Congressional Documents

EXCERPTS - General Provisions

105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-132



                              R E P O R T

                                 OF THE

                        HOUSE OF REPRESENTATIVES


                               H.R. 1119

                             together with


      [Including cost estimate of the Congressional Budget Office]

 June 16, 1997.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

HOUSE COMMITTEE ON NATIONAL SECURITY One Hundred Fifth Congress FLOYD D. SPENCE, South Carolina, Chairman BOB STUMP, Arizona RONALD V. DELLUMS, California DUNCAN HUNTER, California IKE SKELTON, Missouri JOHN R. KASICH, Ohio NORMAN SISISKY, Virginia HERBERT H. BATEMAN, Virginia JOHN M. SPRATT, Jr., South JAMES V. HANSEN, Utah Carolina CURT WELDON, Pennsylvania SOLOMON P. ORTIZ, Texas JOEL HEFLEY, Colorado OWEN PICKETT, Virginia JIM SAXTON, New Jersey LANE EVANS, Illinois STEVE BUYER, Indiana GENE TAYLOR, Mississippi TILLIE K. FOWLER, Florida NEIL ABERCROMBIE, Hawaii JOHN M. McHUGH, New York MARTIN T. MEEHAN, Massachusetts JAMES TALENT, Missouri ROBERT A. UNDERWOOD, Guam TERRY EVERETT, Alabama JANE HARMAN, California ROSCOE G. BARTLETT, Maryland PAUL McHALE, Pennsylvania HOWARD ``BUCK'' McKEON, California PATRICK J. KENNEDY, Rhode Island RON LEWIS, Kentucky ROD R. BLAGOJEVICH, Illinois J.C. WATTS, Jr., Oklahoma SILVESTRE REYES, Texas MAC THORNBERRY, Texas TOM ALLEN, Maine JOHN N. HOSTETTLER, Indiana VIC SNYDER, Arkansas SAXBY CHAMBLISS, Georgia JIM TURNER, Texas VAN HILLEARY, Tennessee F. ALLEN BOYD, Jr., Florida JOE SCARBOROUGH, Florida ADAM SMITH, Washington WALTER B. JONES, Jr., North LORETTA SANCHEZ, California Carolina JAMES H. MALONEY, Connecticut LINDSEY GRAHAM, South Carolina MIKE McINTYRE, North Carolina SONNY BONO, California CIRO D. RODRIGUEZ, Texas JIM RYUN, Kansas MICHAEL PAPPAS, New Jersey BOB RILEY, Alabama JIM GIBBONS, Nevada Andrew K. Ellis, Staff Director C O N T E N T S ---------- Page Explanation of the Committee Amendment........................... 1 Purpose.......................................................... 1 Relationship of Authorization to Appropriations.................. 2 Summary of Authorization in the Bill............................. 2 Summary Table of Authorizations................................ 2 Rationale for the Committee Bill................................. 10 Readiness...................................................... 13 Quality of Life................................................ 14 Modernization and Innovation................................... 15 Defense Reform................................................. 16 Conclusion..................................................... 17 Hearings......................................................... 18 DIVISION A--DEPARTMENT OF DEFENSE AUTHORIZATION.................. 19 TITLE III--OPERATION AND MAINTENANCE............................. 262 OVERVIEW....................................................... 262 Funding Priorities........................................... 262 Readiness.................................................... 263 Reform....................................................... 264 Funding Overview............................................. 264 ITEMS OF SPECIAL INTEREST...................................... 292 Budget Request Reductions.................................... 292 Defense Support Services Reform.............................. 293 Overview................................................... 293 Contracting Out Firefighter and Security Activities at Military Installations................................... 294 Defense Supply and Logistics Management.................... 295 Definition of Mission Essential Support Services........... 296 Extensively Studied Functions.............................. 297 Multi-Service Contracting of Base Operations Functions..... 297 Oversight of Outsourced Functions.......................... 298 Other Issues................................................. 314 Army After Next............................................ 314 Budget Justification Materials............................. 316 Flying Hour Shortfalls..................................... 319 LEGISLATIVE PROVISIONS......................................... 324 Subtitle A--Authorization Of Appropriations.................. 324 Section 301--Operation and Maintenance Funding............. 324 Subtitle B--Military Readiness Issues........................ 325 Overview................................................... 325 Section 311--Expansion of Scope of Quarterly Readiness Reports.................................................. 328 Section 312--Limitation on Reallocation of Funds Within Operation and Maintenance Appropriations................. 329 Section 314--Prohibition of Implementation of Tiered Readiness System......................................... 329 Section 315--Reports on Transfers From High Priority Readiness Appropriations................................. 330 Section 316--Report on Chairman, Joint Chiefs of Staff Exercise Program and Partnership for Peace Program....... 331 Section 317--Quarterly Reports on Execution of Operation and Maintenance Appropriations........................... 331 Subtitle D--Depot-Level Activities........................... 332 Section 331--Extension of Authority for Aviation Depots and Naval Shipyards to Engage in Defense Related Production and Services............................................. 332 Section 332--Exclusion of Certain Large Maintenance and Repair Projects from Percentage Limitation on Contracting for Depot-Level Maintenance.............................. 332 Section 333--Restrictions on Contracts for Performance of Depot-Level Maintenance and Repair at Certain Facilities. 332 Section 334--Core Logistics Functions of Department of Defense.................................................. 333 Subtitle G--Other Matters.................................... 338 Section 373--Inclusion of Air Force Depot Maintenance as Operation and Maintenance Budget Activity Group.......... 339 .............. TITLE IX--DEPARTMENT OF DEFENSE ORGANIZATION AND MANAGEMENT...... 392 ITEMS OF SPECIAL INTEREST.................................... 392 Defense Reorganization..................................... 394 Management Headquarters and Headquarters Support Personnel. 394 LEGISLATIVE PROVISIONS....................................... 395 Section 901--Limitation on Operation and Support Funds for the Office of the Secretary of Defense................... 395 Section 904--Center for the Study of Chinese Military Affairs.................................................. 396 TITLE X--GENERAL PROVISIONS...................................... 399 LEGISLATIVE PROVISIONS......................................... 405 Subtitle B--Naval Vessels and Shipyards...................... 406 Section 1022--Authority to Enter into a Long-Term Charter for a Vessel in Support of the Surveillance Towed Array Sensor (SURTASS) Program................................. 407 TITLE XII--MATTERS RELATING TO OTHER NATIONS..................... 422 OVERVIEW....................................................... 422 Defense Logistics Cooperation with the People's Republic of China.................................................... 424 LEGISLATIVE PROVISIONS......................................... 427 Section 1203--Report on Future Military Capabilities and Strategy of the People's Republic of China............... 429 TITLE XXVIII--GENERAL PROVISIONS................................. 465 ITEMS OF SPECIAL INTEREST...................................... 465 Military Construction in the Republic of Korea and Burdensharing Support for United States Forces Korea..... 465 Departmental Data................................................ 519 Department of Defense Authorization Request.................... 519 Military Construction Authorization Request.................... 519 Committee Position............................................... 520 Communications From Other Committees............................. 520 Fiscal Data...................................................... 528 Congressional Budget Office Estimate........................... 528 Congressional Budget Office Cost Estimate...................... 528 Authorization of Appropriations.............................. 529 Committee Cost Estimate........................................ 537 Inflation-Impact Statement..................................... 537 Oversight Findings............................................... 537 Constitutional Authority Statement............................... 538 Statement of Federal Mandates.................................... 538 Roll Call Votes.................................................. 538 Additional and dissenting Views.................................. 768 Dissenting views of Ronald V. Dellums.......................... 768 Additional views of John Spratt................................ 770 Additional views of James Hansen, Tillie Fowler and Solomon Ortiz........................................................ 773 Additional views of James M. Talent............................ 777 Additional views of Patrick J. Kennedy......................... 779 105th Congress Report HOUSE OF REPRESENTATIVES 1st Session 105-132 _______________________________________________________________________ NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 1998 _______ June 16, 1997.--Committed to the Committee of the Whole House on the State of the Union and ordered to be printed _______________________________________________________________________ Mr. Spence, from the Committee on National Security, submitted the following R E P O R T [To accompany H.R. 1119] [Including cost estimate of the Congressional Budget Office] The Committee on National Security, to whom was referred the bill (H.R. 1119) to authorize appropriations for fiscal years 1988 and 1999 for military activities of the Department of Defense, to prescribe military personnel strengths for fiscal years 1998 and 1999, and for other purposes, having considered the same, report favorably thereon with amendments and recommend that the bill as amended do pass. The amendments are as follows: The amendment strikes out all after the enacting clause of the bill and inserts a new test which appears in italic type in the reported bill. The title of the bill is amended to reflect the amendment to the text of the bill. EXPLANATION OF THE COMMITTEE AMENDMENT The committee adopted an amendment in the nature of a substitute during the consideration of H.R. 1119. The remainder of the report discusses the bill, as amended. PURPOSE The bill would--(1) Authorize appropriations for fiscal year 1998 for procurement and for research, development, test and evaluation (RDT&E); (2) Authorize appropriations for fiscal year 1998 for operation and maintenance (O&M) and for working capital funds; (3) Authorize for fiscal year 1998: (a) the personnel strength for each active duty component of the military departments; (b) the personnel strength for the Selected Reserve for each reserve component of the armed forces; (c) the military training student loads for each of the active and reserve components of the military departments; (4) Modify various elements of compensation for military personnel and impose certain requirements and limitations on personnel actions in the defense establishment; (5) Authorize appropriations for fiscal year 1998 for military construction and family housing; (6) Authorize appropriations for fiscal year 1998 for the Department of Energy National Security Programs; (7) Modify provisions related to the National Defense Stockpile; (8) Authorize appropriations for fiscal year 1998 for the operation of the Panama Canal Commission; and (9) Authorize appropriations for fiscal year 1998 for the Maritime Administration. RELATIONSHIP OF AUTHORIZATION AND APPROPRIATIONS Importantly, the bill does not generally provide budget authority. The bill authorizes appropriations. Subsequent appropriation acts provide budget authority. The bill addresses the following categories in the Department of Defense budget: procurement; research, development, test and evaluation; operation and maintenance; working capital funds, military personnel; and military construction and family housing. The bill also addresses Department of Energy National Security Programs and the Maritime Administration. Active duty and reserve personnel strengths authorized in this bill and legislation affecting compensation for military personnel determine the remaining appropriation requirements of the Department of Defense. However, this bill does not provide authorization of specific dollar amounts for personnel. SUMMARY OF AUTHORIZATION IN THE BILL The President requested budget authority of $265.6 billion for the national defense budget function for fiscal year 1998. Of this amount, the President requested $251.0 billion for the Department of Defense (including $8.4 billion for military construction and family housing) and $13.6 billion for Department of Energy national security programs and the Defense Nuclear Facilities Safety Board. The committee recommends an overall level of $268.2 billion in budget authority. This amount is an increase of approximately $2.6 billion from the amount requested for the national defense budget function by the President. The committee's recommendation is consistent with the amounts established in the budget resolution for fiscal year 1998 for the national security budget function. ............. RATIONALE FOR THE COMMITTEE BILL H.R. 1119, the National Defense Authorization Act for Fiscal Year 1998, reflects the committee's continued efforts to manage the risks that continued force downsizing and budget reductions pose for U.S. national security interests in an uncertain world. The committee and the Congress have helped bring a measure of stability to the U.S. defense program over the past two years, moving to restore some balance between the need to maintain sufficiently large and capable forces today and the need to modernize and introduce innovative new technologies and concepts that will provide a basis for continued American military superiority in future. The committee believes that the fundamental dilemma facing the Department of Defense remains constant: how to maintain a viable all-volunteer force in an environment where the number, scope and duration of military missions, especially peacekeeping and humanitarian missions, continue to grow while military forces and defense budgets continue to decline. Although the Department's recent Quadrennial Defense Review (QDR) recognized these realities, the long-standing gap between strategy and resources will persist and, in fact, is likely to widen. The National Defense Panel (NDP), an independent body selected by the Administration and Congress to assess the QDR, summarized the problem when it concluded that the QDR exposed a ``risk in defense resources.'' In particular, the NDP concluded that the QDR's plan to improve modernization funding was based upon ``tenuous'' assumptions which ``collec tively . . . represent a budget risk which could potentially undermine the entire Defense Strategy.'' The QDR acknowledges that a sound national military strategy is based upon protecting the ability of U.S. military forces to respond to today's challenges while also preparing for the challenges of an uncertain future. This strategy requires three principle tasks of the Department of Defense. First, U.S. military forces must help to maintain the security and stability among powerful nations that is by and large the result of the American-led victory in the Cold War. Second, U.S. forces must protect today's security and stability from lesser threats, be they smaller nations, ethnic conflicts, terrorism or myriad other sources. Finally, U.S. forces must begin to prepare now for the possibility of future great-power conflicts that may be fought with military forces quite different from today's. This first task of maintaining current security and stability has been articulated in a clear set of standards that account for the size and structure of today's U.S. military forces. These standards include the need to maintain approximately 100,000 troops both in Europe and in East Asia, and sufficient forces available to deploy, fight and rapidly win two nearly simultaneous major wars. The committee continues to support these standards. The troop levels in Europe and Asia represent an enduring commitment by the United States to these vital regions, while the capability to fight two wars simultaneously ensures that the United States will be able to respond to crises without compromising the ability to maintain stability elsewhere. With the continued imminent threats in Korea and the Persian Gulf, this two-war capability must remain a basic building block of U.S. military forces. At the same time, the dominance of U.S. conventional military forces and the continued strength of our nuclear deterrent is compelling adversaries to be more innovative and aggressive. Countering more diffuse and less traditional threats accounts for the second principle task of U.S. armed forces. Terrorism, proliferation of weapons of mass destruction, tribal and ethnicconflicts, the potential for ``information warfare'' and other asymmetric threats are placing new burdens upon the U.S. military. In the past year, the terrorist bombing of the Khobar Towers complex in Dhahran, Saudi Arabia has highlighted the need for improved force protection measures for U.S. units deployed abroad. The proliferation of ballistic missile technology and weapons of mass destruction also has accelerated in the past year, and the committee continues to believe that efforts to develop and deploy effective defenses against such threats must remain a national priority. The QDR also has acknowledged, under the rubric of ``smaller-scale contingencies,'' that U.S. military forces will be engaged in a growing number of peacekeeping and humanitarian missions. Because the Administration regularly has deployed the U.S. military on such missions, the QDR concluded that these lesser contingencies will represent a significant element of U.S. military operations over the next decade. The QDR also recognized the strains that multiple peacekeeping and humanitarian deployments place on U.S. troops, their families, military equipment and training for combat. However, based upon its continued attention to the growing readiness problems that U.S. forces confront, the committee is skeptical that the Department can maintain the current level of operational and personnel tempo without sacrificing critical military capabilities. Units and troops absorbed in repeated peacekeeping operations are unable to train effectively, for the high-intensity combat missions necessary to execute the national military strategy. The committee has long been concerned that the third principle task of the U.S. armed forces--preparing today for the eventuality of future great-power conflicts--has been undervalued by the administration. By contrast, the committee considers the maintenance of peace and stability among the world's most powerful nations to be America's unique contribution to global security, and of critical importance to the nation's ability to protect its interests around the world. However, today's security is the historical exception rather than the rule. As historian Donald Kagan testified before the committee, ``War has been a persistent part of human experience since before the birth of civilization. In 1968, Will and Ariel Durant calculated that there had been only 268 years free of war in the previous 3,421.'' There is every reason to believe that the current epoch should be viewed not as a ``post-war'' period, but instead as an interwar period. With history as a teacher, it is only prudent to assume that a large power or coalition of powers eventually will contest a vital U.S. national security interest. While the committee cannot predict with certainty who this challenger will be or exactly when the challenge will arise, it is possible to identify what our enduring national interests are, for they have remained constant. Even in the post-Cold War era and absent a global competitor like the Soviet Union, the United States retains its traditional interests in protecting the American homeland and its people; preventing a hostile power or coalition of hostile powers from dominating Europe, East Asia and the energy-producing regions of the world; and protecting the international order of nation-states. These abiding interests preceded, and have survived, the Cold War. The most serious and sustained threats to these enduring interests can only come from other powers capable of fielding substantial conventional military forces or nuclear weapons. While the QDR represents an improvement over the Administration's 1993 Bottom-Up Review, the QDR presents an overly optimistic view of the possibility of future challenges to America's core security interests. The committee believes that a sound national military strategy must account not only for the likelihood of threats but also for the gravity of any threat to these core security interests. In the past year, the committee has focused on the challenges posed by China--an emerging power--and Russia--a once and perhaps future power--to United States global interests. While neither nation is currently an enemy of the United States, they do represent the nations most likely and able to accumulate military power sufficient to challenge U.S. vital national security interests. The QDR's projection that neither China nor Russia is likely to emerge as a regional great power until beyond 2015 is questionable. The committee remains supportive of efforts to bolster the democratic process in Russia. The collapse of the Soviet Union has created an opportunity to more closely tie Russia to the world's democracies. However, the committee believes that Russia's future will be shaped less by U.S. policies than by whether Russia decides to remain an independent power pursuing its own strategic goals, driven by its own history and character, or decides to form working partnerships with the United States and its allies. The current Russian experiment in quasi-democracy is struggling against a centuries-long tradition of autocracy, and the United States must remain guarded in assessing prospects for the experiment's success. Moreover, history has demonstrated that the transition to democracy often proves a tumultuous and violent process. A vast but collapsed empire, governed by a weak central authority and armed with an arsenal of nuclear weaponry under questionable control, Russia must provide cause for great caution. Even if Russia succeeds in becoming more fully democratic, it still may establish security goals that conflict with those of the United States. China is an emerging power and poses an inverse problem. The Administration believes that the nature of Chinese power is not yet determined, and that China's external relations can be shaped through engagement to allow it to make a positive contribution to regional stability and to act as a responsible member of the international community. The committee takes a guarded view, more consistent with the Department of Defense report prepared pursuant to the National Defense Authorization Act for Fiscal Year 1997. The report concluded that China's goal is to become one of the world's great powers, that China will be securely established as the leading political power in East Asia early in the coming century and that China will ``build its military power to the point where it can engage and defeat any potential enemy within the region with its conventional forces and can deter any global threat to China's national security.'' Whether or not an emerging China becomes an enemy of the United States and its allies remains to be seen, but China's stated strategic goals would appear to challenge America's current position as a powerful presence for peace and stability in East Asia. The committee believes that the process of managing strategic risk must be shaped first and foremost by the risks of renewed great-power rivalries. The surest way to optimize the chances of an American strategic partnership with either Russia or China is for the United States to continue to be the world's most powerful force for peace and stability. However, the committee also recognizes that the assumption that either Russia or China will acquiesce in American global leadership is a dangerous premise upon which to base U.S. security strategy for the coming century. The making of strategy has always been a process of managing risk. In a post-Cold War environment of shrinking military forces and constrained defense budgets, the imperative to maintain strategic priorities grows while the margin for error gets smaller. The QDR strategy is consistent with the committee's view of the role America should play in the post- Cold Warworld, and the committee is hopeful that the review might provide a more stable foundation for maintaining the armed forces necessary for the nation to meet these future challenges. However, the continued decline in defense spending means that the committee's two- year-old effort to begin revitalizing U.S. military forces will take longer and will involve higher risk to the nation. The projected real decline in future defense budgets, assumed in the QDR and ratified in the recent budget agreement, adds to strategic risk. Neither the Administration's fiscal year 1998 defense budget request nor the defense plan established in the QDR adequately address budgetary shortfalls that exacerbate the strategic risks inherent in a dangerous world. The QDR has not allayed the committee's skepticism regarding the Administration's commitment to establishing a defense program that balances the pillars of a sound defense program: the maintenance of sufficient combat forces in a state of readiness necessary to execute the national military strategy, the guarantee of a decent quality of military life and an adequate program of equipment modernization to ensure for the future the advantages U.S. military force enjoy today. If the defense program is to be truly brought into balance, and the harmony between current readiness, quality of life, and modernization restored, more dramatic actions are demanded. READINESS The committee reaffirms its commitment to maintaining a high state of military readiness. In past years, the committee has added significant funds to restore pay raises, increase the level of combat training, improve the level of equipment maintenance and undertake many other initiatives to compel the Administration to address readiness problems. However, the readiness of U.S. armed forces, particularly for the high- intensity combat missions central to the nation's military strategy, has continued to erode. It is apparent that the high pace of military operations, due in large part to the burdens of repeated deployments for peacekeeping and humanitarian missions, and declining budgets are taking a heavy toll on U.S. military forces. Four trends are salient. First, soldiers, sailors, airmen and Marines are working harder and longer to execute their peacetime missions due to an inherent tension between personnel and resources shortages and the increased pace of operations. Military personnel and their families are paying an increasingly higher human price from being repeatedly asked to ``do more with less.'' Second, the quantity and quality of combat training is being compromised, especially for the most demanding mission--to fight and win tomorrow's high- intensity wars. Third, the quality of military life continues to erode to the point where a growing number of talented and dedicated military personnel and their families are questioning the desirability of a life in uniform. And fourth, military equipment is aging prematurely due to extended use and reduced maintenance. Budget cuts and the increased operational tempo have started to affect the reliability and availability of existing fleets of equipment. In sum, these trends depict a significant, systemic readiness problem that will continue to undermine the preparedness of U.S. military forces. The committee bill represents an effort to manage the risk associated with a deepening readiness problem by protecting funding for high-intensity combat training and maintenance of equipment and infrastructure. In addition, the committee believes that the Administration's personnel budget request will not be able to provide the forces needed to execute the national military strategy and to support current operational tempo while providing a decent quality of military life. Nor does the committee accept the QDR's end-strength recommendations, which are likely to exacerbate the personnel readiness problems outlined above. To more prudently manage the risk associated with the problems inherent in the Administration's budget request, the committee has maintained the end-strength floors established in 1996 and continues to protect what it believes to be prudent active-duty force levels. The committee also has continued its commitment to readiness by adding funds for depot maintenance, real property maintenance and mobility enhancements needed to maintain a power-projection force capable of rapid reaction to world crises. QUALITY OF LIFE In past, the committee has considered the quality of military life to be an essential component of a balanced defense program, and has strengthened military housing programs, programs to reduce out-of-pocket costs for military personnel and their families, and has funded full pay raises, whether requested by the Administration or not. Nonetheless, many troops and their families have grown increasingly dissatisfied with the quality of military life. Much of this dissatisfaction stems from the stress of extended time away from home resulting from almost continuous peacekeeping and other humanitarian missions. Quality of life is inherently difficult to quantify. It is a complex construct, reflected in a delicate mix of variables such as balancing family life and military service, decent housing, adequate pay and benefits, reliable and affordable health care and many other factors. Providing a decent quality of military life is essential to recruit, retain and maintain the professional, all-volunteer force upon which U.S. military strategy relies. Since the 1970s, when the draft was terminated, the compact between the nation and the men and women who serve it in uniform has rested upon the proposition that soldiers, sailors, airmen and Marines and their families will be provided with a standard of living that approximates that of middle-class America. However, there is a widespread belief among service personnel and their families that the quality of their lives is eroding. As a consequence, many in the military are beginning to question whether the rewards of military life are worth the mounting hardships. Perhaps the leading cause of dissatisfaction is increased family separations. Given that 65 percent of the force, officer and enlisted, is married, the choice between professional requirements and personal needs is becoming more complicated. One Navy spouse summarized the problem when she told the committee, ``In such a high [operations tempo] environment, the best marriages, the ones that survive, are those in which people learn to live apart.'' The services' attempts to balance quality of life with other factors reveal just how difficult a management problem this is. For example, the commander of the Army's III Corps at Fort Hood, Texas, has demanded that important training time and resources be diverted to create opportunities for soldiers to attend to basic and essential activities of family life, such as parent-teacher conferences. This is a poignant and disturbing example of the dilemmas facing military families. Since the committee began reporting on the growing readiness problem, the Department of Defense has begun to recognize the problem, and has introduced a number of measures to better manage the strains of high operational and personnel tempos. The committee notes these small belated steps with satisfaction, but believes that more aggressive actions will be necessary. MODERNIZATION AND INNOVATION A third critical component of a balanced defense program is ensuring that U.S. military personnel are equipped with modern technology. There is widespread general consensus that the ``procurement holiday'' of the past five years must come to an end. The Joint Chiefs of Staff have identified a goal of $60 billion per year in procurement spending as the approximate funding level needed to recapitalize the U.S. armed forces--a figure reconfirmed by the QDR. The committee continues to support this objective, but continues to doubt the Administration's commitment. In the context of trying to manage risk in an environment of constrained resources, the committee believes it is necessary to set modernization priorities that reflect strategic priorities. Systems that promise only marginal improvement over those currently in the field should, and eventually will, give way to those systems that demonstrate more cost-effective and strategically relevant capabilities. There is no better example than tactical aircraft programs, where plans far exceed projected budgets and the half-measures recommended in the QDR do not address the problem. The committee was pleased to see, in several instances, that the QDR did make important strides toward aligning modernization priorities with strategic need. For example, the QDR's recognition that the Administration's own ``three-plus- three'' national missile defense program was substantially underfunded confirms the committee's approach to this important program over the past several years. The committee stands by its belief that continued global proliferation of ballistic missile technology makes the deployment of an effective national missile defense system of the highest priority. However, the committee continues to question the Administration's commitment to either national or theater missile defenses. Despite claims advanced in the fiscal year 1998 defense budget request that theater defense programs were being accelerated, funding for these programs was cut by more than $400 million from current spending levels. DEFENSE REFORM Serious readiness, quality of life and modernization problems and shortfalls add increased urgency to the committee's continuing efforts to reform the Department of Defense establishment to create a smaller, smarter and streamlined bureaucracy. In an environment where combat forces continue to be reduced while they are deploy more often, the committee believes that it is untenable to continue devoting 60 percent of the defense budget to support and infrastructure. If the goal to reestablish a defense program balanced among the need to maintain ready forces and to ensure a decent quality of military life today while modernizing U.S. military forces for tomorrow is to become a reality, the Administration must become a more active partner in pursuing meaningful defense reform. Defense reform is no longer just about being more efficient. Rather, it is about survival in an environment where failure to achieve real defense reform will result in degraded combat capability for lack of adequate resources. The committee initiated a number of reforms during the 104th Congress in the areas of acquisition policy, infrastructure and support services, and defense structure and organization. All were intended to increase overall efficiency within the Department while, at the same time, encouraging the shift of resources from the Department's support ``tail'' to the services' combat ``tooth'' in an effort to preserve the military's warfighting effectiveness. The committee acknowledges Secretary Cohen's promise to pursue defense reform through the establishment of the Task Force on Defense Reform, but the committee notes that the results of that new review will not be known until late in the year. While additional reviews may be warranted, it is the committee's view that in the aftermath of the 1995 Commission on Roles and Mission, the 1996 Defense Science Board Task Force on Outsourcing and Privatization, and the 1997 QDR, the time for aggressive action is now. To accelerate the process of reform, the committee reported H.R. 1778, the Defense Reform Act of 1997, to the House of Representatives. This bill pursues meaningful reform in three basic areas: streamlining the defense bureaucracy, improving defense business practices and adding a measure of common sense to the environmental regulations governing the Department's operations. Chief among the bureaucratic reforms are initiatives to reduce headquarters staffs by 25 percent and the defense acquisition workforce by more than 40 percent. According to the Congressional Budget Office, these reforms will save $15 billion over the next five years and an additional $5 billion each year thereafter without taking into account the additional potential savings resulting from the mandated increases in competition of defense support services. Finally, the environmental reforms will not merely help to control the rapidly escalating cost--now $12 billion per year-- of defense environmental clean-up efforts, they will ensure that these funds actually are spent on restoration work itself, rather than to satisfy excessive and redundant regulatory requirements. The committee recognizes the need for environmental restoration of former military and defense installations, but believes that taxpayer dollars should be devoted to the needed cleanup work, not on paperwork. CONCLUSION Secretary of Defense Cohen has admitted that the defense posture outlined in the Quadrennial Defense Review will allow U.S. forces to execute the national military strategy, but at increased risk. He also quantified the budgetary risk--the amount of defense spending required to close the strategy- resource gap--at approximately $15 billion per year. While the committee believes that the annual shortfall is greater than $15 billion, what was most striking about the Secretary's estimate was the relatively small size of the budget shortfall in comparison to the tremendous strategic risk associated with not addressing it. At $15 billion, the estimate represents approximately one-tenth of 1 percent of the federal budget. Yet the military, strategic and political risks associated with not fixing this shortfall are monumental. For the military, the budget shortfall translates into declining readiness, diminished quality of military life and postponed modernization problems described above. The continued erosion of military capability will threaten the nation's capabilities to protect and promote its interests around the world and will inevitably lead to the loss of American international influence. In the committee's view, the risks of inaction or failure far outweigh the cost of addressing shortfalls in the defense budget-- whether $15 billion per year, or more. Although the QDR was completed too late to shape the Administration's fiscal year 1998 defense budget request or to factor significantly in the committee's deliberations, H.R. 1119 reflects the committee's mounting sense of urgency to restore a proper balance among readiness, quality of military life and modernization and to push the Department of Defense in the directionof meaningful reform. The nation cannot afford status quo defense budgets. The way forward is uncertain and involves great risks. The committee would prefer to be raising and maintaining military forces capable of an unquestioned response to challenges anywhere in the world, rather than managing budgetary, military and strategic risk with no margin for error. In this context, H.R. 1119 reflects the committee's effort to address serious shortfalls while managing risk in a resource-constrained environment. HEARINGS Committee consideration of the National Defense Authorization Act for Fiscal Year 1998 results from extensive hearings that began on February 12, 1997 and that were completed on May 22, 1997. The full committee conducted 11 sessions. In addition, a total of 54 sessions were conducted by five different subcommittees and two panels of the committee on various titles of the bill. DIVISION A--DEPARTMENT OF DEFENSE AUTHORIZATION ............. TITLE III--OPERATION AND MAINTENANCE OVERVIEW Funding Priorities The Administration's fiscal year 1998 defense budget request provides the illusion that funding for readiness of the armed forces was increased over past year levels. The Administration's rationale for this operation and maintenance (O&M) funding increase is that the preservation of readiness is a major priority. However, a significant portion of the growth in the O&M budget results from inflationary adjustments, additional funding for contingency operations, and in working capital funds adjustments (mostly to cover prior year expenses). When these factors are taken into account, the net effect is that the President's budget request would not increase military readiness or increase the resources necessary to arrest the shortfalls that are beginning to impact on battlefield effectiveness and safety. In response, the committee's recommendations for fiscal year 1998 extend a significant priority to sustaining an acceptable level of readiness for our military forces and continuing reforms of the administration and infrastructure of the Department of Defense (DOD). Each of these areas is extensively discussed elsewhere in this report. The committee is convinced that reforming the business operations of the DOD is critical since only 36 percent of the O&M budget relates directly to force readiness. Although a portion of the remaining 64 percent contributes indirectly to mobilization capabilities, the majority is directly related to the overhead needed to maintain a large and somewhat inefficient defense bureaucracy. The committee believes that too much of the current defense budget finances an overly large defense infrastructure at the expense of resources necessary to maintain a ready and capable force. The table below shows a breakdown of the readiness related expenditures contained in the budget request: [In millions of dollars] Land Forces................................................... $3,523.2 Air Operations................................................ 21,306.3 Ship Operations............................................... 7,431.0 Special Operations............................................ 1,169.4 Drug Interdiction............................................. 652.6 -------------------------------------------------------------- ____________________________________________________ Total................................................... 34,082.5 The remaining $59.5 billion contained in the O&M budget request has been identified for activities other than training and operating military forces. Therefore, the committee believes there is ample room for effecting significant further efficiencies in the operations of the Department. The committee's recommendations in this area are detailed below. Readiness Over the past few years, the committee has closely monitored the state of military readiness of our nation's armed forces. Two years ago, the committee found that the military services were in the early stages of a long-term systemic readiness problem. In response, the Congress added additional funding to the Administration's budget requests to improve force readiness. In an effort to assess readiness improvements, the committee conducted an intensive scrutiny of U.S military units around the world that revealed, in fact, military readiness is not improving, and may be declining. This investigation included numerous interviews and committee hearings with all ranks; from major military commands to individual military units, non-commissioned officers, and family members. A consistent theme voiced by service members was that they could only maintain their readiness levels by sacrificing other critical areas such as procurement, modernization, and quality of life. A recurring statement by many interviewed was that they are doing more with less, and working harder and longer just to keep up with peacetime mission requirements. The committee believes that U.S. military members should not have to choose between readiness and maintenance of equipment, facilities and quality of life initiatives. The committee is concerned that as readiness levels decline, the quality of military life will erode to the point at which talented and dedicated Americans will question the desirability of a career in uniform. As an example, all of the military services may soon be facing a critical shortage of experienced mid-level pilots due to increased separations to go work for a commercial airline industry that is now hiring. The committee strongly believes that readiness is a perishable commodity. The committee understands that making the necessary changes to return U.S. military readiness to an acceptable level will be difficult, particularly as fewer and fewer resources are made available. The committee recommendations contained in this report reflect a concerted effort to pursue a number of targeted readiness initiatives to ensure that America maintains the best-trained, best-equipped, and most effective military in the world. Some of the readiness enhancements recommended by the committee are as follows: [Dollars in millions] Depot-Level Maintenance and Repair............................ $515.0 Maintenance and Repair of Real Property....................... 200.0 Recruiting and Advertising.................................... 22.9 National Training Center...................................... 60.2 Force Protection Enhancements................................. 25.8 Mobility Enhancement.......................................... 25.0 In addition to addressing the underfunding of key readiness accounts, the committee recommendations includes several legislative provisions intended to provide Congress with the necessary information to allow effective oversight of the readiness programs of the DOD. These initiatives include several provisions to increase timely andcurrent information on the management of readiness funding; provisions to enhance and protect training, particularly combat training; and a provision to improve readiness reporting by the DOD to address the disconnect between official readiness reports and the reality in the field. Reform After a series of hearings and in-depth reviews, the committee believes the DOD continues to support outmoded business practices which divert funding from underfunded higher priorities. The committee recommendations redirect funding from elements in the operation and maintenance budget associated with inefficient procedures, administrative overhead and excess infrastructure in order to support quality of life and readiness priorities. Funding Overview The budget request contained $95,439.0 million for Operations and Maintenance and working Capital Funds, representing an increase of $3.5 billion from the amount authorized for Fiscal Year 1997. The committee recommended $94,849.8 million. The committee recommends approval of the request unless specified otherwise in the following table. ............. ITEMS OF SPECIAL INTEREST Budget Request Reductions Administration and Support Accounts Due to the necessity to address the shortfalls created by the revised budgetary scoring of the President's request, persistent underfunding of key operating accounts, and to ensure adequate funding of critical readiness accounts, the committee recommendation includes reductions in program growth in the administration and support accounts (Budget Activity 4) of the military departments as follows: [In millions of dollars] Army..............................................................$210.0 Navy.............................................................. 230.0 Air Force......................................................... 100.0 In addition, the committee believes that the support structure of the Department of Defense and the various Defense Agencies is disproportionate to needs of the military services. The report of the Quadrennial Defense Review (QDR) proposes a six percent reduction in this area by November 30, 1997. Therefore, the committee recommends reductions in administration and management funding for these accounts as follows: [In millions of dollars] Office, Secretary of Defense...................................... $81.4 Washington Headquarters Service................................... 42.6 QDR savings....................................................... 168.4 The committee is convinced these recommended reductions will not directly affect the readiness capabilities of our combat forces. The committee is mindful, however, that headquarters and other administrative support for the forces is important, but must be appropriately sized to be economically effective. ............. Defense Support Services Reform ............. Defense Supply and Logistics Management The current costs of the Department of Defense (DOD) supply system are significantly greater than the private sector, even after taking into account the need to maintain a wartime capacity. The committee believes that DOD's supply management and work processes are ideal business re-engineering candidates, given the extensive commercial market for these services and the recent improvements in private sector practices. In doing so, the committee encourages DOD to revise the way it provides supply services by making extensive use of such commercial options as consolidation, outsourcing, particularly prime vendor and virtual prime vendor deliveries for most repairable and consumable items. The use of prime and virtual prime vendors provide the benefit of lowering distribution, warehousing, and inventory costs, which reduces the customer rates in the supply and distribution business areas of the working capital funds. The committee understands that savings, estimated from DOD's current initiatives (i.e., ``lean logistics'' and ``velocity logistics'') to reduce the number of inventoried spare parts and associated storage costs, have been included in the military services' Operation and Maintenance (O&M) budgets. Therefore, the committee directs the Secretary of Defense to report to the House Committee on National Security and the Senate Committee on Armed Services by March 1, 1998, on the savings achieved due to reforms in spare parts inventories and logistic operations the savings estimated in fiscal years 1998- 2003 from these reforms and an assessment of the risks to readiness associated with relying on projected savings. Definition of Mission Essential Support Services The committee continues to be frustrated by the lack of a clear definition of the support services and functions that are essential to the strategic mission of the Department of Defense (DOD), otherwise known as inherently governmental functions. The committee is particularly concerned that the military departments appear to have different definitions and a different, and often changing, understanding of the relationship between inherently governmental and commercial activities. For example, between fiscal years 1994 and 1996, the Department of the Air Force, without changing their role or mission, redefined roughly 194,000 personnel from the commercial activities to inherently governmental categories. The committee directs the Secretary of Defense, in consultation with the secretaries of the military departments, to provide by March 1, 1998, a report to the House Committee on National Security and the Senate Committee on Armed Services containing the following information: (1) A Department of Defense-wide definition for each of following categories; inherently governmental; core; national defense-exempted; and exempted from outsourcing for other reasons; (2) A listing of all functions and activities that are considered inherently governmental and the reasons why; (3) A listing of all commercial activities, indicating whether the activity is core or non-core including a justification for core activities; (4) A listing of all support services, functions and activities that have both a core and a non-core element; and (5) A listing of all commercial activities that are exempted for other reasons and the reasons why. In addition, the committee directs the Secretary of the Air Force to provide a report to the House Committee on National Security and the Senate Committee on Armed Services, by March 1, 1998, providing an explanation for the shift of personnel, between fiscal years 1994 and 1996, in the Air Force commercial activities to the inherently governmental category, a listing of the specific functions that were changed to inherently governmental and an explanation why. Extensively Studied Functions The committee is aware that within the military services, there is little consistency for outsourcing non-inherently governmental base operations functions and services. Specifically, the military services conduct A-76 studies on activities that are similar, if not exactly the same, as extensively studied and outsourced functions in their own service or in the other military services. This practice not only unnecessarily duplicates effort, it is costly. The committee believes that by developing standard ``templates'' based on previous A-76 studies of similar functional areas, the military services would save time and resources in outsourcing these functions. The following chart illustrates the percentage of base operations support activities that were outsourced in fiscal year 1996, an average of 50 percent or more within the military services. [In percent] ------------------------------------------------------------------------ Air Marine Base Operating Activity Force Army Corps \1\ Navy ------------------------------------------------------------------------ Laundry and Dry Cleaning.......... 100 85 81 94 Custodial Services................ 100 88 82 86 Refuse Collection & Disposal Services......................... 96 84 67 81 Food Services..................... 88 88 42 39 Office Equipment Maintenance and Repair........................... 100 75 18 100 Contractor-Operated Parts Stores & Civil Engineering Supply Stores.. 100 71 100 \2\ ------------------------------------------------------------------------ \1\ Marine Corps figures are as of July 1996; all others are as of the end of fiscal year 1996. \2\ Not reported. Note.--Percentages represent the portion of the workforce that is outsourced for a given function. Source: GAO analysis of services' commercial activities inventory databases. Multi-Service Contracting of Base Operations Functions The National Performance Review and the 1995 report of the Commission on Roles and Missions indicated that expanding the Department of Defense (DOD) efforts in contracting out multiple services under a single contract (multi-service contracts) would achieve significantly greater savings than single contracts. Since 1977 DOD has entered into only a handful of such contracts, primarily for base operation support services. However, little information exists on how these contracts work, what services are best delivered under such a program, and what are the actual savings to the military installation. For example, the Army recently determined that the multi-service contract at Fort Irwin, California was too cumbersome to administer. The committee directs that the General Accounting Office review the opportunities and problems with multi-service contracts and provide a report of its findings to the Congressional defense committees by March 1, 1998. The review should identify the characteristics of selected multi-service contracts, what are the lessons learned from past and current DOD multi-service contracts, what are the cost and efficiency gains achieved in multi-service contracts in contrast to a single service contract, what are the implications for small- business, and what DOD functions are best suited for multi- service contracts. ............. Oversight of Outsourced Functions The committee is aware that the Department of Defense (DOD) has increased efforts to maximize efficiencies and improve services by planning to study for outsourcing, more than 100,000 civilian positions between fiscal years 1998 and 2003. The committee has several concerns regarding these efforts. DOD is pursuing opportunities to outsource services and functions currently provided by military personnel. The committee questions the savings estimates from such outsourcing since the military personnel performing these services will be retained and contractor costs will be incurred. In addition, the committee is concerned that services and functions that are currently used to train military personnel will be outsourced. A recent report by the General Accounting Office indicates that DOD does not have the adequate personnel or resources to conduct or manage new contracts for the planned outsourcing efforts. For example, the United States Army Forces Command had about thirty staff dedicated to administering the commercial activities program during the 1980s. By mid-1996, this staff had dropped to three. Furthermore, the committee is concerned that recent outsourcing efforts do not include studies on whether it would be more cost effective to return currently outsourced functions and services to the public sector. Without this review, DOD cannot ensure that it is receiving the best service for the taxpayer. Therefore, the committee directs the Secretary of Defense to review the planned outsourcing efforts and report his findings to the Congressional defense committees by March 1, 1998. The report should address the following questions: (1) What function and services performed by military personnel has DOD planned to study for outsourcing between fiscal years 1998 and 2003? (2) What is the methodology used in determining the public costs when reviewing the outsourcing of a function or service performed by military personnel? (3) What is the adequate level of staff support required for ongoing and future outsourcing studies? (4) What is the adequate staff support necessary to monitor the resulting contracts? (5) What are the opportunities for centralizing the personnel and resources into one office that will provide defense-wide outsourcing support? (6) What are the competitive costs and savings from the planned outsourcing studies? (7) What studies are planned to review the return of outsourced services and functions to the public sector? ............. Other Issues Army After Next The committee notes with interest the success of the initial efforts of the Army's ``Army After Next'' program. With the support of the committee in the National Defense Authorization Act for Fiscal Year 1997 (Public Law 104-201), the Army was able to conduct several highly productive wargaming exercises aimed at determining the future strategic environment for the employment of land forces and the technologies, operational concepts and military organizations that may be required. The committee welcomes the support for this important and cost-effective program that has been expressed by the Secretary of Defense and Chief of Staff of the Army, and encourages the other military services to undertake similar efforts. At the same time, the committee remains concerned about the direction of the Army's future modernization and innovation efforts, which at the least remain hamstrung by inadequate budgets. The process of fielding the next-generation ``Force XXI'' Army will not be complete within the active Army until well after the year 2020. And one lesson apparent from the successful Force XXI exercises at the National Training Center is the need to move more rapidly not merely to digitize current land systems but to develop more lethal, mobile and deployable systems for the future. Therefore, the committee directs that, of the amounts authorized for Operations and Maintenance, Army, Force-Related Training, Special Activities under Budget Activity 3, $7.0 million be made available to conduct further analysis for the ``Army After Next'' program. The committee also recommends that the Army establish a stable funding profile for the program. In addition to allowing United States Army Training and Doctrine Command to investigate the possibilities of more radical change, both in strategic and operational requirements for land combat, than envisioned under the Force XXI, the program provides an important hedge should Force XXI funding be reduced due to overall defense budget shortfalls. The committee continues to consider the small amount of funding required to conduct ``Army After Next'' analysis as a wise investment to ensure the Army's modernization program is responsive to future threats. ............. Budget Justification Materials The committee continues to be concerned with receiving the Department of Defense budget justification materials being received in a timely or useful manner to support Congressional oversight and decision-making. The justification materials, particularly for the operation and maintenance accounts, are currently provided to the Congress late in the committee's review process, often precluding the ability to conduct thorough and in depth analysis of the President's budget request. Although an extensive amount of material is eventually provided, much of it is in formats that conflict between the individual services making it difficult to assess trends in similar functions. As an example, the data concerning depot maintenance for the Air Force is located in a different budget activity than found in the Army or the Navy. The complexity of the multiple displays of budget information also makes locating information on a specific subject difficult and time consuming. In particular, details on the allocation of outsourcing and efficiency savings are either not provided or scattered throughout several tables. Therefore, the committee directs the Secretary of Defense to convene a working group, consisting of representatives of the military departments and the appropriate defense agencies, to develop a single Department of Defensewide standard formulation for the display of budget justification materials provided to Congress. The committee urges this working group to consider eliminating repetitive and redundant budget displays and directs that budget justification materials provided to support the fiscal year 1999 budget request confirm to the maximum extent practicable with a new department-wide standardized format. ............. Flying Hour Shortfalls The committee is alarmed by recent reports of significant shortfalls in the Navy and Air Force flying hour programs. The committee has learned that during fiscal year 1997, the Navy is reporting a funding deficit of $107.0 million and the Air Force reports a deficit of $171.0 million in their flying hour programs. Compounding this problem, and adding to the committee's concerns, is that fact that the Secretary of Defense recently informed the committee that the budget request for fiscal year 1998 underfunds the Navy flying hour program by $350.0 million and the Air Force program by $200.0 million. The committee finds these trends unacceptable and believes they raise serious questions about the validity of the services budget formulation process for these programs. The military services have explained to the committee that a significant portion of the shortfalls result from unanticipated higher costs for aircraft parts, failures in revised repair initiatives, and errors in the calculation of their requirements. As an example, the Navy estimate for aircraft repair parts in the fiscal year 1997 budget request was 25 percent below the actual costs experienced to date. The Air Force reported that F-15C/D aircraft are experiencing a 50 percent increase in engine changes. In addition, when the Air Force changed the source of repair for F-15E engines, they failed to include relevant costs in their fiscal year 1997 budget request. Both of the services report that repair parts usage is greatly exceeding program expectations due to aging of their aircraft. The committee believes that anticipating aging aircraft repair parts requirements and providing the necessary internal management for one of the services' most important combat programs should be a top priority for the Secretary of the Navy and the Secretary of the Air Force. As mentioned elsewhere in this report, the committee understands that the services, and particularly fighter aviation units, are working harder then ever before. This is not a new phenomenon, as these units have been stressed for the last several years. From interviews with aviation personnel and testimony before the committee, the committee understands that flying units are extensively using ``work arounds'' to solve the problems of aircraft breakdowns and parts shortages. The committee has also heard reports of maintenance personnel working long hours to take parts from one aircraft to place on another just to meet operational requirements. The committee does not understand how the service budgeting systems did not recognize and compensate for the impact of the extremely high aircraft operational rates in the past two years. As these budgeting errors have only recently come to light, and at a time when overall funding is being strictly rationed to identified needs, the committee fears that any funds provided to overcome these shortfalls may not address the true underlying problem. Therefore, the committee directs the Secretary of the Navy and the Secretary of the Air Force to conduct a comprehensive review of its current and future years active and reserve component flying hour programs and provide to the Congressional defense committees by December 1, 1997, a report outlining actions taken to correct these budgeting errors. ............. Subtitle B--Military Readiness Issues Overview Based on testimony provided to the committee and in field interviews with hundreds of military personnel of all ranks and in all services, it is clear to the committee that today's operating motto of ``doing more with less'' is incompatible with maintaining a highly-motivated, well-trained, quality military force able to execute the demands of the National Military Strategy. This reality is the result of declining defense budgets, a smaller force structure, fewer personnel and aging equipment laboring under a higher pace of operations. The committee is concerned about the extent to which the military services must strip people, parts, equipment and funds from non-deployed units to fill shortfalls in deploying units. This shell game leaves non-deployed units ill-prepared to maintain combat skills and increases the burden on those left behind who must work longer and harder to maintain operations at home station. The committee is very disturbed about the loss of combat proficiency being reported from the military services' training centers. Degraded combat training, driven in large part by funding shortfalls and inadequate time to accomplish needed training at home station due to deployments in support of contingency operations, strikes at our military forces' ability to fight and win high-intensity wars quickly, decisively and with minimum casualties. Exacerbating the committee's concerns are efforts underway by some of the military services which appear to erode training standards and requirements, as a means to address resource shortfalls and the need to free up funds for modernization priorities. For example, starting in fiscal year 1998, the Army plans to require units scheduled for training at the National Training Center (NTC) to pay for this training out of funds budgeted for home station training. The committee believes that this proposal wouldresult in less home station training for these units which, as noted above, has been identified by the services' training centers as a significant cause of degraded combat proficiency. Further, the Army, in briefings to the committee on this matter, has conceded that starting in fiscal year 1998, units scheduled for training at the NTC will not be as well prepared as in the past. The committee finds this troubling, particularly in light of a statement by Army Chief of Staff, General Dennis Reimer, in a characterization of the NTC as ``. . . a cornerstone of our training program, and a cornerstone of our readiness program.'' Additionally, the NTC has recently begun to reduce NTC live fire exercises by one-third--from three to two. The committee believes that such actions are short- sighted and short-change critical high intensity combat training and diminish the ability of combat units to take full advantage of training at the NTC. As another example, the committee understands the Marine Corps is currently revising its aviation training program. While the committee recognizes the importance of periodically reviewing training standards and requirements in light of operational considerations, it is concerned that this review may also be driven by the realities of under manning, spare parts shortages and aging aircraft which cannot support the current level of training. The committee believes that when training requirements and standards are changed, the risks associated with such changes should be fully understood and the military services should not redefine or rationalize training standards and requirements as a means of addressing resource shortfalls. The committee urges the Secretary of Defense and secretaries of the military departments to ensure that units are afforded the resources and time at home station to accomplish critical combat training. The committee commends efforts to maintain warfighting skills for units deployed to operations other than war, such as the Army's establishment of gunnery ranges in Hungary for units stationed in Bosnia. Notwithstanding the limitations of such efforts, the committee strongly encourages the Department and the military services to maximize combat training opportunities for units deployed in support of operations other than war to minimize the degradation of combat skills and time needed upon redeployment to regain combat proficiency. The committee continues to be concerned over the disconnect which exists between official readiness reports and the readiness reality in the field. While senior military and civilian leaders assert that the readiness of military forces is as good as it ever has been, reports from military personnel in the field depict a much different picture. This disconnect exists partly because the existing reporting system fails to capture many indicators which would allow for a more comprehensive readiness assessment. The committee finds it particularly frustrating, however, that as early as 1994, the General Accounting Office in its October report entitled, ``Military Readiness: DOD Needs to Develop a More Comprehensive Measurement System'' (GAO/NSIAD-95-29) identified additional readiness indicators that would provide a comprehensive assessment. Unfortunately, the Department of Defense (DOD) has yet to integrate these indicators into the formal readiness reporting system. The committee notes that in June 1994, the Defense Science Board (DSB) issued a report which stated that the DSB Task Force on Readiness ``. . . will continue to meet quarterly, or on call of the Secretary of Defense, to review the status of the recommendations and/or address other readiness issues as directed.'' It is the committee's understanding that this has not occurred. While the committee recognizes the increased focus on readiness issues by the Department with the establishment of the Senior Readiness Oversight Council (SROC), the SROC is, nevertheless, an internal mechanism to track readiness. Given the disconnect between official readiness reports and the reality out in the field, the committee believes that a standing senior group of outside advisors charged with providing independent assessments of readiness issues is warranted. The committee urges the Secretary of Defense to resurrect the DSB Task Force on Readiness or similar senior body of outside advisors to be available to the Secretary and the Congress to review readiness issues that arise. Finally, severely constrained defense budgets are leading to the underfunding of many defense accounts resulting in the movement of funds from readiness related accounts to fill funding shortfalls. While movements of funds between budget appropriations accounts are subject to reprogramming actions, transfers within budget activities are rarely visible in a timely manner. The committee has had a long-standing concern over the extent to which funds provided for training, maintenance and other key readiness accounts are being diverted to cover shortfalls elsewhere. For instance, according to the DOD, in fiscal year 1996, the Army shifted $144.8 million from depot maintenance to cover costs of operations in Bosnia. The Navy shifted $208.5 million from ship depot maintenance to fund a range of activities including contingency operations, ship supplies and underfunded flying hour requirements. Therefore, the committee's recommendation addresses several of these concerns and are detailed below. Section 311--Expansion of Scope of Quarterly Readiness Reports This section would expand the Quarterly Readiness Report required by section 361 of the National Defense Authorization Act for Fiscal Year 1996 (Public Law 104-106) to include data and analysis on additional readiness indicators which would provide a more comprehensive readiness assessment. The committee is concerned with what it views as a growing disconnect between the readiness picture presented by ``official'' readiness reports and reality out in the field. In visits to military installations across the country and in recent hearings before the committee, personnel from all military services and from all ranks expressed significant concern over many issues affecting readiness, including operating tempo, increased deployments, the effects of under manning, an eroding quality of life, morale, the impact of peacekeeping operations, and the increasing use of training funds for other purposes. None of these factors are measured by the Status of Resources and Training System (SORTS)--the foundation for senior level readiness assessments. More than three years ago, the committee identified the need to develop a comprehensive readiness assessment system. At the request of this committee, the General Accounting Office (GAO) conducted a review of the adequacy of the current readiness reporting system to provide a comprehensive readiness assessment as well as to provide predictive indicators of change. As a result of that review, the GAO provided to the Department of Defense (DOD) specific indicators cited by military commanders as being critical to readiness assessments but not included in SORTS. The Departmentagreed that it needed a more comprehensive readiness measurement system and contracted with the Logistics Management Institute (LMI) to assess the GAO's indicators to determine which of the 29 recommended by the GAO have the greatest potential value for DOD decision makers charged with maintaining high readiness. The LMI assessment, completed in October 1994, concluded that 19 of the 29 indicators offered high or medium value for readiness assessments. That is, those indicators could allow DOD to measure factors that cause changes in readiness, provide early notice of any adverse changes, provide the opportunity to improve readiness, and detect trends that may affect future readiness. While the committee recognizes that efforts are being made by DOD to enhance readiness assessments through the Joint Monthly Readiness Reviews, the Senior Readiness Oversight Council, and more recently with efforts aimed at developing a Readiness Baseline, it is concerned by the lack of progress the DOD has made to integrate the GAO and LMI recommended indicators into official readiness reports. Given recent reports of declining ``unofficial'' readiness indicators, the committee believes that immediate steps must be taken to ensure that DOD and the military services have a comprehensive readiness assessment system. This section would compel the DOD to act expeditiously to integrate these important indicators into readiness reports, providing comprehensive, and thereby, more accurate information, to decision makers on the true current state of readiness. ............. Section 314--Prohibition of Implementation of Tiered Readiness System This section would prohibit the implementation of any tiered readiness system which would change military service- specific methods of determining the priority for allocating funding, personnel, equipment, equipment maintenance, and training resources to military units--and the associated level of readiness of those units that result from those priorities-- as they existed on October 1, 1996. Should the Secretary of Defense determine that a tiered readiness system would be in the national interest of the United States, this section would require the Secretary to provide a report on the rationale for that determination, and a request for enactment of legislation to implement such a system. Tiered readiness concepts call for maintaining certain portions of U.S. military forces at lower levels of readiness based on their likelihood of being called to respond to a military crisis and deployment timelines. Units identified to be maintained in lower tiers of readiness would be manned, equipped, and trained to a level sufficient only to achieve that lower level of readiness. From testimony before the committee and from interviews with service members of many military units, the committee understands that currently, in order to meet deployment standards and a high operations tempo, military units have had to strip non-deploying units of key officers, non-commissioned officers, and maintenance personnel due to shortages in key military occupational specialties. Under a tiered readiness concept, personnel would be eliminated from the force in order to achieve cost savings exacerbating the personnel management problems and creating higher personnel tempo for those remaining active duty personnel. The committee is deeply concerned that, at some point, such a readiness system would lead to an untenable situation from the standpoint of maintaining a quality, highly motivated all-volunteer force. During the Quadrennial Defense Review (QDR), an assessment was made to determine whether ``tiering'' of the force would meet strategy requirements and result in savings. The conclusion of the assessment was that such tiering would increase the risk to national security at the gain of only modest savings, and would limit the flexibility required to execute current war plans. The committee strongly believes that the military services have, over time, developed readiness systems that are specifically tailored to their individual requirements.These existing systems already represent a form of tiering in that resources are allocated on a priority basis to military units that are expected to enter into combat first. The committee believes that any further tiering of readiness must be carefully assessed to insure that United States military strategy can be accomplished at all times. The tiering of military forces solely for fiscal gains would be a short sighted strategy that largely ignores the demanding reality of the need to maintain ready military forces able to fight and win decisively and with minimal casualties in any future contingency. ............. Section 316--Report on Chairman, Joint Chiefs of Staff Exercise Program and Partnership for Peace Program This section would require the Secretary of Defense to report by January 15, 1998, on both past and planned joint training exercises sponsored by the Chairman, Joint Chiefs of Staff (CJCS) Exercise Program and the Partnership for Peace (PFP) program. The report would include the type, description, duration, objectives, the percentage of service-unique training accomplished, and an assessment of the training value of each CJCS and PFP exercise. In spite of a significant reduction in force structure and personnel since 1989, the October 1995 Defense Science Board Task Force on Quality of Life report pointed out that the number and scope of joint level exercises has continued to increase. In June 1995, the General Accounting Office (GAO) issued a report entitled ``Military Capabilities: Stronger Joint Staff Role Needed To Enhance Joint Military Training'' (GAO/NSIAD-95-109) that noted a large number of the joint exercises conducted in 1995 had little training value, with nearly 75 percent conducted for reasons other than training, such as a show of military presence in a region or to foster relationships with other nations. In testimony before the committee, witnesses pointed to the continued growth in the number and scope of CJCS sponsored military exercises as a significant contributor to increased operation and personnel tempos. The committee is concerned that the number of exercises under the CJCS Exercise Program and the military service's participation in the PFP program is exceeding the ability of the services to meet these requirements in what is already a high paced operational environment. Admiral Paul Reason, Commander of U.S. Atlantic Fleet, noted in testimony before the committee, ``Too many unified CINCs are competing for the same scarce assets.'' That many of these exercises may have little or no joint training value compounds the committee's concerns. Therefore, to address operation and personnel tempo concerns and reduce the number of joint exercises, the committee also recommends a reduction of $xx in funding for the CJCS Exercise Program. ............. Subtitle D--Depot-Level Activities Section 331--Extension of Authority for Aviation Depots and Naval Shipyards to Engage in Defense Related Production and Services This section would extend through fiscal year 1999, the authority provided by section 1425 of the National Defense Authorization Act for Fiscal Year 1991 (Public Law 101--510) for naval shipyards and aviation depots of all the services to bid on defense-related production and services. Section 332--Exclusion of Certain Large Maintenance and Repair Projects From Percentage Limitation on Contracting for Depot-Level Maintenance This section would exclude from the restrictions contained in section 2466 title 10, United States Code, an aircraft carrier or a submarine repair or overhaul project that represents five percent or more of the total amount made available to the Department of the Navy for depot-level maintenance and repair. When there is a large single maintenance project, such as the complex overhaul of a nuclear aircraft carrier or a submarine, the size of the project alone can cause an unintended imbalance in the mix of workload between the public and private sector. Under current law, not more than 40 percent of the total funds allocated to a military service for depot-level repair and maintenance may be expended for work in the private sector. The committee is concerned that a large single project should not cause inadvertent disruptions in the mandated percentages. Section 333--Restrictions on Contracts for Performance of Depot-Level Maintenance and Repair at Certain Facilities This section would establish a definition of depot-level maintenance and repair that would require the inclusion of all interim contractor support (ICS) and contractor logistics support (CLS) to be included in determining the restrictions as set forth in section 2466 of title 10, United States Code, also known as the ``60/40 rule.'' The committee understands that including ICS and CLS would have no effect on current contracts for depot level maintenance. The provision would also restrict the Secretary of Defense, or the secretary of a military department, from entering into a contract for the performance of depot-level maintenance and repair at any facility that was approved in 1995 for closure under the Defense Base Closure and Realignment Act (BRAC) of 1990 (part A of title XXIX, Public Law 101-510), unless the following requirements are met: (1) The secretary concerned certifies to Congress that all of the other maintenance and repair facilities of that service are at 80 percent capacity as defined by the BRAC commission in 1995; (2) The secretary concerned certifies to Congress that the total cost of the proposed contract would be less than if the depot-level maintenance or repair were accomplished in facilities owned and operated by the Department of Defense; (3) All of the data which is used to determine the total costs are available for examination; and (4) None of the depot-level maintenance and repair work proposed under the contract was considered to be a core logistics capability of the military department concerned prior to July 1, 1995. The committee believes that to fully comply with the recommendations of the 1995 BRAC to close several depot facilities and to consolidate core depot-level maintenance to the remaining government-owned facilities or to the private sector, these restrictions are necessary. The Committee fully supports the BRAC recommendations and believes that elimination of excess capacity permits significantly improved utilization of the remaining DOD depots and reduces DOD operating costs. Section 334--Core Logistics Functions of Department of Defense This section would amend section 2464 of title 10, United States Code, to clarify that it is essential for national defense that the Department of Defense (DOD) maintain a core logistics capability that is government-owned and government- operated. This section would require the Secretary of Defense to identify those logistics activities necessary to maintain a core logistics capability that would include the capability, facilities, and equipment to maintain and repair those weapons systems necessary to meet the requirements of the National Military Strategy. This section would also require the maintenance and repair of all new weapons systems purchased by the DOD, that are identified as requiring a core logistics capability, in government-owned and government-operated facilities within four years of initial operational capability. ............. TITLE IX--DEPARTMENT OF DEFENSE ORGANIZATION AND MANAGEMENT ITEMS OF SPECIAL INTEREST ............. Defense Reorganization The post Cold War global security environment has witnessed dramatic reductions in the size and capability of the U.S. military force structure while the organizational composition of the Department of Defense, especially at the management level, has remained largely unchanged. Since 1987, the Army has lost eight active divisions, the Navy has decommissioned three carriers and over 200 ships, and the Air Force has cut 12 active and five reserve tactical wings. Notably, 1997 active duty personnel levels are equivalent to 1950 pre-Korean War levels. Meanwhile, from 1985 to 1996, the Office of the Secretary increased its staff 40 percent, military department headquarters continue to maintain redundant staffs, and, in spite of a 70 percent drop in procurement accounts since 1985, the Department's acquisition infrastructure has remained largely static. The committee maintains that the Department currently has sufficient authority to reorganize and restructure itself but has demonstrated little willingness to pursue such reforms. Not since the passage of the Goldwater-Nichols Department of Defense Reorganization Act of 1986 (Public Law 99-433) has the defense establishment undergone significant scrutiny and reform. To address these disturbing trends, the committee undertook a number of initiatives during the 104th Congress to encourage and compel the Department to focus on these matters and arrive at its own options and solutions. The committee deliberately chose not to legislate specific prescriptive remedies on the belief that the Department was better suited to develop such detail on its own. Therefore, the committee provided the Department with broad guidance and, where possible, relief from existing statutory limitations and dictates on organizational matters. To the committee's continuing disappointment, the Department's response to these efforts has ranged from passive resistance to outright defiance of statutory direction. After two years of attempting a preferred approach of cooperation and collaboration, the committee finds itself no further along in effecting the necessary change in the Department's management and organizational structure. The committee reaffirms its commitment to pursuing meaningful management reform of the Department of Defense and intends to make this goal a principal focus of its oversight and legislative activities for the remainder of this Congress. Management Headquarters and Headquarters Support Personnel The committee continues to be concerned with the size and cost of the Department's management headquarters and headquarters support activities. The committee believes the Department needs to further examine the structure and size of its management headquarters and headquarters support activities to eliminate unnecessary duplication, outdated modes of organization, and wasteful inefficiencies. The committee notes with concern that the Department has yet to submit the report and recommendations required by section 904 of the National Defense Authorization Act for Fiscal Year 1997 (Public Law 104-201). While the Quadrennial Defense Review (QDR) has cited reducing and streamlining management headquarters and headquarters support activities as a priority, it has postponed implementation of reductions until another internal study reviews the issue and makes recommendations to the Secretary of Defense by August 29, 1997. The committee is encouraged with the QDR's assertion that the reduction of layers of oversight at headquarters and operational commands and elimination of management and support personnel will yield 10,000 military and 14,000 civilian positions. The committee concurs with the need to drawdown unnecessary infrastructure and supports the Department in this regard. The committee is aware of several organizations that have not been reported by DOD as management headquarters or headquarters support, but appear to be performing those functions. These organizations include the Air Force Studies and Analyses Agency, U.S. Army's Forces Command Field Support Activity, Air Combat Command's Studies and Analyses Squadron, and the U.S. Atlantic Command's Information Systems Support Group. Furthermore, the committee understands only a portion of the headquarters staffs of the DOD Inspector General and some Defense Agencies are reported by DOD as being management headquarters or headquarters support. For example, none of the headquarters of the numbered air forces are currently reported (although they were in the past), and the Navy's Program Executive Offices apparently have not been reported in spite of the DOD directive requiring their inclusion. The committee understands the Department will address the inadequacies of the current definition of management headquarters and headquarters support activities in its August 29, 1997 report to the Secretary. Accordingly, the committee expects the aforementioned inconsistencies will be addressed in the August report. LEGISLATIVE PROVISIONS Section 901--Limitation on Operation and Support Funds for the Office of the Secretary of Defense The committee in the 104th Congress passed a series of measures designed to improve the organization of the Office of the Secretary of Defense (OSD). The basis of the committee's action was concern with the expanding and evolving scope of OSD staff responsibilities at the expense of the primary role of enhancing the Secretary's decision making ability. While active duty forces were cut 33 percent over the last ten years and have been required to adapt innovative resource management techniques, OSD increased its size by 40 percent. The committee continues to be concerned with OSD's unwillingness to modify its excessive management structure in spite of the overwhelming fiscal pressures facing the rest of the Department. The committee believes OSD has deliberately avoided any downsizing effort and has elected not to lead the Department by example. The committee notes with concern the Department's non- compliance with section 901 of the National Defense Authorization Act for Fiscal Year 1996 (Public Law 104-106) requiring a report on specific plans for improving organizational efficiency and effectiveness of the Office of the Secretary. The committee was disappointed to learn the Quadrennial Defense Review (QDR) postponed consideration of OSD reorganization pending an internal review panel. The committee believes the Department has been provided ample time to comply with section 901 and fails to support the rationale behind delaying these important issues. Specifically, the QDR states the Task Force on Reform will commence its examination of OSD in the spring of 1997 and will report its findings by November 30, 1997, almost two years after the law required. The committee strongly believes OSD should reduce its size and report to Congress pursuant to section 901 of the National Defense Authorization Act for Fiscal Year 1996 (Public Law 104- 106). The committee recognizes OSD is not implementing personnel reductions at a rate sufficient to achieve the statutory requirement by October 1, 1997, as specified in section903 of the National Defense Authorization Act for Fiscal Year 1997 (Public Law 104-201). Accordingly, the committee recommends a provision (sec. 901) that would reduce the funding associated with the operation and support activities of the Office of the Secretary of Defense by 20 percent, as reflected within section 301 of this bill, and would restrict the obligation of 10 percent of authorized funding until the Department conforms to the statutory requirement to provide reports as required by section 901 of the National Defense Authorization Act for Fiscal Year 1996 (Public Law 104-106) and section 904 of the National Defense Authorization Act for Fiscal Year 1997 (Public Law 104-201). ............. Section 904--Center for the Study of Chinese Military Affairs Section 904 would mandate the establishment of a Center for the Study of Chinese Military Affairs at the National Defense University. This center would provide a focus for academic study to develop understanding of Chinese political, security and military strategy; military operational art; tactical and organizational doctrine; and similar and related subjects. The center is intended to provide senior Department of Defense officials and the broader policy-making community with independent analysis of these issues. The committee emphasizes that the success of the center in fulfilling its mandate would be dependent upon the quality of its leadership and scholarship and its ability to operate in a manner removed from political influence of any kind. The center's director must be a distinguished scholar and possess the management skills necessary to shape the center's research toward a cohesive end. The director also must serve as a strong advocate for the center's academic independence. The center's prime mission would be to provide detailed analysis of Chinese military affairs. However, the center also should balance this requirement with the requirement to place military affairs in context. Consequently, the committee urges the that the center take a comprehensive ``net assessment'' approach to its research. The committee also directs that the center publish a report summarizing its research and the conclusions of that research not later than December 31, 1998 and following on an annual basis in succeeding years. This report should also provide a summary analysis of current and projected Chinese military capabilities and their relationship to Chinese strategic goals. The committee believes a key strategic question for the United States in the coming century will be the role played by an increasingly powerful China in military and security affairs. The committee regards the center as an important tool for developing a deeper understanding of the factors shaping the answer to that question. Therefore, the committee directs that, of the amounts available to the Secretary of Defense for Defense-wide operation and maintenance, excluding funds otherwise available for the operations of the National Defense University and with no offsetting reduction in funds available to the National Defense University, the Secretary shall make $5.0 million available for the center. ............. Subtitle B--Naval Vessels and Shipyards ............. Section 1022--Authority to Enter into a Long-Term Charter for a Vessel in Support of the Surveillance Towed Array Sensor (SURTASS) Program This section would authorize the Secretary of the Navy to enter into a contract in accordance with section 2401 of title 10, United States Code, for the charter of the vessel RV CORY CHOUEST through fiscal year 2003 in support of the SURTASS program. ............. TITLE XII--MATTERS RELATING TO OTHER NATIONS ............. Defense Logistics Cooperation with the People's Republic of China The committee is aware that the Department of Defense is engaged in a broad range of activities to promote and enhance U.S. military relations with the Chinese People's Liberation Army (PLA) through a policy of comprehensive engagement. Some of the Department's activities with the Chinese government and the PLA have included frequent and regularexchanges on the topics of U.S. military strategy, regional security issues and the transfer of U.S. high-technology to China. In particular, the committee is concerned that the Department has chosen to advance U.S.-Chinese military relations by engaging the PLA in detailed discussions and briefings about advanced defense logistics techniques, infrastructure, and battlefield employment concepts. The committee's concern arises from the fact that China's long-term strategic ambitions remain unclear to U.S. policymakers and to the governments of the Asia-Pacific region. The committee also observes that the PLA's force modernization priorities suggest an intent to create a force capable of projecting and sustaining military power beyond China's borders. Therefore, the committee urges the Department to reconsider U.S. military-to military activities with the PLA that could further enhance the ability of the PLA to project and sustain military power beyond China's borders. The committee also expects to be kept fully informed of all future meetings, exchanges other DOD contacts with Chinese defense entities and PLA officials for the purpose of discussion on defense logistics or other military support subjects. ............. LEGISLATIVE PROVISIONS ............. Section 1203--Report on Future Military Capabilities and Strategy of the People's Republic of China This section would require that the Secretary of Defense prepare a report on the future pattern of military modernization of the People's Republic of China. The report is similar to one directed in the National Defense Authorization Act for Fiscal Year 1997 (Public Law 104-201), but expands the scope of research and the time period to be considered. ............. TITLE XXVIII--GENERAL PROVISIONS ITEMS OF SPECIAL INTEREST ............. Military Construction in the Republic of Korea and Burdensharing Support for United States Forces, Korea The committee recognizes the critical facilities shortfalls at United States military installations in the Republic of Korea, particularly those that affect readiness and the living conditions for military personnel. The committee fully supports the $97,525,000 contained in the budget request for overseas military construction in the Republic of Korea. The committee provides authorization for military construction projects for the Department of the Army at Camp Casey, Camp Castle, Camp Humphreys, Camp Red Cloud, and Camp Stanley and for the Department of the Air Force at Kunsan Air Base and Osan Air Base. The committee is satisfied that these military construction projects begin to address significant shortfalls at installations which are central to current U.S. and Korean defense planning. The committee further notes, however, that these investments are tied to stationing requirements that may not be indicative of a long-term, post-reunification U.S. military presence on the Korean peninsula. The committee also recognizes the progress made by the United States in recent years to improve bilateral burdensharing arrangements with the Korean government. However, the committee believes that the current level of burdensharing provided is insufficient given the conditions of facilities in Korea and the importance of those facilities to the mutual defense effort. The committee notes the expiration in 1998 of the Special Measures Agreement (SMA), the framework for current burdensharing arrangements with the Republic of Korea. The committee urges the Secretary of Defense to work cooperatively with the Secretary of State to improve the level of burdensharing in the follow-on agreement to the current SMA. Within the context of negotiations with the Government of Korea, the committee encourages the Secretary of State to ensure that any future negotiated agreement provide for adequate and reasonable residual value payments for military facilities and installations returned to the Republic of Korea.The committee expects that such residual value would include the cost of investment by the United States in such facilities and installations. ............. COMMITTEE POSITION On June 12, 1997 the Committee on National Security, a quorum being present, approved H.R. 1119, as amended, by a vote of 51 to 3. ............. FISCAL DATA Pursuant to clause 7 of Rule XIII of the Rules of the House of Representatives, the committee attempted to ascertain annual outlays resulting from the bill during fiscal year 1998 and the four following fiscal years. The results of such efforts are reflected in the cost estimate prepared by the Director of the Congressional Budget Office under section 403 of the Congressional Budget Act of 1974, which is included in this report pursuant to clause 2(l)(3)(C) of House Rule XI. Congressional Budget Office Estimate In compliance with clause 2(l)(3)(C) of rule XI of the Rules of the House of Representatives, the cost estimate prepared by the Congressional Budget Office and submitted pursuant to section 403(a) of the Congressional Budget Act of 1974 is as follows: June 13, 1997. Hon. Floyd Spence, Chairman, Committee on National Security, House of Representatives, Washington, DC. Dear Mr. Chairman: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 1119, the National Defense Authorization Act for Fiscal Year 1998. If you wish further details on this estimate, we will be pleased to provide them. Sincerely, June E. O'Neill. Congressional Budget Office Cost Estimate Summary: H.R. 1119 would authorize appropriations for 1998 for the military functions of the Department of Defense (DoD) and the Department of Energy (DOE). It also would prescribe personnel strengths for each active duty and selected reserve component of the U.S. armed forces. Assuming appropriation of the authorized amounts, CBO estimates that enacting H.R. 1119 would result in additional discretionary spending of $264 billion over the 1998-2002 period. The bill would increase direct spending by $1 million in 1998 and by $5 million over the five-year period; therefore, pay-as-you-go procedures would apply. The bill would also authorize asset sales from materials in the defense stockpile; receipts from these sales would average about $14 million a year. H.R. 1119 contains one intergovernmental mandate as defined in the Unfunded Mandates Reform Act of 1995 (UMRA). However, CBO estimates that the costs to comply with the mandate would be well below the threshold established in the act ($50 million annually, adjusted for inflation). UMRA excludes from application of that act legislative provisions that are necessary for the national security. CBO has determined that all other provisions in H.R. 1119 either fit within this exclusion or do not contain mandates as defined by UMRA. Estimated Cost to the Federal Government: The estimated budgetary impact of H.R. 1119 is shown in Table 1, assuming that the bill will be enacted by October 1, 1997. Authorizations of appropriations The bill would authorize specific appropriations totaling $268 billion in 1998 for operation and maintenance, procurement, research, development, test and evaluation (RDT&E), nuclear weapons programs, and other DoD programs (see Table 2). These costs would fall within budget function 050 (national defense). The estimate assumes that the amounts authorized will be appropriated for 1998. Outlays are estimated based on historical spending patterns. TABLE 1.--BUDGETARY IMPACT OF H.R. 1119 AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON NATIONAL SECURITY [By fiscal year, in millions of dollars] ---------------------------------------------------------------------------------------------------------------- Category 1997 1998 1999 2000 2001 2002 ---------------------------------------------------------------------------------------------------------------- SPENDING SUBJECT TO APPROPRIATIONS ACTION Spending Under Current Law: Budget Authority \1\............................ 265,635 0 0 0 0 0 Estimated Outlays............................... 267,316 91,187 36,212 15,718 6,515 2,997 Proposed Changes: Authorization Level............................. 0 268,490 14 14 0 0 Estimated Outlays............................... 0 175,777 55,012 20,281 8,956 3,660 Spending Under H.R. 1119: Authorization Level \1\......................... 265,635 268,490 14 14 0 0 Estimated Outlays............................... 267,316 266,964 91,224 35,999 15,471 6,657 ASSET SALES AND DIRECT SPENDING Asset Sales \2\ Estimated Budget Authority...................... 0 -14 -14 -14 -14 -14 Estimated Outlays............................... 0 -14 -14 -14 -14 -14 Direct Spending: Estimated Budget Authority...................... 0 1 1 1 1 1 Estimated Outlays............................... 0 1 1 1 1 1 Total Asset Sales and Direct Spending: Estimated Budget Authority...................... 0 -13 -13 -13 -13 -13 Estimated Outlays............................... 0 -13 -13 -13 -13 -13 ---------------------------------------------------------------------------------------------------------------- \1\ The 1997 level is the amount appropriated for programs authorized by the bill. \2\ Based on criteria established in the 1998 budget resolution, CBO has determined that proceeds from the asset sales in this bill should be counted in the budget totals for purposes of Congressional scoring. Under the Balanced Budget Act, however, proceeds from asset sales are not counted in determining compliance with the discretionary spending limits or pay-as-you-go requirement. Note: Costs of the bill would fall under budget function 050 (national defense), except for certain other items as noted. ............. Endstrength. The bill would authorize endstrengths for active and reserve components for 1998 at a cost of more than $68 billion. Endstrengths for active-duty personnel would total about 1,445,000--about 13,600 more than in the Administration's request but about 7,100 below the level estimated for 1997. DOD's reserve endstrengths would be authorized at about 891,600--the same level requested by the Administration, but about 10,800 less than the estimated 1997 level. Also, the bill would authorize an endstrength of 8,000 in 1998 for the Coast Guard Reserve, which is the same as the 1997 level and about 400 reservists more than the Administration's request; this authorization would cost about $67 million and would fall under budget function 400 (transportation). Compensation and Benefits. H.R. 1119 contains several provisions that would affect military compensation and benefits. Pay Raises. Section 601 would authorize a 2.8 percent increase in the rate of basic pay for fiscal year 1998 at a cost of $1,034 million. Current law links pay raises for military personnel to those for civilian employees of the federal government. Starting in 1999, section 602 would make the pay raise provisions for military personnel independent of those for civilians and tie them directly to increases in the Employment Cost Index. As a result, military pay raises would be 0.5 percent higher than under current law, with additional costs growing to $998 million in 2002. TABLE 2.--SPECIFIC AUTHORIZATIONS IN THE NATIONAL DEFENSE AUTHORIZATION ACT, 1998, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON NATIONAL SECURITY [By fiscal years, in millions of dollars] ---------------------------------------------------------------------------------------------------------------- Category 1998 1999 2000 2001 2002 ---------------------------------------------------------------------------------------------------------------- Military Personnel: Authorization Level....................................... 69,540 0 0 0 0 Estimated Outlays......................................... 66,200 3,023 209 0 0 Operation and Maintenance: Authorization Level....................................... 92,897 0 0 0 0 Estimated Outlays......................................... 69,617 18,274 2,879 971 410 Procurement: Authorization Level....................................... 46,315 0 0 0 0 Estimated Outlays......................................... 9,310 13,633 11,886 6,099 2,424 Research, Development, Test, and Evaluation: Authorization Level....................................... 37,276 0 0 0 0 Estimated Outlays......................................... 17,998 13,964 3,473 931 448 Military Construction and Family Housing: Authorization Level....................................... 9,133 0 0 0 0 Estimated Outlays......................................... 3,066 2,814 1,706 888 288 Atomic Energy Defense Activities: Authorization Level....................................... 10,969 0 0 0 0 Estimated Outlays......................................... 7,984 2,985 0 0 0 Other Accounts: Authorization Level....................................... 2,293 14 14 0 0 Estimated Outlays......................................... 1,256 376 248 127 110 General Transfer Authority: Authorization Level....................................... 0 0 0 0 0 Estimated Outlays......................................... 280 -60 -120 -60 -20 ------------------------------------------------- Total: Authorization Level....................................... 268,423 14 14 0 0 Estimated Outlays......................................... 175,712 55,010 20,281 8,956 3,660 ---------------------------------------------------------------------------------------------------------------- ............. ADDITIONAL AND DISSENTING VIEWS ---------- DISSENTING VIEWS OF RONALD V. DELLUMS I voted against reporting H.R. 1119 from the committee for several reasons. First, the price tag for this bill continues to be significantly out of line with the military requirements of this country, out of line with a properly balanced allocation of expenditures across all national security accounts, and out of line with the strategic and geopolitical realities of our world. The national security agenda of this country contains three equally important elements, and requires a balance of funding among the accounts of each element. We must have a vibrant and energetic economy and an informed, healthy, trained and educated citizenry in order to maintain our domestic tranquillity. Second, we must have an engaged foreign policy and foreign aid program that can promote sustainable development, a respect for human rights, and the growth of democracy, all of which are vital for regional stability and the prevention of war and conflict. Third, we must field a right-sized, properly equipped and appropriately trained military force in order to deter violence and aggression, participate in internationally sanctioned peace keeping and meet our obligations to support humanitarian operations. Our national security is as dependent on the amount of the discretionary budget allocated to the first two of these accounts as it is to the account that is recommended to be authorized in this bill and report. To the extent that we over- fund the defense account, as I believe we have done with this recommendation, those other elements of our national security agenda will continue to atrophy. Second, the committee recommendation would procure too much of yesterday's technology by adding, for example, funding for long-lead procurement of nine additional B-2 bomber aircraft as well as for the purchase of additional tactical aircraft for which there is no urgent requirement. Third, the committee recommendation would press forward too rapidly with national missile defense, notwithstanding that the committee recommendation implicitly adopts the administration's so-called three-plus-three strategy for development and preparation of a national missile defense system. I applaud the committee's retreat from any effort to implicitly or to explicitly recommend a program that would exceed the limits of the ABM Treaty. Fourth, the committee recommendation fails to offer the operations and maintenance, personnel and other savings that could be attained if our force structure were further realigned. In an era where we will face no peer competitor for at least a decade, we should undertake such action in order to meet the near-term and mid-term requirements that will confront us. Fifth, I am troubled that the committee recommendation siphons off important resources from the environmental clean-up and construction accounts of the Department of Energy's defense programs in order to finance procurement of the unnecessary additional items in the procurement account. Sixth, I am also troubled at the decision to reduce funds for the Cooperative Threat Reduction program, a program that is essential to our interests in reducing or eliminating threats that are currently posed by nuclear, chemical and biological weapons and materials. Ronald V. Dellums. ADDITIONAL VIEWS OF JOHN SPRATT I support most aspects of this legislation and will vote for it, but I disagree with the diversion of $2.6 billion in budget authority from the Department of Energy (budget subfunction 053) to the Department of Defense (budget subfunction 051). I agree with OMB Director Frank Raines, who wrote the following to the Chairman of the House National Security Committee prior to committee mark-up: The Administration does not support reducing funds from DOE (subfunction 053) accounts below the President's 1998 budget request or allocating these funds to DOD programs. This would be inconsistent with our understanding of the Budget Agreement reached with the Congressional leadership. Of the $2.6 billion diverted, $1.5 billion was designated to start a ``full funding'' policy of major Department of Energy (DOE) capital investments. ``Full funding'' simply means that Congress provides sufficient budget authority to cover the entire estimated procurement cost of major capital investments in one year, rather than paying for the project over a period of years (``incremental funding''). In essence, the DOE was ``banking'' funds needed for large projects, most of which were for the Stockpile Stewardship program (which ensures the safety and reliability of our nuclear weapon stockpile) and for environmental clean-up of sites contaminated by radioactive waste. The committee also slashed $936 million from the DOE's $1.006 billion request to ``privatize'' portions of its environmental clean-up program. The DOE wants private companies to build facilities to treat hazardous radioactive waste. In exchange, the DOE will guarantee that it will pay for the treatment of the waste at a set price per unit of treated waste. By law, an agency cannot enter into a contract without having the budget authority to fully cover the costs of the contract, so the DOE needs to have the budget authority now in order to commit to paying for treatment of waste years from now. I am not sold yet on DOE's privatization policy, and the committee may be wise in postponing this policy. But I am sold on the need to clean up DOE's nuclear weapons facilities, and whether the clean-up is financed through direct appropriations or by privatizing some projects, there is a need for environmental funding. The simple fact is that the committee diverted these funds to the Department of Defense (DOD) and created a $936 million hole in the DOE's five-year environmental clean-up plan. It would have been more prudent to fence the money, to prohibit DOE from spending it until we are convinced of the merits of privatization. If the committee remained unconvinced, Congress could then direct that the funds be used to clean-up our nuclear weapon sites in more traditional ways. Diverting the funding to DOD has effectively cut nearly $1 billion from a sorely needed program. The committee's actions have created a $2.6 billion shortfall in the DOE's planned activities over the next five years. In prior years, this shortfall could have been overcome by re-adjusting future budget requests. But under the bipartisan budget agreement, function levels for discretionary spending have been established for the next five years. The DOE will be hard-pressed to replace this loss of funding since it will either mean retrieving the money from future DOD budgets, or adding funding from other budget functions to the 050 function and violating the budget agreement. This problem is exacerbated since the $2.6 billion diversion fromDOE to DOD went into procurement items that will generate future DOD costs, making it even harder to retrieve the funding from future DOD budgets. I do not believe that we fully thought through the implications for environmental clean-up or nuclear weapons, particularly stockpile stewardship, when we decided to divert this funding. While I support the overall bill, I hope these issues will be revisited during the House-Senate conference. Other important programs at DOE received cuts that seem unwarranted. The Office Worker and Community Transition was established by Congress in the early 1990s to ease the impact of worker layoffs at DOE sites. On a more positive note, I was pleased by several actions taken by the committee to address needs at Shaw Air Force Base and the South Carolina National Guard. The committee fully funded the Air Force's request for $6.072 million for the construction of an ``information warfare sq ops facility.'' The facility will house a new information warfare unit at Shaw Air Force Base in Sumter, South Carolina. The Joint Chiefs of Staff state in Joint Vision 2010 that information superiority will be a key asset in the battles of the 21st century. The Research & Development and Procurement Subcommittees held a hearing this week which underscored this point. Lt. Gen. Douglas Buchholz, Director for Command Control, Communications and Computer Systems who represented the JCS at the hearing explained, ``Our successes in the battlespace of the future, whether combating large, heavily armed forces or providing peacekeeping and humanitarian assistance, depend upon the precise application of force across the full spectrum of missions. The cornerstone of this effort is the ability to get the right information to the right place at the right time--or information superiority.'' The Air Force's information warfare unit at Shaw is tasked with making informational warfare ``operational at the component level.'' In other words, its work is where the rubber meets the road, developing methods to make certain that information technology can be used to tactical advantage. The committee included language directing the Air Force to study the acquisition of land near Shaw without appropriated funds. This language will allow the Air Force to exercise its authority, granted in the FY96 Defense Authorization Act to acquire land adjacent to Shaw. This land will provide a significant enhancement to the base, improving operational flexibility for the Air Force. ............. John Spratt. ............. ADDITIONAL VIEWS OF JAMES M. TALENT I am pleased that the full committee, after vigorous debate, soundly rejected efforts to procure a mix of the older- model F/A-18C/D and the new F/A-18E/F ``Super Hornet,'' and instead procure only the newer E/F. However, I must express my profound disagreement with the net result of the House National Security Committee's action, which was to reduce overall procurement funding for Super Hornets from the Navy's request of $2.1 billion for 20 low-rate initial-production aircraft to $1.348 billion, and to reduce the Navy's research and development request from $267.5 to $153.3 million. These reductions are entirely unjustified and will detract from the Navy's ability to execute its missions in the increasingly demanding threat environment of the next two decades. The Secretary of Defense, in his June 10, 1997 letter, emphasized his ``strong support of the F/A-18E/F Super Hornet program,'' stating that ``our warfighters require the most advanced technology available.'' He further added that ``the Quadrennial Defense Review clearly validated the need for the F/A-18E/F. . . . Without the E/F we would be sending our pilots into combat at the turn of the century with the 1970s technology of the F/A-18C/D.'' The Chief of Naval Operations, in his own letter to the chairman and ranking member, expressed his ``strongest possible support for the F/A-18E/F program . . . It is the cornerstone of the future of carrier aviation and the Navy's number one aviation priority.'' Further, he recently stated to Congress that ``the multi-mission F/A-18E/F Super Hornet is a leap forward in both TacAir design and survivability. The Super Hornet may look like its predecessor, however it is far larger, significantly more capable, and most importantly it is a first strike, every day strike, survivable weapon system for the foreseeable future.'' The Navy states that the Super Hornet will dominate all possible threats for at least the next two decades. The CNO's letter further states that ``the E/F has flawlessly progressed through every required milestone to include operational requirements, mission needs, cost and threat analysis, and engine development. Admiral Johnson describes the entire aircraft program as ``a model of acquisition reform and unprecedented cost performance. The F/A- 18E/F has completed significant portions of the flight rest program (over 1,100 flight hours) . . . Testing results have clearly exceeded all specific performance parameters. The program is on schedule, within budget and under specification weight.'' In terms of cost, the Under Secretary for Acquisition, Dr. Kaminski, in his recent Selective Acquisition Report, found that the Super Hornet would cost only 13 percent more than its C/D predecessor based on production figures of 1,000 aircraft per program. His report pegged C/D per-unit cost at $36.5 million and E/F per-unit cost at $41.6 million. In terms of survivability, the Center for Naval Analysis in its recent report to Congress, reported that the Super Hornet would suffer roughly one fifth the losses of an F/A-18C/D airwing given the same threat environment and warfighter scenario. The independent Institute for Defense Analysis, in its report requested by the Joint Staff, determined that the Super Hornet's survivability characteristics, to include a radar signature only one-tenth that of the older C/D, reduces the number of targets considered as ``high risk'' to the pilot and aircraft by 75 percent over the C/D Hornet it will replace. Finally, it is essential to point out that the E/F program is not in competition with the emerging joint strike fighter concept. The Super Hornet will replace aging F-14s, whose operational costs the Navy desperately seeks to avoid, and older Hornets, all of which have reached the limits of their technological upgradability. The most optimistic forecast for a Navy version of the JSF is 2010, and even then the service would not be able to place a meaningful number of aircraft on its carrier decks until approximately 2015. The Super Hornet is indeed a ``bridge'' from the F-14 and C/D-model Hornets to the joint strike fighter, and that bridge by any reasonable estimate appears to be about two decades in length. I am pleased that the House National Security Committee, after careful consideration of these important issues, declared its overwhelming and bipartisan support for the F/A-18E/F Super Hornet program. James M. Talent. ADDITIONAL VIEWS OF PATRICK J. KENNEDY ....... This year the committee again worked to ensure a strong focus remained on anti-submarine warfare (ASW). As a maritime nation, we must be able to achieve and maintain sea control, therefore we must invest in ASW to remain effective against increasingly advanced submarines. In recognition of the continuing importance of ASW to our national security, as was done in previous years the committee made a significant increase to the Administration's request for ASW. While the committee maintained undersea warfare as a priority, it failed to accept the proposal put forward by the Navy and the shipyards with respect to the teaming agreement. In this instance, I believe we lost an opportunity to take the most cost effective approach tomodernizing our submarines while maintaining a hedge against a future threat. By pursuing a plan that calls for competition of submarine construction at extremely low rates of production, we will embark upon a prohibitively expensive course that will force us into the dangerous position of possessing only one shipyard actively constructing submarines. The Navy's proposal represented an opportunity to endorse the concept of putting the best minds in the business together to develop a more effective yet affordable next generation attack submarine. I am disappointed the committee did not pursue the teaming route though I am confident that we will again revisit this issue during the conference process. ........... Patrick J. Kennedy.