threat. In particular, the lower-tier PAC-3, Navy Area Defense and MEADS
 systems operate in the same battlespace and will have significant capability against the cruise missile
threat. In addition, the NMD BMC3 architecture will be designed to promote interoperability and evolution
                   to a common BMC3 system for ballistic and cruise missile defense.

The department also has a number of initiatives outside the BMD program to improve the ability of U.S.
   forces to detect and defeat cruise missiles in theater or launched against the United States. These
 initiatives include advanced technology sensors to detect low observable cruise missiles, upgrades to
 existing airborne platforms to improve beyond the horizon detection capability against cruise missiles,
                          and upgrades to existing missile interceptor systems.

 The department's NMD goal is to position the U.S. to effectively respond to a strategic ballistic missile
threat as it emerges. Based upon the program review, the NMD effort has been shifted from a technology
                             readiness to a deployment readiness program.
  Following the 1993 Bottom-up Review, the NMD program focused on maturing the most challenging
 technical elements -- often called the long poles -- of the NMD system. The department is sensitive to
    congressional interest in a shift to a more system-oriented approach which would provide for the
balanced development of all elements necessary for the initial deployment. We are focusing our efforts
 on a program that is referred to as "three-plus-three" -- a three-year development and planning phase,
   which, if necessary, could be followed by a three-year system acquisition and deployment phase.

       The department is committed to the development phase -- or the first three years -- of this
three-plus-three program. During this period, BMDO and the services will develop and begin testing the
 elements of an initial NMD system. If at the end of those three years of NMD development efforts, the
ballistic missile threat to the United States warrants the deployment of an NMD system, then in another
three years that system could be deployed. Based on this program an initial operational capability could
                       be achieved in approximately six years, by the year 2003.

If, on the other hand, we reach 1999 and the threat does not warrant deployment of an NMD system, the
department's three-plus-three program is designed to preserve the capability to deploy an NMD system
    within three years by continuing development of the system elements and conducting a series of
 integrated tests. Over time, these efforts would allow us to enhance both the technology base and the
demonstrated systems performance. Therefore, we can make a more informed deployment decision and
         when the threat materializes, be in a position to deploy a more capable NMD system.

The system capability would grow through three avenues: incorporating advanced technology, increasing
     element performance and adding additional elements. We would continue to improve system
effectiveness by incorporating advanced technologies as they mature in our technology base program.

 As we continue to test, we will identify and incorporate improved components to the system elements,
    such as improving the kill vehicle, enhancing its lethality or refining the system software. When
    appropriate, we will add additional elements to the defense. For example, the Space and Missile
Tracking System, which is being developed separately by the U.S. Air Force, would be integrated into our
       proposed architecture as soon as it was available to enhance overam NMD performance.

  As I testified last year, the SMTS system provides a vital role for both NMD and TMD systems. The
low-earth orbit SMTS is an integral part of a potential deployment of an objective NMD system. While we
are enhancing the NMD system's capability, we will address production and deployment lead time issues
          to reduce the time required to field the system when a deployment decision is made.

  Funding for NMD has been shifted forward in the FYDP with allocations of about an additional $100
million per year in fiscal years 1997 and 1998. This increase, coupled with the additional funds provided
   by Congress for NMD in fiscal year 1996, will allow us to complete a reasonable, albeit high-risk,
development program leading to the demonstration of the NMD system in an Integrated System Test in

 The NMD system we will demonstrate in 1999 includes four fundamental building blocks used by all of
the proposed NMD architectures: the interceptor; ground-based radar; upgraded early warning sensors;
and battle management, command, control and communications . Depending on the threat to which we
are responding when a deployment is required, these elements could be combined in a treaty-compliant
deployment or some other architecture. The ground-based interceptor is the weapon element of NMD. It
  consists of an exoatmospheric kill vehicle (launched by a fixed, land-based booster. We have made
significant progress over the past few years to develop an EKV which can perform hit-to-kill intercepts of
                   strategic re-entry vehicles in the midcourse phase of their trajectory.

  Rockwell and Hughes are under contract to develop and test competing EKV designs, which will be
    evaluated in a series of flights starting later this year. Following intercept flights in 1998, a single
contractor will be selected for the initial system. The EKV flights, which start this year, will be conducted
   using the payload launch vehicle as a surrogate for a dedicated booster. Several options are being
    examined for the GBI booster, including Minuteman III and other modified, off-the-shelf boosters.

The NMD ground-based radar is an X-band, phased-array radar that leverages heavily off developments
achieved by the THAAD GBR program. By taking advantage of the work already completed in the TMD
arena, BMDO has been able to reduce the expected development cost of the GBR by approximately $70
million. In 1998, the GBR prototype, developed by Raytheon, will be fabricated at the U.S. Kwajalein Atoll
to begin testing to resolve critical issues related to discrimination, target object map, kill assessment and
                                           electromechanical scan.

The Upgraded Early Warning Radar program is designed to answer fundamental questions concerning
  how UEWRs can contribute to national missile defense while completing the initial development. We
 have already completed two years of successful demonstrations, showing how software modifications
can increase the radars' detection range, sensitivity and accuracy. Our plan is to award a contract in early
1997 for the design and test of a software demonstrator. This tool will be used to prepare specifications
for the early warning radars' upgrades necessary if there is a decision to deploy an NMD system before
                                              SMTS is available.

 The National Missile Defense Battle Management, Command, Control and Communications program
provides the capability for the designated operational commander to plan, coordinate, direct and control
                                   NMD weapons and sensors. The NMD

   BMC3 development program uses an open system architecture and the best industry practices for
development of software that will have the capability to support NMD integrated ground and flight tests.
The BMC3 product, which will include cruise missile defense consideration, leverages off previous NMD
              developments and the BMC3 systems being developed for the TMD program.

Over the FYDP, the department has budgeted those funds required for a deployment readiness effort, or
   roughly $2.8 billion. Deployment of an initial system would cost approximately $5 billion more. Our
analysis shows that such a deployment would provide an effective defense against first-generation rogue
ballistic missile threats to the U.S. The intrinsic strength of our concept for an initial deployment is that the
architecture has been specifically designed for evolutionary development of a more robust and effective
     NMD system over time; it can grow to counter an increasingly sophisticated threat, if required.

  As I mentioned earlier, one of the significant enhancements to the NMD system will occur when the
  SMTS becomes available. This system, funded and developed as part of the Space-based Infrared
System program, provides 360-degree over-the-horizon sensing throughout the threat trajectory, which
              greatly increases the system performance against all of the potential threats.

The NMD development program we are planning will continue to comply with all treaty obligations. As the
three-plus-three NMD program progresses, we will study many different technologies and architectures.
   We will review these options from every perspective including cost, operational effectiveness and
                                          existing treaty obligations.

The three-plus-three concept I have described for NMD has its genesis in last year's efforts by the BMDO
 Tiger Team, which investigated how we could accelerate the development and deployment of an NMD
                system to respond to more rapidly emerging threats to the United States.

 The Tiger Team, estimating time scales of approximately four years to deployment, described several
opportunities and the associated challenges to deploy an interim NMD capability to deal with rudimentary
Third World threats to U.S. territory. In this regard, the BMDO Tiger Team was an important and valuable
endeavor. Nonetheless, it is important to note that the opportunities they described are "off ramps" from
efforts to develop and deploy an objective and highly capable NMD system, and if not carefully evaluated,
                                  could become technological cul de sacs.

 Simply put, near-term options might not field an initial system that could be evolved to a more effective
defense. The tradeoff we must consider is between earlier deployment of a less capable system or later
deployments of increasingly effective defenses for the U.S. homeland. Our three-plus-three approach is
   designed to provide an early deployment opportunity which can evolve robustly with the threat and
                                              operational needs.

  As I mentioned earlier and as a byproduct of the Tiger Team exercise, both the Air Force and Army
provided their recommendations on how to develop and deploy an NMD system. The Air Force and Army,
 in particular, have proposed alternatives which are very similar to, and with immediate commitment to
      deployment could allow earlier maturation than, the department's three-plus-three program.

 In either case, a minimum of approximately four years to a capability was estimated. Consideration of
  such alternatives to the three-plus-three program has strengthened the commitment to deployment
readiness within the department. When it literally could come down to the effective defense of the nation
against an accidental, unauthorized or limited ballistic missile attack, it is critical for us to fully assess all
   the options before us. The Army, Navy and Air Force remain critical members of our team and are
vigorously and efficiently developing those portions of our three-plus-three architecture to which they are

     The Army and Air Force proposals are very similar to BMDO's plans in that they use the same
fundamental building blocks: ground-based interceptors, ground-based radars, upgraded early warning
radars and BMC3. The differences come in the specific design of these elements and the way they are
                                     eventually combined architecturally.

The Air Force's proposal is based on the belief that significant benefits can be achieved by leveraging off
 the deployed Minuteman III infrastructure. They propose using the Minuteman III booster to launch the
 kill vehicle, which could be either the EKV already described or a somewhat simpler kill vehicle which
could be developed by the Air Force. The Minuteman III concept would allow the use of existing launch
    silos and some of the existing BMC3 network, potentially reducing the total cost. To provide the
 necessary sensor data, the Air Force proposes to augment the coverage provided by upgraded early
                                              warning radars.

The Army suggests a commercial booster developed by combining existing off-the-shelf booster stages
   to launch the EKV. These interceptors would be deployed in the existing silos of the old Safeguard
    complex near Grand Forks, N.D. In order to enhance radar coverage, the Army proposes also to
            augment early warning radars and recommends using technology from the GBR.

  Each of these architectures has merit, but they also have potential shortcomings. Early deployment
 options are capable of defending against only the most simple ballistic missile threats -- that is, a few
warheads atop first-generation ICBMs. BMDO and CinCSPACE [U.S. Space Command] are engaged in
the assessment of the existing and future threats, as defined in the National Intelligence Estimate and the
                                     NMD Threat Assessment Report.

      The joint endeavor with CinCSPACE includes an aggressive effort to specify the operational
requirements, including effectiveness and coverage, and evaluate them against architectural options and
system-level developmental requirements. Two major efforts for this evaluation include active command
and control simulations, which combine architectural options, specific threats and concepts of operations
    in a simulated real-world environment; and a cooperative effort in the development of the battle
   management and command, control and communications element. The NMD architecture will be
                      specifically tailored to meet the current and emerging threats.

  In addition to such operational concerns, alternative architectures still need to be reviewed from the
   perspective of our treaty obligations. For instance, the proposals call for the use of additional early
  warning radars. One alternative also would use existing Minuteman III assets (including silos) as the
  boosters for the NMD kill vehicles. This raises both ABM [anti-ballistic missile] and START [Strategic
                                   Arms Reduction Talks] treaty issues.

 I think it is important for the Congress to be aware of these and other potential architectures, including
 both operational concepts and arms control impacts when considering these alternative architectures.
While I acknowledge that there are potential limitations, I still believe there is strong merit to considering

   If we identify an emerging ballistic missile threat to the U.S., I would like to have the best possible
 deployment options available to the president and Congress. I want to reiterate when we address the
defense of the American people against even a rudimentary Third World ballistic missile threat, I want to
   make sure we have every feasible opportunity to effectively defeat that threat as soon as possible.

 I strongly endorse staying the course with the department's current NMD strategy, while continuing to
  protect our earlier deployment options. I think it is the prudent course of action. Following three more
years of system development, we will reach the point where a low-risk decision could be made to deploy
an NMD system, if the threat warrants. If not, we will be prepared to continue development of a system
 that could still be deployed quickly in response to a threat but would ensure a more effective defensive

  The three-plus-three program is designed with the flexibility to allow it to be accelerated if the threat
 warrants and additional resources are applied. As it is currently structured, it provides the capability to
 deploy with an IOC [initial operational capability] in 2003, the date Congress desired. At this time, the
  specific deployment architecture is not an issue which must be decided. What is needed is program

 Completing definition of a system of this complexity in three years is a challenge. We cannot afford to
keep starting over to develop something new. I urge you to accept our program and to provide mfficient
  resources to complete the deployment readiness phase of the three-plus-three program. Then, if it is
    necessary, we will be prepared to defend all of America against limited missile attacks by 2003.

As we move forward with our acquisition programs, the programmatic demands on our BMD resources
 have continued and the number of congressional earmarks has risen. I am concerned that because of
 this we have been forced to reduce our technology program. I would like to remind the committee that
today's acquisition programs are possible only because significant past investments in BMD technology
                                           made them possible.

For instance, development of the hit-to-kill interceptor technology, now adopted by PAC-3 and THAAD,
   evolved from the SDIO's [Strategic Defense Initiative Organization, BMDO's predecessor] Flexible
     Lightweight Agile Guidance Experiment technology demonstration program in the mid-1980s.
Technologies making the infrared sensors and data processors possible for the upcoming SMTS satellite
        system have been developed over the past decade through BMDO-sponsored research and
          development. That includes infrared detectors, cryogenic coolers, optical hardware and
                                   radiation-hardened microelectronics.

  Just as these past technology investments helped enable current TMD acquisition programs, today's
  technology investments will prepare us for evolving, proliferating threats. Evolving threats, based on
reasonable extrapolations of credible countermeasures, set the pace and direction of today's advanced
technology program. As a result, next generation TMD and NMD systems will be able to draw from a set
                                 of readily available technology solutions.

  We have organized the technology program to balance across several variables, including TMD and
 NMD applications, and technology development and demonstrations. In this regard, we have identified
the most critical technology requirements for the program and are pursuing them within the constraints of
   the funding available for the technology program. These unique technology requirements include:

         Sensor and seeker component programs to improve the range and resolution of missile defense
                                     sensor systems and interceptor seekers;
             Interceptor component programs to develop faster, smarter, more capable interceptors;
                BMC3 high-data and low-error advanced component technologies needed in automated
                  decision aids, data fusion, adaptive defense operations and secure communications;
             Phenomenological research to determine how the threat, environment and defensive systems
                                   will behave and interact during an engagement; and
         Research into advanced concepts, such as directed energy systems, that are capable of global
              coverage (i.e., accomplishing both national and multiple-theater missile defense missions) and
                                       that can engage targets in the boost-phase.

  I believe that proper development of technologies to meet these critical requirements is essential to
    maintaining our program's technological edge. Nowhere else in the department are the basic or
                                 component BMD technology programs funded.

   Therefore, to ensure the continued flow of new solutions to meet evolving ballistic missile defense
     requirements and technology needs, I encourage the Congress to consider the BMD advanced
technology program as a strategic investment. I will make sure the technology program maintains a clear
  focus and that its products remain relevant to the BMD mission and are of high quality. I believe this
                investment is critical to the continued success and viability of our BMD program.

The BMD program today is a focused, prudent response to the real world. We are aggressively working
to meet existing and emerging ballistic missile threats, first to our forces overseas, as well as our friends
                   and allies, and secondly, the emerging missile threat to the United States.

  I am dedicated to ensuring that we field improved TMD systems as soon as possible to provide real
   protection for our men and women as they go into battle to defend our national security interests. I
      believe we have made strong progress in developing and acquiring these improved systems.

I am particularly proud that the lower-tier TMD systems will very soon be in the hands of the warfighter.
  We have made this progress because of the strong and enduring executive-legislative consensus on
    theater missile defenses. This consensus is directly responsible for ensuring consistent program
direction and the stable allocation of resources to get the job done. This support must continue if we are
    to deliver on our collective promise to give the warfighter the protection he needs in a world with
                                           proliferating missile threats.

As I have testified today, the department has structured a deployment readiness program for NMD that is
prudent and flexible. That program acknowledges that some potentially adversarial nations are interested
                in developing longer range ballistic missiles which could strike the United States.

         The three-plus-three program could deploy an effective nationwide NMD system against a
 first-generation Third World threat by the year 2003. However, if that threat develops sooner, we have
                   options which could deploy an emergency NMD system at an earlier date.

Given the uncertainty of the ballistic missile threat to the U.S., it is prudent for the department to proceed
   with the three-plus-three program. However, I think it is critical that we work closely together on a
bipartisan basis to form the consensus for NMD that the TMD program has long enjoyed. Such a course
is required if we are to succeed in maintaining program stability and coherence. The success of NMD
                         depends on our ability to reach this consensus. ...
                Setting a Standard of Stewardship
  Prepared remarks of John P. White, deputy secretary of defense, to the Restoration Advisory Board,
                          Naval Air Station Patuxent River, Md., March 11, 1996.

   Good afternoon ladies and gentlemen. It's nice to be here on this beautiful day on this really pretty
base. ... It is also nice to be at a place where you are doing such a good job of BRAC [base realignment
and closure]. BRAC is a hard process for everyone involved. It causes a lot of disruption to communities,
to the people and their families. But it's something that's necessary given where we are in the department,
 so I want to congratulate you on really managing what is always a difficult process and doing it with a
                                                human touch.

 The real reason I'm here, of course, is to recognize and pay tribute to you as a facility in terms of what
   you've been doing with the environment. As you know, the administration -- the president and the
  secretary -- are committed to making environmental improvements. We take what chance we can to
come to a place like this with a real success story so we can point out to people what really can be done
   with the proper leadership and also with the proper cooperation between the military and the local
                                  community, which I know here is terrific.

   Three weeks ago, I signed the first-ever DoD directive for establishing a comprehensive policy on
environmental security. We did that to ensure that we would incorporate environmental factors into all our
 decision-making processes to make sure that when we make decisions, which are obviously based on
 national security interests, that we don't forget the environment. And the Pax River, of course, is a real
    role model for other facilities in terms of recognizing the leadership that can be displayed in the
                            environment while satisfying your overall mission.

You are a DoD leader in terms of the Chesapeake Bay -- ... a great many projects under way here and ...
 pages of awards going back to the early '80s, I think, or maybe the late '70s. And in 1995, you won the
   Secretary of Defense National Resource Conservation Award. Of course, it's been on CBS News
 because of your leadership in this area. So it is really quite a great example for the Navy and for other
                                             Navy communities.

My major responsibility can be put into three different areas: readiness and most importantly readiness;
secondly, quality of life -- making sure that all of our folks in the military and civilian people committed to
the Department of Defense have what they need and have the opportunities that they deserve; and third,
equally important, is modernization. That is, making sure that going into the future we are providing the
capabilities that are needed and the resources that are needed in order to modernize our forces and be
               assured that in the next century we continue to have a very strong military.

We do try to take care of these three fundamental, overarching efforts with the environment in mind, and I
 think it's very important that we do so. With respect to readiness, for example, we are dedicated to the
principle that while we need the facilities that we have, and the land and sea and air that we use for our
training, that we, in fact, do so as a steward and complement our training in a way to make sure that it is
                                          environmentally friendly.
The DoD has responsibility for some 25 million acres of diverse public land, and we need to make sure
     as we use that land for training that in fact we take care of the environment at the same time....

When we were coming down and getting ready for this, we were talking about what it is we are doing, and
I was shown this piece of plastic -- this is from shipboard. As many of you know, in the old days aboard a
ship what you did is throw it over the side. We don't do that anymore. Things that are not degradable, we
bring back. This is a representation of items that are brought back, recycled, made into basic plastic and
then sold again and used for park benches or whatever, so that, in fact, we can reuse the plastic that we
            used at sea. So, it's very, very important -- also very hard. So that's one example.

 Let me give you another example of a different sort. We have to use sand to clean off paint -- off ships
and aircraft and so on. We now use plastic. This is plastic that can be used in order to take the paint off
and then can be scooped up and reused so that rather than have a runoff of a lot of sand and damage to
 the environment, we've done something smart in terms of making sure that we have something that's
                                 reusable. ... is cheaper and more efficient.

 We're also substituting citrus-based cleaners for solvents -- lemon juice, I'm told, in that case. It makes
  you think when you drink your orange juice in the morning whether or not you're getting a little extra
cleansing as well. We were worried about the same sorts of issues as we clean engine parts, for example,
to make sure that we separate the petroleum from the water so that it can be collected and not seep into
                                                  the ground.

 We're using substitutes for the hard cleaners we used to use, to make sure that it's safer and cheaper.
And we're finding that through this resource management, of course, that, in fact, it does not impede our
readiness. In fact, in some ways it enhances our readiness and makes sure that we're being responsible
                                               at the same time.

That's also true with respect to quality of life. Quality of life for us means making sure in the long run that
 all our people have what they want. And we often talk about that in terms of direct compensation or in
terms of housing or in terms of medical support and so on. One critical part of that is making sure that our
people live in safe and hospitable environments, and that means we have to pay attention and do what
has to be done to see that is, in fact, the case. So there's another very important aspect of what it is we're

  It's also reflected in the relationship we have to have with our communities. If we don't have a good
 relationship with the communities -- in many dimensions -- then we are not successful in terms of our
   overall mission. And in that case, ... we need to -- as we've shown here today with your Resource
Advisory Board -- ... have a working relationship with people from the community who are committed to
the environment; who recognize the military as a partner. And together we can improve what we're doing
                                         and expand our capabilities.

 In this regard, last week, the DoD became the first federal agency to release its annual toxics release
 inventory. This provides ... us ... an identification of the toxic materials that we're using. It's part of the
program that was talked about earlier. It provides the community with information on what we're doing. It
 has a certain standard in terms of making sure that we improve over time and are up-front in terms of
                        these issues. We, of course, also do substantial recycling.

 Finally, with respect to the future, as we acquire new systems, we are also particularly sensitive to the
   fact that we need to be environmentally responsible. We've adapted a commercial standard -- the
              National Aerospace Standard 411 -- to reduce or eliminate hazardous waste.

 There was no government standard, so we decided that we would step up and accept the commercial
 standard. This gives contractors a framework for identifying, managing and minimizing or eliminating
              hazardous waste materials as they develop our equipment and capabilities.

In the old days, for example, on a C-5, we would have used as many as 3,000 ozone-depleting chemicals.
On the new weapons system, the F-22, we used one. And so we've made great strides, and people are
very proud of that success. That example has been mentioned to me several times over the last year as
  people have pointed out the kinds of activities that are important to us. In fact, one of our facilities in
Louisville (Ky.) won a national award -- of a joint project from the Ford Foundation and Harvard -- as an
innovator on just these kinds of ozone-depleting chemicals this last year, which was presented by Vice
                                               President Gore.

  So in summary, we think our environmental security program is part-in-parcel, hand-in-hand with our
  overall efforts with respect to readiness, quality of life and force modernization. We're committed to
preventing pollution; to being innovative in the way we utilize technologies; to complying with all federal
laws and regulations; to conserving natural and cultural resources; to cleaning up toxic waste; to being a
 good partner with our communities and, therefore, being a leader in terms of environmental issues on
                                              into the future. ...
     Quality People: Lifeblood of a Quality Force
 Prepared statement of Fred Pang, assistant secretary of defense for force management policy, to the
               Personnel Subcommittee, Senate Armed Services Committee, March 20, 1996.

Mr. Chairman and members of the subcommittee. I welcome the opportunity to appear before you today
along with the personnel chiefs of the services to testify on issues relating to manpower, personnel and
                                      compensation of our armed forces.

 It is truly a privilege to be a member our national security team at this period in our history. It is hard to
                think of a time when there was so much to be optimistic about in our business.

                            We have a high quality, experienced and diverse military force.
           The senior civilian and military leadership have developed an excellent working relationship and
                                               enjoy great mutual respect.
             Our commander in chief has used diplomacy and the judicious use of military power to help
              bring peace to many parts of the world and to raise America's influence and respect to new
                    Through careful attention, we have maintained superior readiness in the force.
            We are nearing the conclusion of a remarkably successful drawdown of our forces, which two
               administrations, the military leadership and the Congress worked so hard to achieve. Our
             recruiting has remained strong through a difficult period, and signs for the future are hopeful.
           And, Mr. Chairman, it seems everyone has come to know what this committee has known for a
                long time: that people are the foundation of military readiness, and as a result, we have
               embarked on an ambitious program to support the quality of life of our service members.

So while I recognize there are difficult problems to be solved, I come to you enthusiastic about where we
                are today and optimistic about our ability to meet the challenges ahead of us.

 I would like to talk to you now about the mission which Secretary [of Defense William J.] Perry has laid
                                        out for the Defense Department.

  He has set a four-part challenge for the coming year: Keep our forces ready; modernize to maintain
technological superiority; improve our ability to conduct joint operations; and improve the efficiency and
                            effectiveness of the way the department does business.

                    The secretary has further divided our readiness mission into three parts:

           Near-term readiness, which requires adequate operation and maintenance funding and a robust
                                                level of realistic training;
            Medium-term readiness, which requires a stable force and support for military quality of life; and
               Long-term readiness, which will depend on modernization and innovation in technologies,
                                                 operations and organization.

In force management policy, our focus is on meeting the challenge of medium-term readiness -- bringing
             stability to the force and implementing the secretary's ambitious quality of life initiative.

   Our downsizing of the active component is now over 90 percent complete. The reductions we are
implementing in fiscal year 1996 will essentially complete the drawdown of our active forces. I can report
  that despite the unprecedented challenge of shrinking an all-volunteer force, we continue to meet or
  exceed our national security objectives with respect to the size and capabilities of the armed forces.
        Because the military leaders were skillful in executing this drawdown, our force today is more
 experienced, of higher quality, more diverse and with the right mix of skills to meet current and future

As the Department of Defense reaches the end of the drawdown, it has become increasingly important to
 examine the factors necessary to sustain the quality and commitment of the men and women who will
  make up the force of the future. The department must ensure it is positioned to provide for the basic
  needs of service members and military families. This means attending to basics like compensation,
housing and health care, as well as providing opportunity for physical, mental and spiritual development.
The department has designed quality of life programs to meet future needs, as well as to address present

 For the 1.5 million men and women on active duty, this administration has established and funded an
  extraordinary initiative, first outlined by Secretary Perry in 1994, to support them and their families. It
began with President Clinton and Secretary Perry's determination to spend the $7.7 billion necessary to
see that service members get the maximum pay raise allowed by law through the end of the decade -- an
                                            unprecedented commitment.

Additionally, Secretary Perry's quality of life initiative committed $2.7 billion over fiscal years 1996-01 to
improve housing, expand child care, supplement the income of service members assigned to high-cost
 areas in the United States, narrow the housing cost gap, improve morale and recreation services and
                            provide other benefits for the members and their families.

    Mr. Chairman, our goal in everything we do is to maintain a ready fighting force, support service
 members and make service in the armed forces an attractive and satisfying career. We are successful
when the force is ready and the soldiers, sailors, airmen and Marines in the field and in the fleet feel that
                      we are keeping the promises we made to them when they signed on.

             Now I would like to review the specifics of our plans and programs for fiscal year 1997.

 Recruiting. A key component of readiness is a steady flow of high-quality recruits. Each service must
enlist enough people each year to provide a flow of qualified volunteers from which the seasoned leaders
                                            of the future will be selected.
DoD must recruit about 200,000 young people annually to join the full-time, active duty armed forces and
    approximately 150,000 for the Selected Reserve. We estimate that our goal for nonprior service
 accessions for the active force will increase by more than 15 percent from current levels over the next
                                                three years.

 Because recruiting is vital to readiness, the senior panel on recruiting was established in April 1994 to
  provide oversight of recruiting status at the highest levels of the department. The deputy secretary of
defense chairs this panel and convenes it on a regular basis. Membership includes the secretaries of the
military departments and the chairman of the Joint Chiefs of Staff. This group is able to deal quickly and
                                   effectively with emerging problems.

 In the last two years, DoD has done well in attracting high-quality recruits. For example, more than 95
 percent of all active duty recruits held a high school diploma, while only about 75 percent of American
                                youth ages 18 to 23 have that credential.

In addition, over 70 percent of new recruits scored above average on the enlistment test, compared to 50
   percent of the total youth population. Higher levels of recruit quality serve to reduce attrition while
increasing hands-on job performance -- and that means dedication and productivity, which are essential
                                   to unit performance and readiness.

 There is a clear relationship between the amount of money spent for recruiting and the quality of new
recruits. We will continue to monitor trends to ensure we have adequate resources to sustain a diverse,
       high quality military force that is ready and able to respond to the nation's defense needs.

 For the next several years, accession requirements appear to rise faster than programmed resources.
Therefore, the department has encouraged the services to reprogram, if necessary, to make sure that we
are able to meet recruit quantity and quality goals. Congress boosted recruiting resources by $89 million
in FY [fiscal year] 1995 and $31 million in FY 1996. The department is grateful for your continuing, strong
                                         support in this vital area.

The department met its FY 1995 recruiting goals while maintaining excellent recruit quality. In fact, 1995
was a better year in terms of quality achievement than any year during the 1980s. In addition to meeting
  quality goals, we also were successful in our numerical targets, enlisting 175,783 recruits -- 168,010
                       nonprior service enlistees and 7,773 prior service recruits.

 All services exceeded the department's established recruit quality floors of 90 percent for high school
diploma graduates and 60 percent scoring above average in aptitude (AFQT [Armed Forces Qualification
Test]) categories I-IIIA. Departmentwide, 96 percent of new recruits were high school diploma graduates
 and 71 percent scored in aptitude categories I-IIIA. The percentage of high quality recruits (those who
have both a high school diploma and also score in categories I-IIIA) was 67 percent. Finally, less than 1
         percent of new recruits scored in the lowest acceptable category (AFQT Category IV).

 Each year since 1975, the Department of Defense has conducted the Youth Attitude Tracking Study, a
 computer-assisted telephone interview of a nationally representative sample of 10,000 young men and
 women. This survey provides information on the propensity, attitudes and motivations of young people
                                           toward military service.

Enlistment propensity is the percentage of youth who tell us they plan to "definitely" or "probably" enlist
over the next few years. Research has shown that such expressed intentions are strong predictors of the
                              overall enlistment behavior of American youth.

Over the past several years, enlistment propensity has declined as the services experienced serious cuts
in recruiting resources. In fiscal years 1995-96, recruitment advertising was increased by $89 million and
$31 million respectively; that investment, coupled with hard work by our recruiters, is providing results --
 1995 YATS results indicate that the decline in propensity may have abated. For example, in 1995, 28
percent of 16- to 21-year-old men expressed a positive propensity for at least one active duty service --
                                        up from 26 percent in 1994.

Continued investments in recruiting and advertising will be required, however, to ensure that the pool of
young men and women interested in the military will be sufficient to meet service personnel requirements
                                                for the future.

 Recruiter Stress. In recent surveys, recruiters have reported higher levels of stress and dissatisfaction,
with 60 percent of recruiters working 60-plus hour[s] weekly, and 20 percent reporting that goals may not
  be achievable. The recruiters also reported a range of other quality of life concerns. Accordingly, the
department asked that the services review recruiting policies and practices to improve recruiter quality of
                  life and reduce pressures that might potentially lead to improprieties.

      This joint study of recruiter quality of life issues currently is focusing on a number of potential
                                        improvements, for example:

                                                    Health care.

   A longstanding concern has been our ability to provide convenient quality health care to recruiters.
Toward this end, we have assessed the feasibility of providing TRICARE Prime to recruiters even though
                        they serve in areas outside the normal areas of coverage.

We will demonstrate this concept in the Northwest Region (Region 11) beginning this spring. The test is
   scheduled to last approximately six months. If successful, it will be expanded to cover all regions.

  Other initiatives include providing a health care management program, and providing recruiters with
                  medical debit cards that guarantee payment to health care providers.

                                                     Child care.
To address the child care needs of our recruiting force, we are looking at the feasibility of using child care
       spaces in other government programs. This includes negotiating with the General Services
 Administration to obtain spaces for military members at 102 government-owned and leased locations

                                                         Housing program.

      We have found that many recruiters -- particularly those stationed in higher-cost areas -- are
  experiencing very steep housing costs. Therefore, we are evaluating the feasibility of establishing a
leased family housing program that would help those recruiters and others. In response to a requirement
set forth in the fiscal year 1996 authorization act, we are working to refine our assessment of this issue.
           We will provide the committee with our report and recommendations by the end of May.

                                                           Special pay.

 The Congress recently authorized an increase in special duty assignment pay from $275 to $375 per
   month. We are now implementing this needed and timely boost in the tangible recognition that we
                                                 provide to recruiters.

    Also, as a follow-up to GAO [General Accounting Office] and defense management reviews, the
 department initiated a joint-service study to evaluate the viability and cost-effectiveness of alternative
     concepts for recruiting support, including the consolidation of recruiting support under a single
       organization. We have evaluated several key functional areas, including recruiting facilities;
transportation, supply and equipment; automation and communications; market analysis and research;
           advertising and promotional support; and quality of life for recruiters and their families.

The study found that many support functions are already performed jointly or on a cooperative basis. The
analysis also indicated that potential savings from consolidating the remaining support functions under a
  single command may reduce their effectiveness. However, the study did identify ways to streamline
                     existing support activities and identified several quality of life initiatives.

Officer Programs. The department continues to balance its officer accessions program by using a mix of

                Reserve Officers' Training Corps (36 percent of accessions) programs provide a varied
                                               academic and geographical mix.
              Officer candidate programs (20 percent) provide growth opportunities for many, including the
                                                           enlisted force.
              The service academies (15 percent) provide an annual influx of officers who couple a deep
                            understanding of the military culture with important technical skills.
        Finally, direct appointments (14 percent) and health professional programs (6 percent) provide
            officers to the professional branches, with a variety of smaller programs accounting for the
                                               remaining 9 percent.

We believe that this mix across commissioning sources provides appropriate balance and diversity with
                 regard to academic disciplines, demographics and military experience.

     Drawdown. As I said at the outset, the end strength reductions planned for fiscal year 1996 will
                         essentially complete the drawdown of the active forces.

 It is important to reiterate that we have achieved our drawdown objectives while treating people fairly,
 whether they stayed in service or separated. Even though the number of active duty personnel already
 has been reduced by more than 650,000, the number of service members who have been involuntarily
 separated has been quite small. Much of the credit for our success is attributable to the strong support
and encouragement of the Congress, which provided the separation incentives and transition programs
                 needed to keep faith with those who serve in America's armed forces.

  Our drawdown objectives are straightforward: take care of people -- both those who are leaving and
those who are staying -- while maintaining readiness to accomplish the missions that our military forces
are called upon to undertake. In accomplishing these objectives, we must carefully evaluate the ways in
which today's decisions will affect tomorrow's force. Our ability to achieve these objectives has improved
  as a direct consequence of the tools we have been provided by the Congress to manage manpower
                                     reductions fairly and effectively.

When the current reductions began, there were nearly 2.2 million men and women on active duty. By the
end of fiscal year 1996, we will have fewer than 1.5 million; and by the end of the drawdown in fiscal year
  1999, we'll have approximately 1.45 million. Overall that's a reduction of about one-third of the active

 Beginning in fiscal year 1992, the Voluntary Separation Incentive and special Separation Benefit were
authorized and funded. Also, more flexible Selective Early Retirement Board authority removed some of
 the statutory restrictions that limited the number and type of officers who could be considered for early
 retirement; thus the services could manage the retirement-eligible portion of the force more vigorously.
  The Temporary Early Retirement Authority, providing for a retirement after 15 years of service, was
                                       enacted in fiscal year 1993.

  The success of these voluntary separation authorities is demonstrated by an important fact -- about
 150,000 career members will have departed voluntarily under these authorities by the end of this fiscal
year, and as a direct consequence, there have been fewer than 2,000 involuntary separations. This is an
                                      extraordinary accomplishment.

An important accomplishment in our efforts to right-size the armed forces centers on the growth in quality,
experience and diversity -- all have increased substantially since the drawdown began. The high quality
 is demonstrated by the fact that the proportion of active duty enlisted personnel in the above-average
  aptitude group (AFQT Categories I-IIIA) has increased from 57 percent in 1987, when the drawdown
 began, to 66 percent in 1995. Those in the lowest acceptable group (AFQT Category IV) dropped from
                           11 percent in 1987 to fewer than 6 percent in 1995.

 At the same time, the active force has become richer in experience, as measured by age and length of
service. For example, the average age increased 1.4 years from 27.3 years in 1987 to 28.7 years in 1995,
and only 18 percent of our enlisted service members are under age 22 compared to 23 percent in 1987.

Finally, while we had some concerns that the drawdown might have a disproportionate impact on women
    or minorities, this has not been the case. In fact, the percentage of women in active service has
increased from 10 percent to almost 13 percent. Total minority representation in the force has increased
from 27 percent to 30 percent. Minority officers showed a like increase -- from 11 percent of the total to
                                        14 percent over the period.

Sharp reductions in end strength, coupled with adjustments in force structure, have caused the services
to review their officer requirements in two areas: one, the number of field grade officers and two, officer
                          billets that should be on the joint duty assignment list.

Officer and enlisted promotions remained stable throughout fiscal year 1995 with promotion opportunities
 and pin-on points relatively consistent with those of previous years. However, it has become apparent
 that adjustments must be made to the officer field grade strengths authorized in law. There has been a
  growth in mid-grade requirements that come about as a consequence of fully implementing both the
Goldwater-Nichols Department of Defense Reorganization Act and the Defense Acquisition Work Force
                                             Improvement Act.

 At the same time, there is a falling number of field grade officers as a result of the drawdown (wherein
lower overall strength forces causes a decline in the number of field-grade officers.) As a result, a chronic
                                         imbalance has emerged.

The services are unable to meet all of those requirements without jeopardizing critical, in-service needs;
 and that imbalance could persist unless the statutory grade tables are revised. Without such relief, the
      services will not have enough mid- and senior-grade officers to perform their missions while
    simultaneously providing high-quality professionals for external requirements, such as joint duty
assignments, that also are critical to long-term readiness. Our proposal to enact permanent grade relief
 will ensure that readiness is maintained today and in the future, and will give the services the flexibility
              necessary to properly administer their officer career management programs.

The department has made considerable progress over the past 10 years in implementing the joint officer
management provisions of the Department of Defense Reorganization Act of 1986 (Goldwater-Nichols).
  Our most recent focus has centered on development of a better process for managing the joint duty
     assignment list, ensuring that proper credit is given to officers who have completed a joint duty
assignment. The department is close to adopting a process that will do just that. That process calls for a
requirements-based assessment of all potential positions to determine which comply with law and policy
  for inclusion on the JDAL. We estimate that the review can be completed within a year and that it will
   result in a somewhat smaller, more operationally oriented list that better complies with the intent of
We also are continuing work with the Joint Staff and the military departments to reduce the dependence
on waivers of joint duty assignment qualifications for promotion to general officer and to make sure that
                                more top officers are assigned to joint duty.

 Additionally, considerable effort is being applied to the identification of those positions requiring a joint
specialty officer and designation as critical JDAs. This will allow us to more accurately determine which
 officers should be designated as joint specialty officers. Consistency in this area is also paramount to
developing the appropriate inventory of joint specialty officers and ensuring they are properly trained and

 We appreciate the support Congress has given us in the past, and the additional flexibility to manage
 joint officer programs provided in the fiscal year 1996 defense authorization will help us to improve our
 management of joint officers, consistent with the intent of Goldwater-Nichols. As we enter new territory
with the implementation of the department's first requirements-based JDAL, we will assess the need for
    additional legislative change. We remain committed to achieving the goals of Goldwater-Nichols.

 The department's initiative to remove unnecessary impediments to the assignment of women began in
    October 1993. Since then, we have opened almost 260,000 positions in combat aviation, aboard
 combatant naval vessels and finally, within ground units that can be filled by the best qualified person,
man or woman. However, with consideration of the advice from the Congress and senior military leaders,
   we continue to exclude women from assignment to units below the brigade level with direct ground
                     combat missions, such as infantry, artillery and armor battalions.

Today, almost 80 percent of all jobs and over 90 percent of all career fields within the military are open to
 both men and women. The department recognizes that this is a long-term effort and that there still are
some challenges to overcome; however, the policy is resulting in changes which will enhance the already
                      high state of personnel readiness of our smaller armed force.

   As the drawdown is nearing its end, our attention has shifted from the selective encouragement of
departure to a broadly based focus on retention. The military services have done an extraordinary job in
maintaining readiness over the course of the drawdown and will continue to use the tools the Congress
has provided to retain the skills needed for current and future readiness. We will work with the Congress
  to ensure that retention programs, such as re-enlistment bonuses, are funded at appropriate levels.

Sustaining Commitments. As we ask and expect more of our troops, we must ensure their pay is fair and
remains competitive. Our FY 1997 budget calls for a military pay raise of 3 percent for FY 1997, and we
       continued to program for the full raises provided under law through the end of the century.

 As you know, cost of living allowances are a critically important component of military retired pay. The
modest, lifetime, inflation-protected income provided through COLAs fulfill[s] a promise made to service
                   members and serve[s as] an important recruiting and retention tool.

The action of the Congress in the fiscal year 1996 authorization act to support the effective date for the
  1996 COLA, consistent with the president's budget, is greatly appreciated. Resolving the disparity in
                 COLA payments between civilian and military retirees is a high priority.
The secretary has also been working to reduce service members' out-of-pocket housing costs. In fiscal
    year 1996, he allocated additional funds for the Basic Allowance for Quarters rate increase that
accompanies annual pay raises. We greatly appreciate the Congress' interest in this area and the added
additional funds you provided. The 3 percent across-the-board pay raise for 1997 will further reduce the
                               out-of-pocket housing costs for our troops.

 BAQ helps our members defray the cost of off-base housing. The intent has always been for members
  living on the local economy to absorb 15 percent of their housing costs, with the remainder offset by
payment of BAQ and Variable Housing Allowance. These steps have moved us closer to that target and
             are directly benefiting more than 700,000 service members and their families.

Within the continental United States, the department implemented a cost-of-living allowance during the
   last quarter of fiscal year 1995. Secretary Perry stipulated that individuals would receive this new
allowance if the reside in areas where the local, nonhousing cost of living exceeds the national average
                                         by more than 9 percent.

  The amount of the allowance is determined by three things: the area's cost of living in relation to the
 national average, the military member's spendable income and whether the member has dependents.
                 Approximately 27,000 members are now benefiting from this program.

  In the summer of 1994, we established a task force to re-engineer our travel system. The task force
 found the department's travel system was fragmented, expensive to administer and compliance- (not
         mission-) oriented. The system was neither customer-oriented nor convenient to use.

In its January 1995 report, the task force recommended that DoD manage travel as mission support and
that travelers be treated as honest customers and commanders as responsible managers of the system.
The vision is of a seamless, paperless system that meets the needs of travelers, supervisors and process
    owners; reduces costs; supports mission requirements; and provides superior customer service.

     Our reformed system provides one-stop shopping for all travel arrangements through use of a
     commercial travel office. We have cut red tape by requiring the use of best business practices.

  We simplified our travel rules by changing the focus to the customer and mission, having an up-front
"should-cost estimate" of travel, giving the supervisor travel approval (one signature) and by streamlining
                                                 the rules.

Our new system will empower supervisors to obligate travel funds as well as direct the travel. Finally, it
     will maximize the use of the government travel cards to eliminate the need for cash advances.

     Our new travel regulations were issued last fall for use in a one-year test at 29 pilot locations.
                     Departmentwide implementation is projected for January 1997.

  We envision a number of long-term compensation improvements and now are analyzing issues and
     developing appropriate legislative proposals. For example, we hope to move toward a "pay for
                               performance"-oriented military pay system.
  While we recognize that increased pay for experience is important, we believe that promotion and its
 associated responsibilities should be the principal determinant of pay. Appropriate reforms to the pay
                                  table can help us to achieve that goal.

We are also working to refine our housing allowances so that they will be able to provide the right amount
  to every pay grade in each location where our members are stationed. This will help ensure that the
allowances are credible and sufficient to provide each and every service member with the ability to obtain
                           housing that meets a minimum adequacy standard.

       Key to our long-range vision is the ongoing work of the 8th Quadrennial Review of Military

  The 8th QRMC, which formally began its work in January 1995, gives us an additional opportunity to
review every aspect of our compensation program. This QRMC has looked to the future and is identifying
desirable components of a military compensation system capable of attracting, retaining and motivating a
                                 diverse military force in the 21st century.

All of these adjustments to our compensation program are intended to further stimulate readiness and to
 generate requisite retention levels while at the same time they must ensure that our pay programs are
              responsive to present and future needs of the military and those in its service.

The department recently has taken steps to improve the scope and effectiveness of its annual legislative
      program. In 1994, operating in close coordination with the military departments, the Office of
Management and Budget and the Coast Guard, the department fielded a process that twice a year brings
  together the personnel, programming, budgeting and legislative communities to jointly establish the
legislative program and connect it with the defense budget. Prior to adoption, linkage between legislation
    and budgets was not always strong, and this generated a frequent inability to advance promising

  As a direct outcome of that greater teamwork within DoD and with OMB, the department was able to
  propose for FY 1996 -- and the Congress subsequently authorized -- a range of improvements that
include improved pays for sailors assigned to sea tours, needed changes to the management of aviation
     career incentive pay, an expanded incentive pay for air weapons controllers, family separation
allowances for geographical bachelors, dislocation allowances for moves associated with base closures,
 improvements in evacuation allowances and a better program for Servicemen's Group Life Insurance.

   Our legislative program for military personnel in FY 1997 builds upon that foundation. We seek the
committee's support in achieving improvements in quarters allowances for petty officers (pay grade E-5)
who are assigned to sea tours, permitting these NCOs to live off-ship at their home port. The department
  also is requesting permanent adjustments to officer grade tables, as the Congress has encouraged.

 In our accession programs, we ask your support in slightly relaxing age criteria by one to two years for
 officer programs[;] ... this would permit those participating in certain faith-required sabbaticals to do so
   without jeopardizing eligibility for ROTC scholarships. We also are seeking flexibility for the military
 services to grant short extensions for those recruits in the delayed entry program, so that we need not
          renegotiate contracts when people must delay entry on active duty for good reason.

Funding for all of these changes is provided in the president's budget, and we will work closely with the
                                      Congress toward enactment.

    Supporting Service Members Deploying to Bosnia. The planning and initiation of Operation Joint
 Endeavor -- the deployment of 20,000 U.S. troops to the Republic of Bosnia [and] Herzegovina -- has
 generated three central concerns for the personnel community: ensuring that operational readiness of
  the troops is maintained; guaranteeing that deployed forces receive all the benefits to which they are
                            entitled; and helping military families left behind.

   All deploying personnel in units departing the United States received up to seven days of intensive
 preparation at one of three bases. Upon arrival in Germany, those troops received up-to-date situation
    briefings prior to movement to their final locations. Units stationed in Germany underwent similar
preparation over several months. Deployed troops also participated in extensive training in the areas of
               personal health care and medical risks associated with service in Bosnia.

With regard to benefits, deploying personnel continue to receive normal pay and allowances. In addition,
deployed troops are receiving imminent danger pay, family separation allowances and other special pays.
  Thus, up to an additional $352 per month will go to deployed troops. The amount will vary for federal
                              civilian employees supporting the operation.

   On Feb. 26, 1996, the administration introduced a tax relief bill for about 25,000 American military
personnel serving in Croatia, Macedonia, Bosnia and Herzegovina. This bill was announced by Secretary
Perry and Treasury Secretary Robert Rubin. The service members in these three countries would receive
all of the combat zone tax benefits of the Internal Revenue Code, such as an exclusion of military pay for
        federal income tax purposes, over the period of time designated by the executive order.

   Other tax benefits also would be available for these individuals and for deployed service members
supporting the mission outside of imminent danger pay areas. These benefits include additional time to
 file returns upon return from the operation and waivers of interest and penalties on amounts owed. On
      Feb. 28, the substantive provisions of this proposal were substituted into HR [U.S. House of
Representatives] 2778 along with language from a previous DoD proposal. It then received unanimous
                                   approval in the House and Senate.

   We are providing dynamic support systems for military families of those mobilized and deployed in
support of this mission. All military community and family support systems play a role, including those of
                             the United States National Guard and Reserve.

 Additionally, civilian communities actively provide support around installations and Guard and Reserve
   units from which service members deploy. Lessons learned from previous deployments show that
service members' and families' No. 1 issue is need for information. Accurate information flow and family
   support systems help our families cope with daily challenges while service members are deployed.
                              Just a few examples of support initiatives are:

             Family readiness training is provided throughout the entire deployment cycle to ensure
             appropriate information and support for each phase including predeployment ongoing, and
        Five hotlines have been established in Germany to provide a point of contact for military families
                    in Baumholder, Bad Kreuznach, Heidelberg, Mannheim and Kaiserslautern.

 A Bosnia home page is accessible through the Internet and contains up-to-date information about the
  role of the U.S. military in Bosnia and Herzegovina. It also has articles on items to send to deployed
             service members and information on how to send messages to those deployed.

Military family center computer interconnectivity is being established to link family centers worldwide and
  to connect National Guard and Reserve family support programs to information available on nearby

 Our dependent schools overseas are supporting children and youth of service members in Bosnia and
  Herzegovina by implementing assistance groups with certified counselors, school psychologists and
 social workers. These assistance groups provide supportive counseling to children to help them cope
                             while their military parents are away from home.

 The department's morale, welfare and recreation programs provide numerous programs for families of
those deployed and are also providing on-site programs and services to deployed service members. The
     following are being provided for the deployment in Bosnia: tactical field exchanges, recreation
deployment kits, four separate MWR [morale, welfare and recreation] centers, basic sports and game kits,
  aerobic fitness machines, free/resistance weight sets, exercise bicycles, televisions and VCRs and
                                                library kits.

Quality of Life. Secretary Perry has made quality of life one of his top priorities. We know that quality of
                 life is linked to the readiness of our armed forces in three distinct ways.

    First, quality of life helps the department recruit good people by offering attractive incentives for
   education, health care, career advancement, retirement and other benefits. Second, quality of life
  programs provide assurances to service members that they will have a safety network of assistance
 programs in times of need, a support system in place to assist their families when they deploy. Finally,
 when we provide good quality of life for service members and military families, it helps us to retain the
                               people in whom we have invested so much.

 Secretary Perry announced his plans to improve military quality of life in November 1994 adding $2.7
    billion over six years to fund increases in allowances, better barracks and family housing and an
upgraded community environment. Secretary Perry recognized that the nature of our mission was rapidly
 changing, we were reducing the size of our force, installations were closing or being realigned and we
                                were deploying differently than in the past.
The department's senior military leadership had raised concerns about personnel tempo, compensation,
health care, housing and community support activities. Service senior enlisted advisors, installation and
 unit leaders, and service members and families throughout the department mirrored these concerns. It
  was evident that we could not continue business as usual without doing something to address these

Secretary Perry also took steps to see that the funds available are used to the best possible benefit of the
                               service members and the forces as a whole.

 The secretary established a quality of life task force of outside experts to provide recommendations for
improving housing and the delivery of community and family services and to provide options for reducing
        the time service members spend away from home for training and mission requirements.

At the same time, he chartered an internal quality of life executive committee to support and implement
task force recommendations. This committee has surfaced a number of low-cost, high payoff initiatives to
 improve quality of life within the military community. We have implemented 18 of these improvements
over the past year, which range from developing program goals and measures to installing phones and
                                    computer access in barracks rooms.

We are now embarking on initiatives emerging from this process. We have been working with each of the
   services to establish priorities based on our review. Quality of life priorities remain fairly consistent
among services: compensation and benefits, safe and affordable housing, quality health care, balanced
 optempo [operations tempo]/perstempo [personnel tempo], community and family support, retirement
benefits and educational opportunities. These are not listed in order of priority, as they all work in tandem
                            to ensure quality of life within military communities.

    The department has long recognized the importance of an appropriate level of compensation in
 sustaining a robust quality of life program. The military compensation package is made up of both pay
                       and nonpay benefits -- the components of a standard living.

 The quality of life initiative addressed three elements of compensation. First, the administration funded
 the maximum pay raise for military personnel authorized by law through FY 1999. This commitment of
  $7.7 billion reflects the recognition that adequacy of military pay is essential to attract and retain high
                                              quality personnel.

   A second initiative was improved quarters allowances. Over two-thirds of military families reside in
 civilian communities. These families receive housing allowances which were intended by Congress to
 cover 85 percent of their housing costs. The department and Congress have funded an additional 2.8
percent increase in housing allowances for 1996, which will cover more than 80 percent of out-of-pocket
                                     costs for the first time since 1985.

Third, the implementation of a continental United States cost of living allowance was funded in the quality
of life initiative. The department began compensating the 30,000 military families assigned to areas in the
continental United States in which payments for goods and services exceed 109 percent of the national
                                            average in July 1995.
  Housing. The secretary of defense has placed special emphasis on improving the overall quality of
 housing for service families. To the extent that the department encourages or directly provides quality
     housing for both unaccompanied and married service personnel, it will materially improve job
  performance and satisfaction, improve the retention of quality individuals and, through these means,
 sustain the high levels of force readiness needed to meet the department's national security missions.
   Both the Defense Science Board's quality of life task force and the department's own quality of life
    executive committee have focused on measures to redress longstanding problems in the living
                        conditions of too many service members, both on and off post.

                        Near-term goals, and in many cases accomplishments, include:

            Development of a range of housing procurement tools that will make the department a more
             efficient consumer of housing by acting more like a private sector company. These authorities
             all have the effect of leveraging limited DoD resources in order to accelerate the acquisition,
            replacement or renovation of bachelor or family housing, both on and off post. They include the
                ability to enter into partnerships; guarantee loans, occupancy rates and rents; and take
                  advantage of commercial standards in both construction and housing management.

 These authorities were provided in the National Defense Authorization Act for FY 1996 and are being
 implemented on a prototype basis by the services with the assistance of a joint housing revitalization
                                                  support office.

           Review and elimination of policies and procedures that have tended to impair the effectiveness
            of the department's housing delivery system. To the extent that these obstacles are statutorily
                                   based, the department will pursue legislative relief.
            Examination of additional tools that could help re-engineer the department's housing delivery
            system in light of high costs, inability to provide affordable, quality housing options on or off post,
            and the pressing need to solve this problem in the near term within the department's resource

  Approximately one-third of military families live in military family housing. Much of this housing is in
  desperate need of repair or revitalization. But two-thirds of military families live off post. For many of
              these families, housing allowances are not in line with commercial housing costs.

 This imbalance can force these families to live in inadequate housing. The department has found that
 housing problems, whether on or off post, have material effect on re-enlistment decisions. Our military
family housing budget for FY 1996 contained an increase of over $500 million to address these problems.
 This sum included $22 million for private sector housing ventures. An additional $20 million for private
                           sector ventures has been included in our FY 1997 budget.
Housing for single military members is as important as for married members. About a half a million single
service members live in military quarters. The department wants to replace rundown, cramped buildings
with quality residential facilities. To initiate this process, the department has adopted a new construction
policy which increases the barracks/dormitory standard living space by over 31 percent, from 90 square
                   feet to 11 square meters of net living area per living/sleeping area room.

The barracks repair, maintenance and construction program budgets were increased in FY 1996 through
  the secretary's QOL [quality of life] initiative. Congress then enlarged that budget further, for a total
                                           increase of $673 million.

    In FY 1997, the department will continue to improve its barracks. Its budget request for barracks
   revitalization, construction and maintenance increases funding by about 20 percent above service
  requests. This QOL initiative will improve approximately 7,000 additional barracks spaces above the
42,000 spaces previously programmed. Almost $2.5 billion has been programmed from FY 1996 through
                                     FY 2001 for this important program.

  Community and Family Support Programs. The department provides social service, recreational and
  education programs wherever military families are stationed. These programs mirror those found in
civilian communities, while being tailored to unique challenges associated with the more mobile military

The department is taking two new steps in relation to community and family support programs. First, we
have adopted goals and measures in 24 community and family support program areas that will provide a
 road map for quality of life improvements within the department. We have also taken action to improve
the capability of tracking funds and improving consistency and accountability in programs and budgets.

  Second, we are exploring efficiencies through partnerships with local communities and outsourcing
                                programs and services where it makes sense.

These two steps will move us toward greater equity across installations and services and ensure that our
                             programs are driven by the needs of our customers.

  Additionally, we have established seven major priorities for community and family support programs:

             Institute the secretary's community QOL agenda: implement program goals and measures;
                                        itrack QOL funds; collect program data;
           Secure the future of the resale system: reconfigure resale boards; implement cooperative efforts;
                                             study resale delivery models;
           Promote a departmentwide MWR agenda: appropriately fund MWR through the implementation
              of the DoD MWR strategic plan; improve accountability, equity and DoD funding standards;
                             pursue a fitness initiative to improve facilities and programs;
              Implement distance learning and improving adult education opportunities: Connect service
                 members to college and university distance learning opportunities; establish minimum
                                             standards for tuition assistance;
               Develop blueprints for new delivery systems for community and family support programs:
                   explore privatization and outsourcing, where appropriate and cost-effective; study
                                         regionalization of community services;
              Provide a model school system: continue to embrace the National Education Goals 2000;
                 integrate the president's educational technology initiative to improve staff and student
                                 performance at all department dependent schools; and
            Pursue a performance-based operation for the defense commissary system in line with the vice
                  president's reinvention's next steps: governing in a balanced budget world initiatives.

Child Development. Child care continues to be a critical quality of life program that serves the needs of
the increasing portion of service members with young children. The DoD child care program is by far the
                largest and one of the most successful child development systems in the world.

Over 65 percent of military spouses are in the labor force, and many need access to reliable child care.
During March of 1995, the department reassessed the need for child care and documented that military
        families had some 299,000 children ages birth through 12 who need some kind of child care.

   The department is currently meeting about 52 percent of this need with military child development
  programs. There are at present 155,391 child care spaces at 346 locations. These include 644 child
 development centers, 9,981 family child care homes, and school-aged care located in youth facilities,
                                schools and other community support facilities.

 The secretary added $38.1 million in fiscal years 95, 96 and in the fiscal year 97 budget to move child
        care availability toward the department's short-term goal of an average of 65 percent of the
  departmentwide demand. We will accomplish this by increasing child care spaces by about 39,000
              additional children, with the bulk of these spaces in the school-aged care programs.

Our ultimate goal is to provide 80 percent of the departmentwide child care demand in the future. Fiscal
                             year 1997 funding requests continue these initiatives.

  We are also conducting two evaluation tests regarding outsourcing child care, recognizing that the
  department is nearing maximum potential to meet child care needs on base. The first of these tests
involves contracting with civilian child care centers in five locations to "buy down" the cost of spaces for
     military families to make costs comparable to on-installation care. The second test focuses on
              outsourcing the management of a defense-owned child care facility in Dayton, Ohio.

 The Family Advocacy Program is now in its 11th year. It has been quite successful in helping prevent
 child and spouse abuse. FAP's prevention efforts contribute to making the rate of substantiated child
 abuse in military families less than half of the civilian rate. FAP has also been successful in protecting
  victims when child or spouse abuse has occurred and in treating both the victims and the abusers.
   During fiscal year 1997, FAP will increase its emphasis on prevention through greater outreach to
families residing off installations, especially to junior enlisted personnel who are first-time parents. Also in
 fiscal year 1997, FAP programs will emphasize improved prevention and intervention efforts regarding
 spouse abuse. This emphasis includes participation in the department's campaign that implements the
                  president's directive to reduce spouse abuse in the civilian work force.

Finally, FAP programs will continue to improve program quality and fully implement a new program area,
                    providing advocacy services to victims of child and spouse abuse.

Model Communities (youth initiative). Installation commanders and parents identified increases in youth
   violence and gang activity on installations as major concerns. They said that a lack of programs to
                             address youth issues contributed to this increase.

As a result, DoD established a Model Communities Incentive Award Program to encourage installations
 worldwide to take responsibility for the problems of youth and their families, and to provide youth with
   positive alternatives and a sense of connection in their communities. Each participating installation
submitted proposals that defined their local needs, described a plan to meet those needs and indicated
                                    how they will manage their solutions.

 The 20 winning installations will serve as test projects for new ideas and as models for military bases
around the world. Installations around the world, representing all four services, submitted proposals. DoD
                        selected the 20 winning installations from 134 submissions.

   The winners received up to $200,000 per year for a three-year period. Over the three years, DoD's
              investment in developing these innovative youth programs will be $6.4 million.

Year-end reports indicate that the model communities projects make positive impacts in the lives of our
  youth and families. Later this year, we plan to distribute a synopsis of all the 134 proposals received
                     DoD-wide and a progress report on those currently being funded.

  The department's 291 family centers continue to be the focal point for our basic social services and
   support networks for the military community. Family centers provide service members and military
families with a host of education, prevention and social programs. These centers also provide information
    that helps service and family members navigate the unique challenges of military life and quickly
                            establish ties in each community in which they live.

   Core family center programs include information and referral, deployment support, crisis response,
 relocation assistance, personal financial management, family life education, volunteer programs, and
 employment counseling and assistance for service members' spouses. Centers provide other special
    emphasis programs if they are not offered elsewhere on the installations. These can range from
 counseling programs, transition assistance and programs for exceptional family members -- those with
                      special emotional, physical or educational challenges or needs.

Special emphasis will be placed in fiscal year 1997 on personal financial health and spouse employment
assistance. Spouse employment is focusing on helping job seekers find civilian sector jobs as the federal
  sector opportunities normally sought by military spouses dwindle. We have also initiated a readiness
                        outcome measures study to evaluate our core programs.

The defense appropriations act for fiscal year 1996 directed the department to report on phasing out our
relocation and transition assistance programs and provide what, if any, residual funding is required. This
 report is being prepared. We understand that certain of the special incentive programs were aimed at
  helping the department bridge the impact of reducing the force. We do not, however, view the basic
                           functions of either of these programs as temporary.

 The relocation program provides education and assistance to the more than one-third of our force that
 relocates each year. Many of these members and families are facing their first move and have limited
   experience in how to plan for and accomplish the move without undergoing significant stress and
                                   incurring unnecessary financial costs.

At the direction of Congress, we established this program and set up an automated Standard Installation
Topic Exchange Service, which provides service members with information about their new community.
          Such information is essential in making informed decisions during the move process.

    This automated information is available through family centers at every military installation. The
 relocation assistance program has been and continues to be integral to our family center network and
    provides benefits far beyond its annual $18 million cost. As long as we continue to move service
   members and their families to new communities, often far from their family networks, we believe it
          essential to provide the services offered through our relocation assistance program.

 Equally important, transition assistance to the almost 300,000 service members who leave the military
 each year remains a priority. These veterans represent a very talented resource pool for America, but
  many have never sought a job in the civilian community and have no idea where to begin. Many are
serving at installations outside the United States and have no way or opportunity to find jobs in the United
                            States until they are discharged from the service.

 These issues, coupled with trying to translate skills performed in the military to civilian job skills, make
 transition assistance a vital service for departing personnel. We have formed tremendous partnerships
   with Departments of Labor and Veterans Affairs, federal and state employment service agencies,
               corporations and businesses in communities throughout the United States.

   These partnerships are helping our veterans find jobs quickly and smoothly integrate back into the
 civilian community. Our two automated systems have also proved extremely successful. The Defense
Outplacement Referral System is a resume data base referral system linking private sector employers to
                                 departing service members and spouses.

 In fiscal year 1995, there were over 69,000 personnel registered in DORS and 13,431 employers. The
 Transition Bulletin Board allows employers to list actual job openings that service members at military
  installations worldwide can see. In 1995, there were 47,343 job openings and business opportunities
  listed in this automated system. Statistics we have gathered show that these programs help service
 members find jobs more quickly, and account for a cost avoidance of $152 million annually that would
                            have to be spent for unemployment compensation.

These facts alone demonstrate that the loss that would be associated with the phase out these important
   programs. However, we are certain that we can find economies without degrading the value of the
services provided through both programs. We are looking at strategies for making these programs more
                                           affordable for the future.

  The Department of Defense provides morale, welfare and recreation programs in order to help bring
 some of the benefits of civilian life to our military communities. These programs are the cornerstone of
community quality of life, providing for fitness, recreation centers, libraries, sports and athletic programs,
   youth centers and a variety of other recreational and social activities. MWR programs also include
     revenue-generating activities such as bowling centers and golf courses, which not only provide
   recreational opportunities, but generate profits used to improve other community MWR programs.

   The department considers MWR critical to mission readiness and productivity. The programs and
 activities offered at our installations worldwide contribute to physical fitness, esprit de corps, and aid in
                                 the recruitment and retention of personnel.

   In the course of the last two years, the department has taken action to improve and update MWR
 programs. We have issued new policy guidance, incorporating requirements for short- and long-range
    planning, specific service goals and standards and a periodic market analysis to ensure that our
 programs are customer driven. We have also provided specific metrics to measure funding standards
                            and for nonappropriated fund financial assessment.

Beginning with fiscal year 1996, we increased funding to bring the military services to a more consistent
 level of appropriated funding for these vital programs. These funds were targeted for improvements in
 programs in the Marine Corps and the Army. For fiscal year 1997, the Navy has included resources in
   their budget to improve fitness centers and libraries afloat, an action that will improve quality of life
                                            aboard over 350 ships.

 Our plans for next year will build on these initiatives. As a result of a finding from the quality of life task
force, we will be examining the programs and facilities we provide for physical fitness on our installations
      and working with the military departments to build action plans to address any shortcomings.

     We will continue to promote innovative solutions for program delivery, encourage partnerships,
   public/private ventures and community agreements when it makes sense. We will also continue to
promote cooperative efforts among the military services and exchange programs as another avenue to
   reduce overhead, increase service and reduce costs. Finally, we will monitor our joint execution of
                   program goals to increase consistency of service for our total force.

   Off-duty Voluntary Education Programs. The department has historically spent about $220 million
annually to support its very popular off-duty continuing education programs. About one-third of the active
 force participates in these programs, earning thousands of associate, bachelor's and master's degrees
                            from nationally accredited colleges and universities.
  The services provide their members with about $135 million in tuition assistance annually. Typically,
 courses are offered evenings and weekends at education centers located on military bases around the
    world. However, service members may take courses off base, on board ships at sea or through
  correspondence courses and other forms of independent study available via television or computer.

 Members are also offered fully funded opportunities to enhance the basic academic skills, earn a high
    school equivalency diploma or test for college credit. Tests for licensing, certification and college
                                      admission are also fully funded.

  Current initiatives include connecting all education centers to the Internet and expanding options for
    service members to take courses and complete degrees using distance education opportunities.

  DoD Education Activity. Our DoD Education Activity provides a world-class educational program that
 prepares students in military communities for success in a dynamic global environment. In fiscal year
1997, we project that we will provide education to some 87,000 students in our DoD Dependents School
system overseas and 33,000 through our DoD domestic dependent elementary and secondary schools.
      Additionally, we have oversight responsibilities and fiscal support of eight special contractual
   arrangements with local education agencies in five states and Guam, serving an additional 6,000

   This past year, we have involved parents, staff and the military services in the development of an
 aggressive strategic plan to support continued quality and integrate the president's national education
                                           goals into our system.

Additionally, we have integrated a technology initiative aimed at improving staff and student performance
 into the 21st century. This initiative fully supports the president's educational technology initiative. This
initiative moves toward providing greater access to modern computers in classrooms, connects schools
  to the information superhighway, develops effective subject area curriculum software and develops
teacher competence to help students use and learn through technology. We have included $7.5 million in
                                our budget for these technology initiatives.

While we have been undergoing a tremendous amount of turbulence within our system over the past two
  years, we have successfully minimized any adverse affects on children's education. Students at our
schools consistently scored eight to 19 percentile points above the national average in all comprehensive
              test of basic skills and American college test areas over the past school year.

We project that we will complete most of our school closures and realignments in Europe and the Pacific
 by the end of this year. We now have 177 schools overseas, 92 less than we had when we began our

           Our budget request for fiscal year 1997 remains consistent with last year's request.

Commissaries and Exchanges. The commissary system is an important element of the military nonpay
   compensation package and a critical aspect of quality of life. Secretary Perry remains firm that this
                                        benefit must not be eroded.
 Commissaries enhance income through a 20-25 percent savings on purchases of food and household
items for the military member and family. The importance of commissaries for those stationed overseas
cannot be understated -- they are often the only source of American products and in isolated or remote
                             areas, the only convenient source of groceries.

   We continue to work toward greater efficiencies in these stores. The Defense Commissary Agency
   recently received the Hammer Award [created by Vice President Al Gore to recognize government
 agencies for their efforts in streamlining operations] for the accomplishments of the agency's operation
support center, specifically their new system for ordering and receiving products for overseas stores, and
  for two other business practices -- resale ordering agreement and delivering ticket invoicing. These
 innovations greatly improve overseas order/ship time, dramatically reduce the number of contracts the
                         agency has with vendors and boosts timely payments.

       As of October 1995, there were 201 commissaries in the United States and 111 overseas.

 Exchanges support service members and military families by providing goods and services to them at
 affordable prices. The exchanges also generate revenues that fund recreational activities designed to
 promote readiness, individual and community fitness, esprit de corps and the personal development of
                                     those who serve their country.

 During the past year, the department took a hard look at its policies that describe where and when we
   can operate exchanges and commissaries. We did this in an attempt to balance our quality of life
                  initiatives with the hard realities of base closures and realignments.

  We discovered that in many instances, active duty personnel were remaining on or in the immediate
vicinity of many of these installations. This past year, we began a new way of doing business and rewrote
  department policy to maintain certain exchange operations and commissaries on those installations
                 where a significant number of active duty service members remained.

Recognizing, too, that members of the reserve component could lose their exchange or commissary as
installations closed or realigned, we opened up a new BXmart at Homestead Air Force Reserve base in

  The BXmart at Naval Air Station, Fort Worth, Texas, formerly Carswell Air Force Base, completed its
 second year of operation. Although the BXmart was not financially viable as a stand-alone operation,
overall exchange operations were marginally profitable. Because of the marginal profitability of the Fort
 Worth test, we are not yet able to endorse this as future policy of the department. We will continue to
  evaluate our test sites for overall profitability and the overall impact on the MWR dividends. We will
           establish future test BXmarts only where programs indicate a profitable outcome.

 Civilian Personnel. Our civilian work force is a crucial link in our national defense. The Department of
Defense employs more than 800,000 civilians around the world and even with the drawdown, we remain
                                   by far the largest federal employer.
Regular employment in the Department of Defense has fallen from 1.117 million at the end of fiscal year
         1989 to 837,000 in November 1995. This cut represents 25 percent of our work force.

              We continue to work hard to manage the drawdown of our civilian work force.

Through creative use of our transition programs we have been able to hold our involuntary separations,
 that is, separations by reductions in force, to less than 9 percent. To achieve this remarkable rate, we
  have applied a variety of transition assistance programs. The DoD Priority Placement Program has
   placed 133,000 workers in its 30-year history and continues to find jobs for more than 900 surplus
   employees per month. We are making good use of the voluntary early retirement authority to allow
                    employees to retire under reduced age and service requirements.

The Defense Outplacement Referral System has been available since FY 1992. Under this system, we
have referred about 18,000 employees to potential private sector employers. We are also using voluntary
separation incentive payments or buyouts. These are lump sum payments of up to $25,000 to encourage
 employees in surplus occupations to resign or retire. Roughly 78,000 employees have left with VSIPs,
avoiding a like number of layoffs. Another new program is the nonfederal hiring incentive. Effective Aug.
25, 1995, this program offers nonfederal employers up to $10,000 to retrain or relocate a DoD employee
                            and keep the person employed for at least a year.

Despite the drawdown, we have been able to maintain work force balance. The cuts have affected men
 and women in equal proportions. Female employees comprise 37 percent of the work force, the same
 proportion they did in September 1989. And we have made progress in our higher-graded positions. In
grades GS-13 through SES [Senior Executive Service], women have increased their representation from
   14 to 19 percent. Minority group members have increased from 10 to 12 percent of the work force.

    We have managed our reductions by being true to our goals (reducing staff, avoiding involuntary
separations, assisting employees and achieving balance). We delegate authority to the lowest possible
levels and use our transition tools effectively. At the same time, we pay constant attention to work force
demographics and the results of downsizing while holding on to our mission and readiness requirements.

   Even though we are working hard to make the downsizing go smoothly and humanely, we also are
    concerned about the people and programs that remain. We are streamlining and automating our
 personnel management systems to improve the service we provide to our managers and employees,
                                  increase efficiency and reduce costs.

We are developing a standard DoD system to allow immediate access to current civilian personnel data,
provide on-line update of employee data, reduce training and operational costs and improve productivity.
To accelerate the process, we have selected a commercial off-the-shelf software package as a basis for
the modern data system. For interim improvement, we have completed or nearly completed 13 projects
to automate functions that account for at least half of the standard civilian personnel office workload. Our
                          target system should be deployed in fiscal year 1998.

To improve productivity and customer service while reducing costs, the military departments and defense
   agencies are pulling functions from their installation civilian personnel offices into regional service
   centers. We will have 23 regional centers to perform those functions that can be performed more
                            efficiently and effectively from a central operation.

The Army has opened three regional centers and is developing seven more sites. The Navy has opened
 two centers with six additional sites planned. The Air Force will establish a single center. Four centers
 serving the defense agencies will be operated by the Washington Headquarters Service, the Defense
 Mapping Agency, the Defense Finance and Accounting Service and the Defense Logistics Agency. All
                      the centers will be operational by the end of fiscal year 1998.

To help support the field liaison offices we established last year at Department of Labor offices, we have
developed and deployed a comprehensive tracking and auditing system. This system facilitates the flow
  of information to all of our DoD installations and helps us ensure that only valid claims are paid. The
system has already been installed in 67 personnel offices, and 150 more offices will receive the system
by the end of this year. Combined with home visits and case reviews, this system saved the department
       $5.5 million in fiscal year 1995. This represents a potential lifetime savings of $110 million.

   The Civilian Personnel Policy and Civilian Personnel Management Service staffs have undertaken
several initiatives to improve labor relations and partnerships within the department. We had a major role
 in developing the National Partnership Council handbook and establishing an NPC partnership award.
 The Defense Partnership Council continues to be an effective vehicle for providing assistance to labor
                                         and management teams.

Extensive savings have been achieved through partnership. For example, at the San Antonio [Texas] Air
    Logistics Center, an organization that had a history of labor-management problems, partnership
  initiatives resulted in an 89 percent decrease in unfair labor practice filings from 1992 to 1995. Union
    grievances fell by 82 percent, and employee grievances fell by 85 percent. At Rock Island [Ill.], a
negotiated alternate work schedule cut overtime costs by $250,000 in 1995. At the Trident Refit Facility,
the result of no formal ULPs in a year-and-a-half no arbitrations in two years has been a cost avoidance
                                               of $300,000.

    Following extensive discussions and coordination within the Department of Defense and with the
Department of State and our embassy in Lisbon, we were successful in framing an acceptable solution to
  an impasse that was straining U.S.-Portuguese relations and our operations at Lajes Air Base in the
 Azores. This settlement removed the remaining barrier to U.S.-Portugal execution of a new charter on
              cooperation, a revised technical agreement and the understanding on labor.

  When the complaints investigation offices of the military departments were consolidated into a single
defensewide Office of Complaints Investigations in fiscal year 1994, we inherited 33 site offices around
    the world. We have cut the number of sites to 25 by the end of fiscal year 1995 and plan further

 Even with these consolidations and reductions in staff, the OCI staff has managed to reduce the case
   backlog of 1,800 cases and now completes 90 percent of the cases in 120 days as opposed to the
180-day requirement. Through the use of alternative dispute resolution efforts (mediation and fact-finding)
      we saved the department approximately $8 million in case processing costs in FY 1995. OCI
  investigators completed over 4,000 cases during the fiscal year, of which 20 percent were resolved
                          through the use of ADR [alternative dispute resolution].

Equal opportunity. Effective equal opportunity policies provide the all-volunteer force access to the widest
possible pool of qualified men and women, allow the military to train and assign people according to the
      needs of the service and guarantee service men and women that they will be judged by their
performance and will be protected from discrimination and harassment. These conditions are the context
  in which the department's equal opportunity policies and programs are developed and implemented.

 In a March 3, 1994, memorandum to all DoD components, Secretary Perry reiterated his unequivocal
commitment to equal opportunity. The secretary said, "Equal opportunity is not just the right thing to do, it
 is also a military and economical necessity. Most importantly, all employees of this department have a
     right to carry out their jobs without discrimination or harassment. ... Therefore, I will not tolerate
              discrimination or harassment of or by any Department of Defense employee."

The secretary recognizes that discrimination and sexual harassment jeopardize organizational readiness
by weakening interpersonal bonds, eroding unit cohesion and threatening good order and discipline. By
 comprehensively addressing human relations issues and by expeditiously investigating and resolving
discrimination complaints, the department supports readiness. Following the secretary's lead, senior DoD
 civilian officials and military leaders strive to ensure that every individual in the department, military or
    civilian, is free to contribute to his or her fullest potential in an atmosphere of respect and dignity.

 In May 1995, the department transmitted to the Congress the report of the Defense Equal Opportunity
Council Task Force on Discrimination and Sexual Harassment as directed by Section 532 of Public Law
     103-337. The report contained 48 recommendations for improvements in the military services'
  discrimination and harassment prevention programs, including the establishment of departmentwide
standards for discrimination complaints processing. The report's 48 recommendations were put in place
with the issuance of DoD Directive 1350.2, "Department of Defense Military Equal Opportunity Program,"
                                               in August 1995.

  Our equal opportunity efforts contribute to building a military force which reflects the diversity of our
  nation. Its composition is a resounding statement about what is possible in a multiracial, multiethnic
society. Most nations are multiracial, and many of them are riven along lines of race, religion or language.
When the U.S. military is deployed, whether for warfighting or peacekeeping, it displays the possibility of
        overcoming those sources of division. It shows that diversity can be a source of strength.

 The overview of the department's personnel programs that I have set out in this statement presents a
complex array of initiatives and activities. Our objective, by contrast, remains straightforward -- meeting
 the challenge of medium-term readiness by bringing stability to the force and implementing Secretary
                                  Perry's ambitious quality of life initiative.

At this point I believe we are in good shape. We have met the unprecedented challenge of downsizing an
all-volunteer force successfully. Today's armed forces are more experienced, of higher quality and more
                                          diverse than ever before.
Our recruitment programs -- the lifeblood of a quality force -- have been successful in terms of meeting
  numerical goals and in terms of quality. There are challenges ahead, but I am confident that with the
   continuing support of the Congress and this committee, we can continue to achieve our readiness
objectives and provide the men and women in uniform who serve this nation and their families the quality
                                      of life they so richly deserve.

Thank you again for the opportunity to appear before this committee today. I look forward to answering
                                             any questions
         Assuring Confidence in the U.S. Nuclear
 Prepared statement of Harold P. Smith Jr., assistant to the secretary of defense for nuclear, chemical
 and biological defense programs, to the Military Procurement Subcommittee, House National Security
                                 Committee, Washington, March 12, 1996.

Mr. Chairman and members of the subcommittee, I am honored to have this opportunity to appear before
             you. I will begin by stating that today, the stockpile is safe, secure and reliable.

     My remarks will focus on the shared responsibility between the Department of Defense and the
  Department of Energy to assure high confidence in the nation's nuclear stockpile. This responsibility
presents a new challenge because the nuclear weapons in our stockpile will be retained well beyond their
               intended design lifetimes without the benefit of underground nuclear testing.

The president recognized this challenge for the nuclear weapons program in his Aug. 11, 1995, speech
announcing the U.S. position on a zero-yield Comprehensive Test Ban Treaty: "In order for this program
to succeed, both the administration and the Congress must provide sustained bipartisan support for the
 stockpile stewardship program over the next decade and beyond. I am committed to working with the
                                     Congress to ensure this support."

The president further directed a new annual certification to assure the safety and reliability of the nuclear
stockpile. Finally, he stated that he would be prepared to "exercise our supreme national interest rights
 under the CTBT in order to conduct whatever testing might be required" if a high level of confidence in
the safety or reliability of a nuclear weapon type critical to our deterrent could no longer be certified. With
   this challenge and commitment in mind, I will review some of the changes in the nuclear weapons
 program and actions that are being taken to ensure that we -- and our potential enemies -- continue to
                                   have high confidence in the stockpile.

The end of the Cold War has wrought significant changes in the nuclear weapons program. Over the last
decade, there has been an unprecedented shift in emphasis from design, development, fabrication and
testing of new warheads to refurbishment and life extension of existing warheads. Our stockpile has been
reduced in size and diversity of weapon types, and by the end of this fiscal year, the current inventory will
                                     become the oldest in U.S. history.

    Today, we do not have the capability to manufacture replacements for the nuclear warheads that
comprise our existing stockpile. We must comply with environmental requirements that are increasingly
challenging and litigious. The extended underground test moratorium has evolved into a U.S. position for
 a zero-yield CTBT. Finally, without the traditional yardstick of underground testing, it will become ever
                 more difficult to replace the shrinking cadre of nuclear weapons experts.

  These changes have forced a shift in strategy at the departments of Defense and Energy and were
                             addressed in the DoD's Nuclear Posture Review.
Approved by the president in September 1994, the Nuclear Posture Review continues to provide the DoD
policy guidance, force structure and stewardship obligations for the enduring nuclear weapons stockpile.
  The NPR codified the national policy of lead and hedge as our approach to nuclear weapons and the
                                      attendant technology infrastructures.

 The policy of lead and hedge simply means that the U.S. will lead strategic arms control efforts toward
   START [Strategic Arms Reduction Talks] II or smaller force levels, but retain the ability to hedge by
returning to START I levels. It is our policy as part of this strategy that until START II ratification and entry
into force, we will draw down and maintain our strategic forces at warhead levels consistent with START

Although primarily a DoD document, the NPR contains infrastructure requirements for the Department of
                     Energy to ensure high confidence in the enduring stockpile, namely:

          Maintain nuclear weapons capability without underground testing or the production of fissile

                                  o    Develop a stockpile surveillance engineering base;

                 o     Demonstrate the capability to refabricate and certify weapon types in the enduring

                        o    Maintain the capability to design, fabricate and certify new warheads;

                                        o    Maintain a science and technology base;

                                            Ensure tritium availability; and
                      Accomplish these tasks with no new-design nuclear warhead production.

 To meet these requirements, we must provide an environment for the development of nuclear experts
   who can meet tomorrow's ever-increasing challenges. The DoE, with assistance from the DoD, is
        pursuing a Stockpile Stewardship and Management Program to meet NPR requirements.
   As DoE continues to address NPR infrastructure requirements, the SSMP will provide a structured
approach to deal with the lack of underground testing and no new nuclear weapon production. In the past,
 underground nuclear testing was the ultimate arbiter of the stockpile. Absent this arbiter, the DoE must
 develop new approaches to ensure high confidence in our nuclear deterrent. The SSMP must include:
  enhanced surveillance of the stockpile, expanded computational capability such as the Accelerated
Strategic Computing Initiative, above-ground experimental facilities, subcritical plutonium experiments at
the Nevada Test Site and the ability to return to underground testing, a limited capacity to remanufacture
                  warheads in the existing stockpile and an assured source for tritium.

   The DoD is satisfied with the progress that is being made by the DoE to fulfill its responsibilities as
   delineated in the NPR, but much remains to be done. For example, The Nuclear Weapons Council
 endorses the DoE's dual-track approach of pursuing a commercial light water reactor and accelerator
produced tritium sources by 2005 and 2007 respectively, but both approaches must overcome technical
                                        and institutional challenges.

In the case of warhead fabrication, we must first establish a baseline capacity to replace those warheads
 routinely consumed by the quality assurance and reliability test program and be capable of expanding
                     this capacity to handle precipitous failures of a type of warhead.

  We must be ever more vigilant in the stockpile surveillance program and demonstrate that systemic
failures can be anticipated with sufficient time to implement corrective actions. The two departments must
 continue to certify high confidence in the stockpile without the benefit of underground nuclear testing.

 In its effort to improve its corporate expertise in aging nuclear weapons, the DoD is becoming a more
 active partner with the DoE as warheads and components are assessed and certified. At the individual
    level, the DoD will increase the number of personnel assigned to the DoE weapon laboratories.

   The DoD-chaired project officers groups will take a more active role in warhead assessment while
gaining a more detailed understanding of weapon life extension procedures. At the department level, the
 joint DoD/DoE Nuclear Weapons Council will remain the official forum for resolving interdepartmental
        issues between the DoD customer and the DoE supplier of nuclear weapons technology.

Additional information briefings will continue to be given to the NWC for review of critical issues involving
                               the health of the nuclear weapons stockpile.

  As an example of interdepartmental cooperation, the DoD and DoE are currently formalizing a new
annual certification procedure directed by the president for stockpiled weapons. This challenging task is
being led by my office with the support and concurrence of representatives of the services, the Joint Staff,
                        [U.S.] Strategic Command, DoE and the DoE laboratories.

This new process will include an annual survey of the health of the entire stockpile. It will complement the
 newly implemented dual revalidation process, which requires a detailed technical analysis of individual
 warhead types over a two to three year period. These two new reporting processes will provide timely
                       information on warhead ,safety and reliability for the NWC.
The SSMP will require continuing support from the departments of Defense and Energy, the Congress,
the administration and the public. The DoD and DoE must jointly establish methods to measure success
 of the SSMP at specific intervals. We cannot afford to wait 10 to 15 years to judge the success of the

 DoE must demonstrate the ability to produce tritium and to rebuild all weapons types in the stockpile.
Warheads consumed by the surveillance process must be replaced with certified warheads without the
                      benefit of underground nuclear testing, a major undertaking.

Most importantly, opportunities must exist to attract, train and retain world-class scientists and engineers
 who will be the next generation of stockpile stewards. The safety and reliability of our nation's nuclear
                      stockpile demand an experienced cadre of our nation's best.

  Since the Manhattan Project, the United States has invested heavily in the development, production,
 deployment and maintenance of the national nuclear deterrent. Nuclear weapons, even at significantly
  reduced levels, remain a core component of future national security strategy. Our DoD/DoE shared
responsibility is to ensure high confidence in our nuclear deterrent without underground nuclear testing.
This enduring responsibility must have the resources necessary to ensure that the stockpile remains safe
                                   and reliable, today and in the future.

 Mr. Chairman, members of the committee, absent nuclear testing, the potential for erosion in stockpile
confidence will undoubtedly increase with time. To maintain high confidence is a challenge that exceeds
 those previously faced by our stockpile stewards, but I believe we are on the right track. The president
 recognized this challenge in his Aug. 11, 1995, speech and remains committed to this challenge. The
      people in this room and the agencies they represent must meet this daunting requirement. ...
America's Armed Forces: A Shared Commitment
   Prepared statement of Edwin Dorn, undersecretary of defense for personnel and readiness, to the
            Personnel Subcommittee, Senate Armed Services Committee, March 13, 1996.

Mr. Chairman and members of the subcommittee, I am honored to appear before you today to present an
                          overview of Department of Defense personnel issues.

The United States military continues to be the best-trained and best-equipped fighting force in the world,
  as its performance over the past year in the Persian Gulf, Haiti and Bosnia-Herzegovina illustrates.
 During this period, our forces have also continued to manage the downsizing with skill and spirit. Our
forces are now smaller but fully ready to do what we ask of them. We must ensure they remain ready and
provide them the quality of life they and their families deserve. Secretary [of Defense William] Perry and I
                  look forward to working with this subcommittee to attain these ends.

In this statement I will discuss the manpower levels requested in the president's budget and then detail
                   the steps we are taking to maintain readiness and quality of life. ...

The president's budget request for active military, Selected Reserve and civilian manpower for FY [fiscal
 year] 1997 continues the downsizing that began in the late 1980s. At the beginning of FY 1996, active
   duty military strength was at 1.518 million; by the end of FY 1997, it will decrease to 1.457 million.
Selected Reserve strength will be reduced to 901,000. Civilian positions will decrease to 807,000 by the
                                             end of FY 1997.

 The drawdown of the active component to congressionally mandated permanent end strength levels is
now almost 90 percent complete and will be about 97 percent complete after the reductions planned for
  FY 1997. Even though the number of active duty personnel already has been reduced by more than
  655,000 since FY 1987, the number of service members who have been involuntarily separated has
      been quite small. Much of the credit for our success is attributable to the strong support and
encouragement of Congress, which provided the separation incentives (Voluntary Separation Incentive,
 Special Separation Benefit, Temporary Early Retirement Authority) and transition programs needed to
                        effect the drawdown in a sensible and sensitive manner.

  Through the Reserve Component Transition Assistance Program, the department has successfully
  reshaped and balanced the reserve forces. The transition program includes Special Separation Pay,
Early Qualification for Retired Pay, continued eligibility for commissaries and exchanges and extension of
Montgomery GI Bill educational assistance. This program will enable the department to complete almost
90 percent of its drawdown and restructuring plans by the end of FY 1996 and 97 percent by the end of
                                                 FY 1997.

 The department began streamlining infrastructure and reducing its civilian work force before National
 Performance Review reductions were proposed. Through creative use of our transition programs, we
 have been able to hold our involuntary separations to less than 9 percent. The DoD Priority Placement
Program has placed over 136,000 workers in its 30-year history and continues to find jobs for an average
    of over 900 displaced employees per month. We have been aggressively using downsizing tools
                                         provided by the Congress.

 Civilian reductions have amounted to 23 percent between 1987 and FY 1995. By September 1999, an
 additional 104,000 positions will be eliminated, with further reductions anticipated. The reductions are
   based on reinvention and streamlining of workload and missions, base closures and reduced fiscal
   resources. Our goal is to maintain effectiveness while managing the reductions both efficiently and

The department's first priority is maintaining readiness to execute the National Security Strategy. As last
  reported to the Senior Readiness Oversight Council, U.S. forces are at a high state of readiness, as
 exemplified by our current operations in Bosnia and throughout the world. The department anticipates
  that we will be able to maintain this high state of readiness, assuming the timely reimbursement for
contingency operations. U.S. forces must be manned, equipped and trained to deal with the dangers to
U.S. national security, including response to major regional conflicts, overseas presence operations and
                                             other key missions.

  Personnel readiness results from three factors: quality people, quality training and quality of life. We
 recruit those whose background and aptitudes indicate a high probability of completing their obligation
   while performing well in their occupational fields. We manage people carefully, provide them with
rigorous and realistic training and ensure we assign well-qualified people to each job. Finally, we make a
               genuine commitment to "people first" programs that recognize their service.

A steady flow of high-quality recruits is an important component of readiness. In spite of the fact that our
military forces are growing smaller, each service must enlist enough people each year to provide a flow
of seasoned leaders for the future. DoD must recruit about 200,000 young people annually for the active
                duty armed forces and approximately 160,000 for the Selected Reserve.

In recent years, DoD has done well in attracting high-quality recruits. In FY 1995, 96 percent of all active
 duty recruits held a high school diploma and 71 percent scored above average on the enlistment test.
     Fewer than 1 percent of new recruits scored in the lowest acceptable category on the test. The
  department also was successful in recruiting for the reserves, with 90 percent of reserve accessions
 holding a high school diploma and more than two-thirds scoring above average on the enlistment test
and less than 2 percent scoring in the lowest acceptable category. Higher levels of recruit quality reduce
attrition while improving hands-on job performance, which is essential to unit performance and readiness.

Over the past several years, enlistment propensity had declined as the services experienced serious cuts
in recruiting resources. In FYs 1995 and 1996, recruitment advertising was increased by $89 million and
$31 million respectively. That investment, coupled with hard work by our recruiters, is paying off. Results
 from the 1995 Youth Attitude Tracking Study indicate that the decline in propensity may have abated.
However, recent surveys indicate higher recruiter stress and dissatisfaction, along with a range of quality
                                               of life concerns.

Accordingly, the department asked the services to review recruiting policies and practices with a goal of
  reducing pressures that might lead to potential improprieties. A joint study of recruiter quality [of] life
   issues is focusing on potential improvements in health care, child care and housing. The Congress
recently authorized an increase in Special Duty Assignment Pay from $275 to $375 per month. We are
                now developing implementation plans, in coordination with the services.

  Because recruiting is vital to readiness, then-Deputy Secretary John Deutch established the Senior
Panel on Recruiting in April 1994 to provide oversight at the highest levels of the department. This panel
     deals quickly and effectively with any emerging problems. The department has also initiated a
 joint-service study to evaluate the viability and cost-effectiveness of alternative concepts for recruiting

We will continue to monitor trends to ensure we maintain high quality standards in enlisted recruitment.
With adequate resources and realistic recruit quality requirements, we can sustain a diverse, high-quality
              military force that is ready and able to respond to the nation's defense needs.

The department continues to sustain balance in its officer accession program, with a mix of new officers
  from a number of sources: Reserve Officers Training Corps (36 percent of officer accessions), which
provides a varied academic and geographical mix; officer candidate programs (20 percent) that provide
 growth opportunities for the enlisted force; and service academies (15 percent), which provide officers
  who couple a deep understanding of the military culture with important technical skills. Other officer
  accession programs support the professional branches: direct appointment (14 percent) and health
  professional programs (6 percent). We believe that this mix across commissioning sources provides
                                    appropriate balance and diversity.

   While recruiting is the crucial first step in creating a ready force, retaining and carefully managing
  personnel during the course of their careers is just as important. As the drawdown nears its end, our
 focus has shifted from selective departure to broad-based retention. Our retention incentive programs
are designed to maintain the high level of readiness needed to perform the missions we are called upon
to perform, and we will work with the Congress to ensure that retention programs, such as re-enlistment
                                bonuses, are funded at appropriate levels.

 There is a common misconception that promotions have slowed because of the drawdown, but that is
    simply not the case. The services have worked hard to provide reasonably consistent promotion
opportunities in order to meet requirements, ensure a balanced personnel force structure and provide a
meaningful opportunity for all service members. Promotions have remained generally steady during the
     drawdown. Officer and enlisted promotions remained stable through FY 1995, with promotion
            opportunities and pin-on points relatively consistent with those of previous years.

   However, reductions in end strength, coupled with adjustments in force structure, have caused the
services to re-examine their officer requirements with regard to the number of field grade officers. We will
be proposing permanent grade relief to achieve the number of mid- and senior-grade officers needed to
perform Defense missions. Also, we are working with the Joint Staff on a number of projects designed to
                                    improve joint officer management.

One such measure is a process to ensure those positions that fully meet the intent of the law are on the
joint duty assignment list. The department appreciates the support the Congress has given us in the past,
 particularly the revised authorities reflected in the FY 1996 Defense Authorization Act, to improve our
management of joint officers. As we enter new territory with the implementation of the department's first
   requirements-based JDAL, we look forward to improved utilization of officers who are trained and
                                       experienced in joint matters.

The Reserve Officer Personnel Management Act, enacted with the FY 1995 Defense Authorization Act,
   becomes effective on Oct. 1, 1996. Involving over 200 changes to existing law, ROPMA is the first
 comprehensive overhaul of reserve officer personnel management statutes since the Reserve Officer
Personnel Act of 1954 and will affect approximately 250,000 officers not on the active duty list. It provides
 flexibility in managing Guard and Reserve officers, provides career visibility to individuals and will help
 maintain a cost-effective reserve component personnel structure. The department is actively updating
          Guard and Reserve manpower and personnel policies in conformance with ROPMA.

In the area of civilian management, the military departments and defense agencies are pulling functions
from their installation civilian personnel offices into regional service centers to improve productivity and
customer service, while reducing costs. We plan for 23 regional centers to perform those functions that
can be performed more efficiently and effectively from a central operation. Thirteen projects to streamline
 and automate functions that account for at least half of the standard civilian personnel office workload
have been completed or are nearing completion. We are also developing a standard DoD system to allow
 immediate access to current civilian personnel data, provide on-line update of employee data, reduce
training and operational costs and improve productivity. A commercial off-the-shelf software package has
  been selected as the basis for the modern data system. Our target system should be deployed in FY

We are encouraged by the successful implementation of policies that have opened more jobs to women
in uniform. Today, almost 80 percent of all jobs and over 90 percent of all career fields within the military
    are open to both men and women. This means we are able to put the right person in the right job
unencumbered by unnecessary gender restrictions. There are still some challenges to overcome in this
area; however, we believe the changes will enhance the personnel readiness of our smaller armed force.

   The secretary has been very firm and clear about the issue of fairness. Discrimination and sexual
    harassment jeopardize organizational readiness by weakening interpersonal bonds, eroding unit
      cohesion, and threatening good order and discipline. The department supports readiness by
 comprehensively addressing human relations issues and by expeditiously investigating and resolving
discrimination complaints. DoD strives to ensure that it is an organization where every individual is free to
             contribute to his or her fullest potential in an atmosphere of respect and dignity.

Rigorous and realistic training is the foundation of personnel readiness. This includes entry-level training,
specialized skill training and professional development courses. The department invests about $30,000
    per recruit during basic and initial job training alone. We offer over 20,000 different courses -- an
investment of $15 billion -- that produce 1.15 million graduates annually. These programs ensure that we
                                      develop well-qualified leaders.

   Cost-effective training to promote effective reserve component integration into total force missions
means increasing opportunities for joint training missions with the active forces and making good use of
all the tools available, especially technology. During the coming year, we will continue to identify training
 opportunities to involve reserve components in more peacetime operational missions and to promote
 innovative training opportunities in U.S. communities. These measures will increase reserve readiness
    as a result of meaningful involvement in peacetime missions, while also helping to reduce active
               component personnel tempo (perstempo) and operating tempo(optempo).

 This year, the department is launching a major effort to provide a more universal, comprehensive and
    systematic program of civilian career and leader development. This effort has already led to the
establishment of a new civilian training philosophy. Called Growing the Gold, this program is creating a
 cross-component system of civilian leadership development with policies and procedures more closely
                                     aligned with those of the military.

     The focus of Growing the Gold is a more DoD-team-based approach to the training, education,
 assignment and promotion of DoD's civilian personnel. This comprehensive redesign in civilian career
 and leader development responds to the president's call for greater and smarter investment in human
          capital, as well as to recommendations from the Commission on Roles and Missions.

   Competitive pay, realistic perstempo standards, health care and improved housing and community
support programs enhance the services' ability to keep and grow future leaders, gain a return on training
              investment and reflect a commitment to service members and their families.

    The secretary of defense has made quality of life one of his top priorities. In November 1994, we
 embarked on an ambitious course to assess and improve quality of life. The president announced an
unprecedented initiative that added $25 billion to the defense spending plan to provide more funding for
                              readiness and improve quality of life programs.

  As part of this initiative, the secretary allocated $2.7 billion to the Future Years Defense Program to
 increase Basic Allowance for Quarters, initiate a new cost of living allowance for high-cost areas in the
  United States, improve housing, expand child care, bolster recreation programs and enhance family
                                            violence prevention.

 He established a quality of life task force of outside experts to provide recommendations for improving
housing and the delivery of community and family services and to provide options for reducing the time
 service members spend away from home for training and mission requirements. At the same time, he
    chartered an internal quality of life executive committee to support and implement the task force

        We are now analyzing these task force recommendations and have achieved numerous
   accomplishments during the past year that are significantly improving quality of life. I am going to
highlight a few of our initiatives in the areas of compensation, health care, housing, support to families of
           service members currently deployed, and community and family support programs.

Since 1994, the law regulating the annual increase in military pay has called for pay raises that trail the
increase in private sector pay. It is essential that military pay remain competitive. In order to lessen the
   disparity with private sector raises, the president's budget funds a 3 percent military pay raise that
emphasizes the department's commitment to pay comparability. This commitment sends a very positive
  message to uniformed personnel that their country values their services and recognizes the unique
                         hardships, obligations and dangers of military service.

  In FY 1996, the secretary added $43 million to housing allowances in order to reduce the amount of
out-of-pocket housing expenses for the two-thirds of military families residing in civilian communities. We
have increased our FY 1997 budget to maintain housing allowances at current levels. Also in FY 1996,
  the secretary added $17.2 million to provide cost of living allowances within the United States where
  payments for goods and services exceed the national average by more than 9 percent. This CONUS
[continental United States] COLA increase improved living standards for 30,000 service members living
         in high-cost areas. Our FY 1997 budget maintains the CONUS COLA at current levels.

   For reservists, two legislative changes adopted in 1995 will contribute to personnel readiness and
improved quality of life: the establishment of mobilization income insurance for Selected Reservists and
the requirement to provide Selected Reservists with a low-cost dental insurance program. Both of these
                           changes will be implemented beginning in FY 1997.

 Military personnel deploying to Bosnia-Herzegovina continue to receive normal pay and allowances. In
 addition, deployed troops are receiving imminent danger pay, family separation allowances and other
 special pays. Thus, up to an additional $352 per month will go to deployed troops. We also support tax
                   waivers and delays. The amount will vary for civilian counterparts.

 The department continues to support military retirement pay as a critical element of the overall military
 compensation package. Any changes to this system amount to broken promises and have a negative
  impact on retention and morale of our service members. At the same time, the department strongly
 supports cost of living allowances to military retirement pay in order to maintain a measure of income
                        security for those who complete military service careers.

  We envision a number of long-term compensation improvements and now are analyzing issues and
     developing appropriate legislative proposals. For example, we hope to move toward a pay for
  performance-oriented military pay system. While we recognize that increased pay for experience is
     important, we believe that promotion and its associated responsibilities should be the principal
       determinant of pay; appropriate reforms to the pay table can help us to achieve that goal.

We also hope to refine our housing allowances so that they increasingly will be able to provide the right
amount to every pay grade, in each location where our members are stationed. We want to ensure that
 the allowances are credible and sufficient to provide each and every service member with the ability to
 obtain housing that meets minimum adequacy standards. Key to our long-range vision is the ongoing
                    work of the Eighth Quadrennial Review of Military Compensation.

As part of the quality of life review, the department looked at the demands made on personnel, especially
 time away from home. The quality of life task force made several observations and recommendations
that will be reviewed for their potential to help reduce personnel tempo and turbulence. Additionally, the
     department continues to support programs aimed at increasing the stability of families despite
                             requirements for service member deployments.
Our goal is to find a balance between mission and training requirements and service members' need to
 be with their families. To accomplish this goal, the quality of life executive committee will fully evaluate
task force and internal recommendations, which include reviewing programmed training and deployment
schedules, expanding use of reserve components to reduce the personnel tempo for the active force and
                            increasing contractor support of certain functions.

Military medicine faces compelling challenges at this time of unprecedented change in the nation's health
   care system. One priority is medical readiness -- the need to be prepared wherever and whenever
    service members are deployed, with the highest quality of care. At the current pace of worldwide
   operations, our high focus on medical readiness has never been more important. Another equally
important task is to supply accessible, high-quality health care to the active duty force, family members,
                   retirees and other beneficiaries not currently involved in operations.

More than 8.3 million people are eligible to receive health care from the military health services system.
Direct care is delivered worldwide in 120 hospitals and numerous clinics. Care is also purchased from the
civilian sector through the Civilian Health and Medical Program of the Uniformed Services and TRICARE
support contracts. The medical portion of the president's FY 1997 budget is approximately $15.4 billion,
                                or 6.2 percent of the entire defense budget.

TRICARE is the DoD regional managed health care program for members of the uniformed services and
their families, and survivors and retired members and their families. TRICARE brings together the health
   care delivery systems of each of the military services, as well as CHAMPUS, in a cooperative and
  supportive effort to better serve military patients and to better use the resources available to military

TRICARE introduces to beneficiaries three choices for their health care delivery: TRICARE Standard, a
   fee-for-service option which is the same as standard CHAMPUS; TRICARE Extra, which offers a
    preferred provider option with discounts; and TRICARE Prime, an enrolled health maintenance
                                            organization option.

 All active duty members will be enrolled in TRICARE Prime, and families of active duty personnel who
choose to enroll in TRICARE Prime will have no enrollment fees. All Medicare-eligible DoD beneficiaries,
and those CHAMPUS-eligible beneficiaries who elect not to enroll in TRICARE Prime will remain eligible
                     for care in military medical facilities on a space-available basis.

  TRICARE will provide health care coverage to active duty personnel and their families, and retirees,
  survivors and their families until the retirees reach age 65. At that point, retirees become eligible for
  Medicare and lose their eligibility to use civilian health care providers under the TRICARE program.
 However, Medicare-eligible retirees may continue to use the services of military treatment facilities as
                                       they are entitled to under law.

 The department spends about $1.4 billion per year on over-65 retirees yet receives no reimbursement
  from the Health Care Financing Administration for that care. The department believes it has a moral
obligation to provide health care for its retirees in the TRICARE HMO program and has sought legislation
       that would enable us to enroll over-65 retirees in the TRICARE HMO program and to seek
                                reimbursement from HCFA for their care.

The department is strongly committed to dealing with specific issues such as any adverse health effects
  that may have resulted from service during Operations Desert Shield/Storm. We are conducting an
 aggressive, comprehensive clinical diagnostic effort to determine, as far as possible, the causes of the
    symptoms in Persian Gulf veterans as described by the National Institutes of Health technology
     assessment workshop panel. All Persian Gulf veterans are being offered an intensive clinical

  Results from evaluations of over 18,500 patients completing the Comprehensive Clinical Evaluation
  Program show that the majority have a definitive diagnosis or diagnoses that span a broad range of
 clinical entities for which they are receiving treatment and responding favorably. For those remaining,
  who have less definitive diagnoses, the department has established specialized care centers where
              patients requiring further attention will continue to be evaluated and treated.

For Operation Joint Endeavor, the department is implementing enhanced medical surveillance measures.
These measures involve conducting medical assessments and informing personnel regarding potential
     health risks prior to deployment; collecting data to localize health problems, facilitate outbreak
investigations and assess hazardous exposures during the operation; and doing medical assessments,
      evaluations and epidemiological studies, and maintaining rosters upon return of the forces.

 In addition, the department is conducting a demonstration aimed at the families of reserve component
  personnel who have been activated for Operation Joint Endeavor. This demonstration will allow the
families of reservists called for more than 30 days to use CHAMPUS without having to meet the annual
deductible. Families of reservists called for 179 days or more and who reside in an area where TRICARE
Prime is offered may enroll. Both of these measures are designed to alleviate potential hardships on the
                               families of men and women called to serve.

Last year, the department placed special emphasis on trying to redress the condition of military housing.
 This was one of the cornerstones of the secretary's quality of life initiative. We have made progress in
                       both family and bachelor housing, but we have only begun.

Family housing, like other quality of life programs, is key to readiness and retention. We have found that
   the number of personnel remaining in the military from bases with high-quality housing is about 15
  percent higher than those stationed at places with lower-quality housing. This is a telling figure when
  deferred maintenance and replacement have resulted in 64 percent of military family housing being
 classified as "unsuitable" by the services. Our FY 1996 budget contained a $500 million increase over
that previously planned and programmed in FY 1996. This increase is allowing us to construct or repair
                                         over 11,000 family units.

We found similar problems in our bachelor housing. The average age of a barracks is 40 years, and 62
   percent of our military bachelor housing is considered substandard due to overcrowding and poor
   conditions. We began to rectify this situation with an FY 1996 increase of $673 million for barracks
 construction and maintenance. As a result, 71 projects are funded this year to increase availability and
improve conditions. Our FY 1997 budget reflects the secretary of defense increase of almost $201 million
 for barracks repair, maintenance and construction. These funds continue improvements in privacy and
                          other amenities to another 5,000 bachelor living areas.

The final piece of our housing initiative is our exploration of private sector partnerships. We set aside $22
  million in FY 1996 to stimulate partnerships with a goal of increasing affordable and quality housing.
   These projects focus on funding homebuilding, with lease-back options via private sector housing
ventures/partnerships. We established a Housing Revitalization Services Office that is overseeing these
efforts and have programmed an additional $20 million in our FY 1997 budget to continue this program.

   We are providing dynamic support systems for military families of those mobilized and deployed in
   support of peace-keeping in Bosnia. All military community and family support systems play a role,
                           including those of the National Guard and Reserve.

Lessons learned from previous deployments show that the primary issue for service members and their
families is need for information. Accurate information flow and family support systems help our families
                     cope with daily challenges while service members are deployed.

We have fielded several initiatives to provide this kind of support. For example, family readiness training
  is provided throughout the entire deployment cycle to ensure appropriate information and support for
each phase, including pre- and post-deployment. We have also established five hot lines in Germany and
                                   a Bosnia home page on the Internet.

 In addition, our dependent schools overseas are providing assistance groups with certified counselors,
school psychologists and social workers. These groups will provide counseling to children to help them
                          cope while their military parents are away from home.

   Finally, the department's morale, welfare and recreation programs provide numerous programs for
  families of those deployed and are also providing on-site programs and services to deployed service

The department provides social service, recreational and education programs wherever military families
 are stationed that mirror those found in civilian communities while being tailored to unique challenges
associated with the more mobile military lifestyle. The department is also preparing a range of initiatives
    to maximize opportunities for reservists and their families to participate in military community life.

 Our budget request continues funds for service member and family support programs; morale, welfare
and recreation programs; off-duty voluntary education opportunities; the DoD Education Activity; and the
       Defense Commissary Agency and exchanges. Highlights from each of these areas follow.

  Child Development. The DoD child care program is by far the largest and one of the most successful
child development systems in the world. Over 65 percent of military spouses are in the labor force, and
 many require child care. The department recently reassessed the need for child care and documented
           that military families had some 299,000 children who need some kind of child care.
We are currently meeting about 52 percent of this need. The secretary added $38.1 million in FYs 1995,
 1996 and 1997 to move child care availability toward the department's short-term goal of 65 percent of
 the departmentwide demand. We will accomplish this by increasing child care spaces by about 39,000
children, with most of these spaces in the school-aged care programs. Our ultimate goal is to provide 80
percent of the departmentwide child care demand in the future. Our FY 1997 budget requests funding to
   continue this initiative. We are also conducting tests of outsourcing child care, recognizing that the
              department is nearing maximum potential to meet child care needs on base.

 Family Advocacy. The Family Advocacy Program, now in its 11th year, has contributed to making the
rate of substantiated child abuse in military families less than half of the civilian rate. FAP has also been
successful in protecting victims when child or spouse abuse has occurred and in treating both the victims
    and the abusers. During FY 1997, FAP will emphasize prevention of spouse abuse and provide
                         advocacy services to victims of child and spouse abuse.

Model Communities (Youth Initiative). Installation commanders and parents have identified increases in
youth violence and gang activity on installations as major concerns. As a result, DoD established a model
communities incentive award program to encourage installations worldwide to take responsibility for the
    problems of youth and provide them with positive alternatives and a sense of connection to their

 Each participating installation submitted proposals defining their local needs and describing a plan to
   meet them. The 20 winning installations will serve as test projects for new ideas and as models for
 military bases around the world. The winners received up to $200,000 per year for a three-year period.
   Over the three years, DoD's investment in developing innovative programs in this area will be $6.4

Family Center Programs. The department's 291 family centers continue to be the focal point for our basic
social services and support networks for the military community, offering a host of education, prevention
   and social programs. In FY 1997, special emphasis will be placed on personal financial health and
spouse employment assistance. The spouse employment programs will focus on helping job seekers find
  civilian sector jobs as the federal sector opportunities normally sought by military spouses dwindle.

  Relocation and Transition Assistance Programs. Congress has directed the department to report on
 phasing out our relocation and transition assistance programs and on what, if any, residual funding is
 required. This report is being prepared; however, we do not view the basic functions of either of these
                                         programs as temporary.

 The relocation program provides education and assistance to the more than one-third of our force that
relocates each year. It has been and continues to be integral to our family center network and provides
                              benefits far beyond its annual $18 million cost.

Equally as important, transition assistance to the almost 300,000 service members who leave the military
each year remains a priority. The Defense Outplacement Referral System, a resume data base referral
 system linking private sector employers to departing service members and spouses, had over 69,000
personnel and 13,431 employers registered in 1995. The Transition Bulletin Board, an automated system
that allows employers to list actual job openings that service members at military installations worldwide
   can see, had 47,343 job openings and business opportunities listed in 1995. These programs help
 service members find jobs more quickly and account for a cost avoidance of $152 million annually that
                         would have to be spent for unemployment compensation.

While we cannot phase out our important relocation and transition programs, we are looking at innovative
                          strategies for making them more affordable in the future.

 Morale, Welfare and Recreation Programs. The Department of Defense provides morale, welfare and
recreation programs -- recreation and youth centers, libraries, sports and athletic programs -- to provide a
    wholesome community for our military members and their families. MWR programs also include
     revenue-generating activities such as bowling centers and golf courses, which not only provide
 recreational opportunities but also generate profits used to improve other community MWR programs.
The programs and activities offered at our installations worldwide contribute to physical fitness and esprit
                        de corps and aid in recruitment and retention of personnel.

 During the last two years, the department has improved and updated MWR programs. Beginning in FY
  1996, we increased funding to make service appropriations for these vital programs more consistent.
               Funds were targeted for improvements in Marine Corps and Army programs.

For FY 1997, the Navy has budgeted funds to improve fitness centers and libraries afloat, an action that
will improve quality of life aboard over 350 ships. As a result of a finding from the quality of life task force,
 we will be examining the programs and facilities we provide for physical fitness on our installations and
                      working with the military departments to address shortcomings.

   Off-Duty Voluntary Education Programs. The department has historically spent about $220 million
annually to support its very popular off-duty continuing education programs. About one-third of the active
 force participates in these programs, earning thousands of associate, bachelors and masters degrees
from nationally accredited colleges and universities. The services provide their members with about $135
 million in tuition assistance annually. Current initiatives include connecting all education centers to the
   Internet and expanding options for service members to take courses and complete degrees using
                                      distance education opportunities.

DoD Education Activity. In FY 1997, we project that we will provide education to some 87,000 students in
   our DoD Dependents' School System overseas and 33,000 through our DoD Domestic Dependent
Elementary and Secondary Schools stateside. Additionally, we have oversight responsibilities and fiscal
support of eight special contractual arrangements with local education agencies in five states and Guam,
                                    serving an additional 6,000 students.

During the past year, we have developed an aggressive strategic plan to support continued quality and
     integrate the President's National Education Goals into our system. We have also integrated a
 technology initiative aimed at improving staff and student performance into the 21st century. We have
added $7.5 million to the DoD Education Activity technology plan to develop the president's technology
initiative, which moves toward providing greater access to computers in classrooms, connects schools to
the information superhighway, develops effective subject area curriculum software and develops teacher
                        ability to help students use and learn through technology.

While we have been undergoing a tremendous amount of turbulence within our system over the past two
  years, we have successfully minimized any adverse effects on children's education. Students at our
       schools consistently scored eight to 19 percentile points above the national average in all
    Comprehensive Test of Basic Skills and American College Test areas over the past school year.

We project that we will complete most of our school closures and realignments in Europe and the Pacific
                                          by the end of this year.

  Commissaries and Exchanges. The department continues to support our commissary system as an
 important element of the military nonpay compensation package and a critical aspect of quality of life.
                      Secretary Perry remains firm that this benefit not be eroded.

  Commissaries enhance income through savings of about 20 to 25 percent on purchases of food and
 household items for the military member and family. For those stationed overseas, commissaries are
often the only source of American products and, in isolated or remote areas, the only convenient source
of groceries. We continue to work toward greater efficiencies in these stores. The Defense Commissary
   Agency recently received the Hammer Award, recognizing significant innovations. It has also been
selected as a candidate for the National Performance Review Performance-Based Organization status.

Exchanges continue to support our service members and their families by providing goods and services
  to them at affordable prices. The exchanges also generate revenues that fund recreational activities.
During the past year, the department took a hard look at policies that describe where and when we can
operate exchanges and commissaries. As a result, we have begun to allow certain exchange operations
and commissaries on those installations affected by closure or realignment where a significant number of
                                  active duty service members remain.

Recognizing that members of the reserve component could also lose their exchanges and commissaries
as installations closed or realigned, we opened up a new BXMart at Homestead Air Force Reserve Base
  in Florida. We will establish future test BXMarts only where programs indicate a profitable outcome.

Advanced weapons give U.S. armed forces tremendous advantages, but our national security ultimately
   relies on the quality and commitment of the men and women who serve in uniform and the civilian
  employees who support them. As the backbone of U.S. national security strategy, America's armed
 forces are ready today to carry out this strategy. To maintain that status, the Defense Department will
           continue to place its emphasis on quality people, quality training and quality of life.

 The programs I have detailed to you in this statement are aimed toward these three goals, and we ask
  you to support them. With the continued assistance of this subcommittee and the Congress, we will
                     ensure that the U.S. armed forces remain the best in the world.
  DoD's Fiscal 1997 Acquisition and Technology
 Prepared statement of Paul G. Kaminski, undersecretary of defense for acquisition and technology, to
 the Acquisition and Technology Subcommittee, Senate Armed Services Committee, March 20, 1996.

 Mr. Chairman, members of the subcommittee and staff, thank you for the opportunity to appear before
         you today to discuss the Department of Defense Acquisition and Technology Program.

The United States has the best led, trained and equipped military force in the world today. Since World
War II, fielding technologically superior forces has been the cornerstone of our national military strategy.
 This advantage has allowed our forces to deter, and when deterrence failed, prevail over numerically
large enemy forces. Our predecessors invested wisely in technology in the 1960s and 1970s. The result
was an overwhelming, swift, decisive victory in Desert Storm and a continuing deterrence of our potential

  In today's post-Cold War world, our planning must cope with increased uncertainty. We are far less
   certain about who our future adversaries will be or what technology we will face. In today's global
    economy, everyone, including our potential adversaries, will gain increasing access to the same
commercial technology base. The military advantage will go to the nation which has the best cycle time to
capture technologies that are commercially available, incorporate them in weapon systems and field new
                                          operational capabilities.

   Mr. Chairman, the strategic focus of the defense acquisition and technology program is on fielding
 superior operational capability and reducing weapon system life cycle costs. We have maintained this
focus since the Gulf War. As impressive as our military accomplishments were against Saddam Hussein,
our forces are qualitatively superior today. We received an inkling of what combat will look like in the 21st
           century in our support of the NATO combat Operation Deliberate Force in Bosnia.

   In Desert Storm, only 2 percent of the weapons expended during the air war were precision guided
munitions. During the NATO combat Operation Deliberate Force in Bosnia, PGMs accounted for over 90
    percent of the ordnance expended by U.S. forces. We have employed these weapons with great
precision. The bomb damage assessment photographs in Bosnia bear no resemblance to BDA photos of
                 the past where the target, often undamaged, is surrounded by craters.

The Bosnia BDA photos show one crater where the target used to be and virtually no collateral damage.
 We have moved to one target, two weapons, and are moving to a situation of one target, one weapon.
              This has been the promise for the past 20 years, now it is becoming a reality.

Mr. Chairman, I am pleased to report that these capabilities are being fielded at less cost to the American
  taxpayer. This would not have been possible without the help and support from the members of this
   subcommittee. Working together, the Congress and the department have implemented sweeping
acquisition reforms that are reducing the life cycle costs of our weapon systems. We now have examples
 of cost avoidance in the range of 15 to 50 percent. As these savings and cost avoidance opportunities
are identified, they are applied during the department's budget process. The president's FY [fiscal year]
 1997 budget request includes the benefits of the department's ongoing program of acquisition reform.

  Technology Strategy. One point that I made before the subcommittee last year, but one that always
needs emphasizing, is that stable, sustained investments in the technology base, technology "on ramps"
     and advanced concept technology demonstrations are essential for military superiority. A long
 commitment to this strategy is required over years and decades to achieve significant results; it is not
possible to wait until advanced technology is clearly needed in a system to begin investment; by then, it is
                                                  too late.

   Today's leading edge systems were made possible through decades of investment in fundamental
     science and exploratory development work. The technology base initiated in the 1960s and the
 technology "on ramps" sustained in the 1970s gave us the stealth aircraft, precision guided munitions
and night vision systems that provided U.S. forces with a decisive combat edge during the 1991 Gulf War.
As I pointed out last year, the Air Force's F-117 stealth fighter, so effective in Desert Storm, can be traced
to a mathematical formulation for radar scattering from geometric shapes and the development of radar
                          absorbing materials that date back to the early 1960s.

  The Basic Research, or 6.1, account within the RDT&E [research, development, test and evaluation]
appropriation is the source of new knowledge and understanding that ultimately forms the foundation for
  future military capabilities. Over the 50 years since DoD founded its first basic research office, basic
   research has sometimes paid immediate dividends, with a transition of technology directly from the
                             laboratory bench to defense systems in the field.

   For example, last year researchers applied high-speed, experimental computational fluid dynamics
   techniques to solve an operational problem encountered on the C-17 airlifter. During certain flight
   regimes, paratroops deploying on each side of the C-17 would bump-and-tangle. CFD technology
 enabled engineers to quickly define the combination of C-17 flight parameters (airspeed and angle of
    attack) that allows paratroopers to safely and simultaneously exit from both sides of the aircraft.

In most cases though, the full benefits of the department's investment in basic research do not become
 apparent until much later. It is only in hindsight that we are able to clearly discern the patterns of basic
 research that spawned revolutionary military capabilities over the past several decades -- such as the
capabilities provided by the Global Positioning System, Arpanet, night vision, high-speed computer chips,
                                           lasers and fiber optics.

 The department's investment in basic research is focused on science and engineering areas with the
greatest long-term potential for defense application. Even though DoD's total 6.1 funding is less than 10
 percent of the federal investment in basic research, the DoD provides almost two-thirds of total federal
  support for basic research in electrical engineering, mechanical engineering and materials science.

The importance of these DoD investments to national security cannot be overstated, as evidenced by the
 promise of several recent scientific accomplishments. DoD-sponsored basic research has produced a
way to make stable, high-temperature silicon carbide fibers that can be used to make the parts for a new
generation of high-performance, low-pollution aircraft engines. These engine parts will function at 2,000
          degrees without degradation -- hundreds of degrees hotter than alternative materials.

Our fertile nanoscience program has produced experimental operating transistors with feature sizes of 30
billionths of a meter. Building on this success, we are beginning to control electronic properties on a scale
   of less than 10 billionths of a meter. Circuits using such dimensions will have up to 1,000 times the
  number of electronic components of today's computer chips -- a quantum leap in circuit technology.

The department benefits greatly from investment in basic research at universities, industry and in-house
laboratories. Universities carry out about 60 percent of the total 6.1 program -- basic research is a core
competency of the universities, and university research pays additional dividends through the associated
  training of future scientists and engineers in disciplines important to national defense. Approximately
  one-quarter of the 6.1 program is performed by DoD and other federal laboratories to focus on areas
where extramural capability is unavailable, and about 15 percent is performed by industry and nonprofit
                                     institutions other than universities.

With respect to resources, the president's FY 1997 budget request maintains zero real growth in the 6.1
 basic research account. This carefully considered request reflects the importance that the department
places on sustaining the long-term foundation for future military capabilities. I urge your support of the full

The Exploratory Development, or 6.2, account within the RDT&E appropriation is the second component
of the department's technology base investment and is the mechanism for exploiting new knowledge and
understanding for future military capabilities. We are vigorously exploiting 10 technology areas: sensors
   and electronics; information systems and technology; weapons; advanced materials and materials
   processes; airborne platforms; nuclear, biological and chemical defense; human systems; ground
                  vehicles and watercraft; medical and biomedical; and space platforms.

 One illustrative example of the military payoffs associated with sustained investment in 6.2 exploratory
  development programs is the F-119 engine that powers the F-22 fighter. This engine, by virtue of its
  ability to sustain supersonic flight without afterburning and its high thrust-to-weight ratio, dramatically
increases the capability of the aircraft as well as reducing the weight and cost penalties associated with
stealth. There are many critical technologies that have made this engine possible. In the area of materials
   and processes alone, they include graphite polyimide fan components, hollow-bladed fans with an
     integral rotor, thermal barrier coatings for high-temperature parts and various other processing
    techniques. All of these technology developments and many more date back to the department's
 investment in 6.2 exploratory development programs in the 1970s and 1980s. Most of these programs
        were executed largely before the precise needs for the F-119 or the F-22 were identified.

   Superior weapon systems like the Army's Big Five heroes of Desert Storm -- Apache, Black Hawk,
  Patriot, Abrams and Bradley -- the Air Force's F-117 stealth fighter and the Navy's Tomahawk cruise
     missiles are all products of well planned technology "on ramps." It is clear that technology base
  investments, focused on specific technological objectives, must be made well in advance of specific
  system requirements. Nonetheless, as system requirements begin to emerge, it is also necessary to
adjust science and technology efforts, particularly in the 6.3 advanced development arena, to ensure that
  potential sources of technological risk are addressed. Technological risk is further reduced through
technology insertion roadmaps leading to system level demonstration and validation and/or engineering
                                  and manufacturing development efforts.

An example that illustrates this point is the M-829A1 kinetic energy projectile, used very effectively as a
 tank killer in the Gulf War. As with many other developments, its technological origins can be traced to
   the 1960s, with fundamental efforts on energetic materials, mechanics of composite materials and
    penetration mechanics. During the late 1970s and early 1980s, exploratory development efforts
   addressed the more application-oriented areas of propulsion technology, aluminum and composite
                                     materials, and target interactions.

   These efforts, while focused on specific technological objectives that would improve kinetic energy
projectiles, were not focused on a specific requirement. In the mid-1980s, however, when the need for a
    new projectile began to emerge, 6.3 advanced development efforts were initiated to focus on the
    technological risk associated with the specific design aspects of the projectile: charge, sabot and
   penetrator. These risk-reduction efforts enabled a short development program leading to an initial
                                       operational capability in 1989.

The Joint Strike Fighter program is a technology "on ramp" for providing the U.S. Navy with a first day of
 the war survivable aircraft, the U.S. Air Force with a 21st century replacement of its F-16 fleet and the
U.S. Marine Corps with an AV-8B replacement. Technology insertion roadmaps exist to reduce risk and
take advantage of technological advances in a more-electric airframe, shared radio-frequency apertures
and sensors, shared electro-optical apertures and sensors, advanced packaging and cooling techniques
                                 for integrated avionics and many others.

  A final example illustrating a technology "on ramp" for a specific application is in the air-to-air missile
    technology arena. We have maintained a sustained annual technology base investment in core
    technologies relevant to air-to-air missiles: advanced processing, fuzing, propulsion and the like.
   However, when a specific application is identified, such as the AIM-9X, exploratory and advanced
    development investments are made in technology areas specific to the application to reduce the
       technological risk. Accordingly, we are currently making investments in areas such as high
angle-of-attack operation, airframe control, and infrared guidance and integrated fuzing to reduce the risk
                              associated with incorporation into the AIM-9X.

 In many cases, the technology associated with a new system or piece of equipment is mature and the
technical risk is low, but the operational risk high. In order to gain acceptance in the field, the advanced
 technology must be married with a suitable employment doctrine. This is one thing that I think has not
  been given adequate emphasis in the past. We have traditionally underestimated the importance of
  developing the appropriate doctrine, the tactics for employment, the training and the people who use
                                    technologically advanced systems.

  Advanced Concept Technology Demonstrations are designed to rapidly transfer technology from the
     developers to the users by focusing on concept -- not technology -- risk reduction. ACTDs are
  user-oriented and even user-dominated. They are an integrated effort to assemble and demonstrate
significant, new and improved military capability that is based upon mature advanced technologies. Each
    ACTD is based on actual military operations or demonstrations which are jointly developed and
  implemented with the operational users and material development communities as key participants.

    In FY 1995, Congress and the Department of Defense initiated the first 10 ACTDs. As originally
  conceived, ACTDs are relatively short-term efforts to assess the potential and develop the doctrine,
concepts of operations and tactics for new technologies prior to committing to formal acquisition. ACTDs
 are a critical precursor to formal acquisition. As such they can support both our operational needs and
   our legitimate acquisition requirements and serve as a means to reduce both operational risk and
                                         acquisition cycle times.

ACTDs are specifically intended to be completed within two to four years. Of the 10 initiated in FY 1995,
 several have already achieved their initial objectives and are completed or very near completion. All of
these demonstrations have provided significant insight and added capability for operational forces. They
have afforded the appropriate commanders with an opportunity to evaluate new technologies and assess
             the impact of this technology on their present and emerging military missions.

    The most well known ACTD is the Predator medium altitude unmanned aerial vehicle. Predator
 progressed from a concept to a three system operational capability in a period of less than 30 months.
Each system consists of three air vehicles, the appropriate ground stations and communications support.

Predator flew its first flight in July 1994 and deployed to the Bosnia theater in July 1995. On March 1 of
   this year Predator again deployed as an ACTD to European Command to support Operation Joint
Endeavor. On July 1, 1996, we are planning to complete the ACTD and transfer the Predator to the Air
  Force, which will provide the UAV operational support to our joint task force commanders. Both the
technical and operational lessons learned during the real world operational application of this ACTD are
                             facilitating our acquisition of the Predator UAV.

 In January 1996, we completed the Cruise Missile Phase I Mountain Top ACTD. This ACTD involved
   participation by the Navy, Army and Air Force and very successfully demonstrated the concept of
 cooperative engagement, supported by airborne sensors, of low-flying cruise missiles. This is a critical
step in assessing our future needs and the technology applications which will be needed to address the
emerging cruise missile threat. The technical concept demonstrated during this ACTD provides us with
        the ability to significantly leverage our present surface and airborne weapons systems.

 The Joint Countermine ACTD, still in execution, is a cornerstone of the department's efforts to ensure
that the countermine efforts in all of our military services are coordinated and complementary. The ACTD
 addresses the issue of providing a joint task force commander with a seamless countermine capability
 which flows from the deep water, through the shallow water, surf zone and up on to the land. As such,
      this ACTD involves significant participation by the Navy, Marine Corps, Army and our unified
commanders. This ACTD is addressing many technologies relevant to the countermine issues in Bosnia,
and we are continually assessing, in coordination with the Joint Staff, the maturity of these technologies
                    for possible deployment in support of Operation Joint Endeavor.

  The ACTDs initiated in FY 1995 and the nine started in FY 1996 leverage approximately $1 billion in
 military service and DoD agency technology programs. To ensure the ACTDs address the warfighters'
needs and requirements, they are coordinated closely with the Joint Staff through the Joint Requirement
 Oversight Council and Joint Warfighting Capability Assessment groups. This coordination ensures that
we focus our present and future ACTDs on legitimate present and emerging joint warfighting issues. The
           Joint Staff and JROC provides the critical link to the unified commanders-in-chief.

 ACTDs are an effective, inexpensive means to evaluate the operational utility of mature technologies
 emerging from the DoD Science and Technology Program and from investment by other government
agencies, industry or our allies. As indicated earlier, ACTDs are focused on the needs of the military user.
    They provide us with the ability to quickly respond to unanticipated needs and take advantage of
                    technology advances before they proliferate or become obsolete.

Congress has provided the department with a powerful tool, which has been used in executing ACTDs.
  Section 845 of the National Defense Authorization Act for FY 1994 provided the Defense Advanced
  Research Projects Agency authority to conduct technology demonstrations and prototype projects of
                            military systems using nonprocurement contracts.

   Section 845 provides unparalleled flexibility in contracting. DARPA [Defense Advanced Research
      Projects Agency] is successfully using this authority to conduct several projects including the
 high-altitude endurance unmanned aerial vehicle program, Tier II Plus (Global Hawk) and the stealthy
 Tier III Minus (DarkStar). The Navy/DARPA program to apply commercial practices to the arsenal ship
                                      will also utilize this approach.

With Section 845 authority, DARPA conducts experiments with the acquisition process and attempts to
    tailor the process for each project to achieve optimum results. DARPA has encouraged teaming,
integrated product and process development, established performance goals rather then specifications
  and introduced such innovations as having a single firm requirement, namely the price of production
                                        versions of the prototype.

    We have strengthened our requirements, technology assessment, technology development and
 demonstration processes with initiatives like Advanced Concept Technology Demonstrations and the
   Joint Warfighting S&T Plan. The department has taken these steps to ensure the S&T program is
                                 militarily relevant and technically sound.

    Working with the Joint Staff and services, the director of defense research and engineering has
 developed and currently has in coordination the Joint Warfighting S&T Plan. This plan supports the FY
     1997 budget and is responsive to the chairman of the Joint Chiefs of Staff vision for the future
    battlespace. It is directed towards exploiting the rapid pace of technology advances and gaining
 information superiority to enable enhanced dominant maneuver, precision engagement, full-dimension
protection and focused logistics operational concepts. The department's future success in achieving this
   vision will in large measure depend upon supporting the technology roadmaps that are essential to
       achieving the joint warfighting capability objectives cited in the Joint Warfighting S&T Plan.

 The Joint Warfighting S&T Plan complements the revised Defense Technology Area Plan and our first
Basic Research Plan. Another innovation this year is that in collaboration with the services and agencies,
  we have developed 300 defense technology objectives and six strategic research objectives to help
focus and improve management of our S&T investment. These plans will be made available over the next
several months to support industry and university decisions about how to invest their research funding.

Dual-Use Strategy. The department's dual-use strategy remains one key to ensuring our military forces
will have affordable access to the world's best technology. Last year, I testified before this subcommittee
   that commercial industry surpassed the DoD in R&D spending back in 1965 and that the disparity
  between DoD and commercial sector investment in R&D has been growing wider ever since. Those
trends have continued over the past year. The bottom line for the department is that we have no choice
but to move from separate industrial sectors for defense needs and commercial markets to an integrated
                                           national industrial base.

    Leveraging the commercial sector, the essence of the dual-use strategy, gives us a tremendous
  opportunity to field advanced weapons both more quickly and affordably. The department's dual-use
                                      strategy consists of three pillars:

                       Invest in dual-use technologies critical to military applications;

                                 Integrate military and commercial production;

                             Insert commercial components into military systems.

  The first pillar means leveraging the commercial sector's base of research and technology to foster
militarily useful technology. The second involves leveraging the commercial sector's low-cost production
capabilities by manufacturing commercial and military items on the same production lines. The third pillar
  requires creating the incentives and management approaches inside the DoD necessary to facilitate
                    using these dual-use, dual-produced items in military equipment.

    Last year, I cited multichip modules as one example of the department's investment in dual use
  technology. MCMs are semiconductor chips packaged together on a single substrate and integrated
  together into a single package or module. Because MCMs have application in a multitude of defense
    systems, where they can offer increased performance and reliability in a smaller package, DoD
                             jump-started this technology with early investments.

 Our aim at the outset was to improve the state of the art of the technology and more importantly, lower
  production costs so that MCMs became affordable for defense applications. The key to lower cost is
    larger production volume, and larger volume production comes from increased use of MCMs in
                                             commercial items.

    I am pleased to report that the department still expects to see a factor of 10 decrease in costs as
 production volume increases. We are starting to see results from our investment. In 1990, the Defense
Department was the only customer -- there was practically no commercial market. Last year, I was able
    to tell you that commercial applications are using over half of total sales of MCMs. That trend is
continuing. Several of the companies that originally depended solely on the department's research and
   development investment, such as nCHIP and MicroModule Systems, are now profitably producing
               hundreds of thousands of modules for commercial computer workstations.

  These MCM manufacturers have also successfully produced dozens of prototype modules for use in
 military systems and can expect to receive volume production orders for future defense systems. Until
they do, they are being sustained through orders for their commercial products. The U.S. manufacturing
  base for this important technology is robust but does not rely on DoD for its sole support. DoD gains
 access to the most advanced t