Hearing Of The Readiness Subcommittee Of The House Armed Services Committee; Subject: Fiscal Year 2010 National Defense Authorization Budget Request For Military Construction, Family Housing, Base Closure, Facilities Operations And Maintenance

Statement

Hearing f The Readiness Subcommittee Of The House Armed Services Committee
Subject: Fiscal Year 2010 National Defense Authorization Budget Request For Military Construction, Family Housing, Base Closure, Facilities Operations And Maintenance
Witnesses: Wayne Arny, Deputy Undersecretary Of Defense, Installations And Environment; Joseph Calcara, Deputy Assistant Secretary Of The Army, Installations And Housing; B.J. Penn, Assistant Secretary Of The Navy, Installations And Environment; Kathleen Ferguson, Deputy Assistant Secretary Of The Air Force, Installations
Chaired By: Representative Solomon Ortiz

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REP. ORTIZ: I thank our distinguished witnesses for appearing before the subcommittee today. Today the Readiness Subcommittee will hear about our military construction and BRAC programs.

In general, I am pleased with the budget request this year. I think it does a good job of advancing a number of important initiatives, including fully funding the BRAC 2005 process and providing the infrastructure to support our growing force and (recapitalizing ?) on an aging infrastructure.

However, I'm also concerned about the trends that I see within the department. First of all, in the BRAC 2005 process, I am disturbed at the apparent cost escalation over the past few years. (Since ?) the department submitted the first budget request to implement the findings of BRAC 2005 commission, the costs to implement this program have almost doubled to $34 billion.

While a variety of reasons have been attributed to this growth, I believe the assumptions underlying the 2005 BRAC recommendations were flawed. The department has indicated that its analysis of the BRAC recommendation were based on consistent planning assumptions. Unfortunately, those planning assumptions were completely inadequate. This type of bad cost data leads us to make bad decisions.

I am also concerned about whether we can meet the statutory (completion ?) date of September 2011. I am concerned that the shortcuts may be taken and money may be wasted in an attempt to meet the deadline. It is important the department take a critical look at this program and review the implementation time lines to ensure that government waste is eliminated and artificial acceleration initiatives are avoided.

We owe the men and women of our armed services and the taxpayers of this nation the very best BRAC implementation plan that smoothly relocates forces in strict compliance with the BRAC decisions.

On another subject, I wanted to discuss strategic realignment of United States forces in the Pacific. The most pressing issue relates to Marine Corps realignment from Okinawa to Guam. In Guam alone, we are expecting more than $10 billion in construction in the next few years. It is important to note that Guam is not the only expanding location. Included in this realignment is the expansion of forces to the -- (inaudible) -- facility at -- (inaudible) -- in Okinawa.

I believe it is important to get each of these decisions right and to make sure our long-term relations with our Pacific partners remain vibrant and viable for the foreseeable future.

Let me turn our attention to another equally important subject -- the basing of aviation assets. I understand the department is facing a number of basing decisions this year. The most expansive involves the Joint Strike Fighter. The Air Force alone needs to determine the location of four operational JSF bases and one additional pilot training center.

The problem is that the Joint Strike Fighter is much louder than the F-15, F-16 and F-18 aircraft. In the basing of future aviation assets, the department is to take great caution in balancing the needs of the armed forces with the competing requirements of expanding local communities. A long-term outlook needs to be taken into account to ensure that the nation has a viable, unencumbered aviation infrastructure that fully supports the missions of the armed forces.

Finally, I remain concerned about the continued underfunding of the sustainment of our military infrastructure. Funding only 90 percent of the -- (inaudible) -- requirement is short-sighted and only raises costs over the long term.

This chronic underfunding of infrastructure will remain a critical issue of interest for this subcommittee. We can do better. And I look forward to working with the department on making this a reality.

Gentlemen, I think that we have a lot to discuss today, and I look forward to hearing you address these important issues.

The chair recognizes my good friend, the distinguished gentleman from Virginia, Mr. Forbes, for any remarks that he would like to make.

Mr. Forbes.

REP. RANDY FORBES (R-VA): Thank you, Mr. Chairman. And I just again appreciate your leadership in holding this hearing. And I also want to thank the witnesses and appreciate each of them being here today to discuss building and maintaining the best possible facilities for our troops, whether at home or deployed, and their families.

And I want to just pause a moment and sincerely thank you for what you have done. You have made some enormous strides. And oftentimes we're so focused on the limited amounts of time that we have on where we're going tomorrow that we really don't step back and just say how much we appreciate what you have done and how you've gotten us to this point. So I want to make sure I'm thanking you for that.

But then, Mr. Chairman, I am a bit frustrated with the budget that the department has submitted. And while we need to hold this hearing in preparation for our subcommittee markup next week, we've been given incomplete information at best. And while it's not the fault of any of our witnesses, transparency has certainly not been an adjective describing this budget process, and we can and must do better.

It's difficult enough to properly consider a complex military construction budget under our compressed schedule. Worse, we have no Future Years Defense Plan, or FYDP, to help us understand future intent.

Finally, most disturbing, major Defense Department decisions announced after the budget was (locked ?) will require budget adjustment, and detail on these adjustments is still not available, at least not available to us. And while understandable to some degree in a new administration, many large decisions have been pushed to the Quadrennial Defense Review, or QDR, leaving us in a quandary about what is real and what has changed in the budget request.

For example, the secretary of Defense's recent decision to limit the Army's BCT growth to 45 rather than 48 brigades calls into question the Army's military construction program. Even though the Army finally identified the brigades that will be lost, the ultimate BCT footprint is still undetermined pending QDR review of restationing two BCTs from Europe. The reality is that the Army cannot articulate within any precision how the fiscal year 2010 budget request should be adjusted.

In addition, the deputy secretary of Defense delayed the Navy's earlier recent decision to home-port a nuclear aircraft carrier at Mayport, Florida pending the outcome of the QDR. While I support the department's review of the decision, the Navy still has requested funding that could be used in furtherance of making Mayport a carrier home port. It's difficult for me to support a legitimate request to have another East Coast port in a storm when I know that it could be used as a down payment for the unnecessary expense of making Mayport a nuclear carrier home port.

There are equally vexing unresolved issues involving the basing of Joint Strike Fighter squadrons around the United States due to pending environmental reviews, the Marine Corps realignment from Okinawa to Guam, and the department's brinksmanship on completing BRAC moves in a number of sites.

This budget also defers a number of land acquisition challenges. Even without a FYDP, we know that the Navy wants an outlying landing field for Oceana-based aircraft squadron. The Army wants to acquire more training land in Colorado, and the Marine Corps intends to acquire large tracts adjacent to Twenty-Nine Palms Marine Base in California. Each of these actions is important for the readiness of Army, Navy and Marine Corps units, and each comes with considerable public concern or opposition.

All of these acquisition and basing issues are sensitive national security and local matters requiring the considered judgment of Congress in possession of all the facts. But we don't have the facts, nor do we have transparency. Instead we're asked to approve a budget funding decision that will be revisited during the QDR.

Mr. Chairman, I think it's fair to expect that we will make modifications to this request unless today's witnesses are prepared to resolve some of the questions I've posed. Our constituents rightfully expect us to understand the consequence of the budgets we approve, and I don't believe we have what we need to approve this request. But once again, to all of our witnesses, we recognize the great job you've done up to this point. We thank you so much for that.

Mr. Chairman, once again I just thank you for your leadership and your direction. And I yield back the balance of my time.

REP. ORTIZ: Thank you.

Today we have a panel of distinguished witnesses representing the department. And again, thank you so much for your service.

Our witnesses include Dr. Wayne Arny, deputy undersecretary of Defense for Installations and Environment, Department of Defense; Mr. Joseph Calcara, deputy assistant secretary of the Army, Installations and Housing; and the honorable B.J. Penn, assistant secretary of the Navy, Installations and Environment; and Ms. Kathleen Ferguson, deputy assistant secretary of the Air Force Installations.

We thank you for being with us today. And without objection, the witnesses' prepared statements will be accepted for the record.

Secretary Arny, so good to see you again, sir. You still look like a young pilot.

MR. ARNY: (Laughs.) Not anymore.

REP. ORTIZ: Without objection, of course, now we begin. And Secretary Arny, welcome. You can begin your testimony whenever you're ready.

MR. ARNY: Thank you, sir.

Thank you, Mr. Chairman, Congressman Forbes, distinguished members of the subcommittee. I'm honored to appear before you today. And with your permission, I'll submit the full statement for the record.

In the last 10 years the department has come a long way in improving the facilities and infrastructure in which our military and civilian workforce and families work and live. We could not have progressed as far as we have without the continuing support of Congress and, in particular, the support of this subcommittee.

Today we manage over 500,000 facilities, worth over $700 billion, located in approximately 29 million acres of land around the world. In comparison, about 10 years ago we had 115,000 more facilities in our inventory, which is, in part, a testimony to our continuing efforts to right-size the department's infrastructure.

The principal program that has helped us balance the infrastructure is the BRAC authority, and using that we've been able to close over 121 major installations and realign 79 major bases around -- after five rounds. The 2005 decisions alone affect over 800 locations and include 24 major closures, 24 major realignments and 765 lesser actions.

However, it's not just enough to have closed bases and moved functions. At the same time, we tried to focus on how we conduct our business so as to become more efficient caretakers of the taxpayers' money.

An excellent example of our efforts towards efficiency is joint basing. As part of BRAC 2005, we were required to form 12 new joint bases from 26 existing locations so that installation management functions will be provided by one component, not two or three, as it is currently.

The joint basing implementation process is complicated, and almost 50 different areas of responsibilities on these bases have been identified for consolidation, including food services, environmental management, child and youth programs, facility maintenance and many more.

But, I can report to you that it is well on the way to achieving success. In January, 2008 we began issuing a series of Joint Basing Implementation Guidance documents and, for the first time, established a set of common definitions and standards for installation support to be provided by each joint base. We established a schedule that divided the 12 planned joint bases into two implementation phases:

Five joint bases, involving 11 installations, were placed into phase one, with an October, 2009 milestone for full implementation, which includes the transfer of personnel and funds to the joint base commander. The remaining seven bases, involving 15 installations, were placed into phase two, with an October, 2010 full implementation, and that is on track. And this is just the beginning of where I see the department in the application of common output levels of service to provide consistent and superb support to our service members at every installation.

As for housing, a decade ago we were maintaining over 300,000 family housing units, two-thirds of which were deemed to be inadequate by the military departments. With you help and vision, we put housing privatizations in place, and the private sector responded by delivering modern, affordable housing.

With this year's request, over 90 percent of DOD's housing inventory in the United States will be funded for privatization. The military Services have leveraged DOD housing dollars by 10 to 1, with $2.5 billion in federal investment generating $25 billion in housing development at privatized installations.

With regard to barracks, it was about 17 years ago that the military departments began an ambitious modernization program to increase the privacy and amenities in permanent-party bachelor housing. Using the military construction funding, and a traditional government-owned business model, much progress has been made but there still is a need for almost $15 billion to complete the permanent-party buy-out.

Privatized housing has unique -- one of the ways we're looking at this is through privatizing bachelor housing, which has unique challenges compared to family housing. But, if we start viewing these buildings more as on-base(ment ?) apartments, instead of unique military training or operating facilities, the private sector will see the potential for a new economic niche in which both they and the department can come out winners.

We've seen recent innovative concepts where the Army has added bachelor officer quarters and senior enlisted bachelor quarters to its existing family housing privatization projects at Fort Bragg, Fort Stewart, Fort Drum, Fort Irwin, and a fifth is planned for Fort Bliss.

In contrast to the Army, the Navy is mainly focusing its unaccompanied housing privatization to bring ship-board junior enlisted sailors ashore using a special pilot authority. The first unaccompanied housing privatization pilot project was awarded in December, 2006 in San Diego; the second in 2007 in Hampton Roads; and a third is under consideration for Mayport and Jacksonville.

Both of the awarded pilot projects in the Navy have demonstrated that, with the authority to pay junior enlisted members less than full housing allowance, privatization of single junior enlisted personnel is less costly, on a lifecycle basis, than the traditional government- owned model. I view this as just the starting point, and ask for the subcommittee's support in the department's continued progress in shifting towards this way of thinking.

This year's budget signals yet another banner year for installations, with about $23 billion in military construction and about $8 billion in facilities sustainment, restoration and modernization. At $23 billion, the military construction program is very robust, especially compared to the $8 to $9 billion levels we were receiving 10 years ago. Similarly, our sustainment budget is also more robust as compared to 10 years ago.

Recapitalization has been more of a challenge. We moved from believing a single recap rate, expressed in years, applied across myriad category sources could provide (a) funding level that was rational or defendable.

When I was Navy secretary and I personally observed the inaccuracy of the recap rate as Hurricane Ivan hit Pensacola. The sudden infusion of restoration funds skewed the recap rate for Navy to a lower number than the targeted 67 years, yet the condition of the rest of the Navy facilities across the board did not improve.

I was dissatisfied with that 67-year metric and I asked my staff to go back to the basics and open a dialogue on the facility condition indices that are already mandated for DOD in real property records. These quality ratings, or "Q-ratings," represent the health of our facilities, and I believe they've been long ignored.

This summer my staff will be working closely with the military departments and Defense agencies to set up program guidelines for determining which facilities require priority for funding; reassessing how Q-ratings are conducted, and their frequency; and, most importantly, reestablishing how the department views and uses master planning at the installation level.

Also, and equally important -- in cooperation with our policy secretariat, the joint staff, the combatant command and the Services, we hope to initiate joint installation master plans at each overseas combatant command region. In closing, Mr. Chairman, I sincerely thank you for this opportunity to highlight our management of installation assets. Thank you.

REP. ORTIZ: Thank you so much.

Secretary Calcara.

MR. CALCARA: Thank you, Mr. Chairman. Good morning, Mr. Forbes, members of the committee. I too am honored to be here today to present details on our FY '10 budget.

We continue on in the largest transformation in Army history. The FY '10 budget does represent for us the second half of the home stretch to complete all our transformation under Base Realignment and Closure, military construction, Grow the Army, and the Army modular force.

-- (inaudible) -- it's a challenging year for all of us -- the dynamics with the budget schedule, and you've asked for us to address in detail the impacts from recent force structure decisions. We are planning tomorrow to have a detailed session with committee staff, to go line-item by line-item project, but let me just briefly cover for you the top line story in my opening remarks.

We got about $1.4 billion in the program tied to the "Grow the Army" initiative. As you know, yesterday we publicly disclosed our decisions on how we are going to apply those changes to the budget. I want you to know it was not a simple process.

We've worked diligently and deliberately over the last several weeks to make sure that every nickel was looked at from both an investment and a capabilities perspective. We're confident that the solution that we'll propose is exactly what is right the for Army and right for the nation at whole.

Of the $1.4 billion that's in the "Grow the Army" wedge in the FY '10 program, approximately half of it is not tied to the brigade configuration, it's tied to combat support and combat services support. Of the remaining half of that wedge, about half of that is tied to reserve and housing -- again, not connected to the "Grow the Army" decision.

So, we're basically talking about 25 percent of the $1.74 billion that is in that budget roll-out that needed to be looked at for reinvestment use. Our plan is to take those dollars and buy down capacity shortages that we had from the other brigades that we built in the 45 total. We also plan to buy-out of relocatables sooner, because you've been telling us that is the right thing to do.

So, that is essentially the impacts of the (DCT ?) decisions, on a macro level. Tomorrow you will cross-walk, one by one, through them.

We think it's the right thing to do to get our capacity back, get out of re-locatables quicker. There's a business case for that. The rest of the budget holds.

Otherwise, I look forward to your questions. Thank you.

REP. ORTIZ: Secretary Penn, good to see you again, sir. Whenever you're ready for your testimony, go ahead, sir.

MR. PENN: Thank you, sir.

Chairman Ortiz, Representative Forbes, members of the subcommittee, it's a privilege to come before you today to discuss the Department of the Navy's installation efforts.

I would like to touch on a few highlights in the department's overall facilities budget request -- very healthy $14.4 billion or 9.2 percent of the department's of (TOA ?). In MILCON, fiscal year 2010 continues the Marine Corps Build the Force Initiatives with a $1.9 billion investment targeted primarily at infrastructure and unit- specific construction required to move Marines from interim facilities and provide adequate facilities for new units.

The fiscal year 2010 MILCON budget also provides funds for the first five construction projects to support the relocation of Marines from Okinawa to Guam in the amount of $378 million.

Our fiscal year 2010 budget request complies with the OMB policy and the DOD financial management regulations that establishes criteria for the use of incremental funding. The use of incremental funding in this budget has been restricted to the continuation of budgets that have been incremented in prior years. Otherwise, all new projects are fully funded or are complete and usable phases.

In family housing, our budget request of $515 million reflects the continuation of investment funding for locations where we still own and operate military family housing and where additional privatization is planned. Prior requests reflect an accelerated program to address additional housing requirements associated with Marine Corps core structure initiatives.

The Navy and Marine Corps have privatized virtually all family housing located in the United States. Where we continue to own housing at overseas and foreign locations, we are investing in a steady state recapitalization effort to replace or renovate housing where needed. Our request also includes funds necessary to operate, maintain and lease housing to support Navy and Marine Corps families located around the world.

Regarding legacy BRAC: We continue our request for appropriated funds in the amount of $168 million as we exhausted all land sale revenue. We disposed of 93 percent of the prior BRAC properties so there is little left to sell and the real estate market is not as lucrative as it was several years ago. We expect only limited revenue from the sales of Roosevelt Roads in Puerto Rico and other small parcels.

With respect to the BRAC 2005 program, our budget request of $592 million represents a shifting emphasis from construction to outfitting and other O&M costs.

One success story I'd like to highlight comes from New Orleans, which still struggles to recover from the aftermath of Hurricane Katrina. We entered into a 75-year leasing agreement with the Algiers Development District in December 2008. In exchange for leasing 149 acres of naval support activity in New Orleans, the headquarters Marine Forces Reserve will receive approximately $150 million in new facilities.

Demolition began recently and we've established temporary quarters for the commissary so that military personnel, retirees and their families still have access to the quality-of-life service during construction. We continue to work with Algiers Development District to ensure this partnership's successful outcome.

We've been able to hold down our cost increases to a modest 2 percent for the implementation period of fiscal year 2006 through fiscal year 2011.

We have made significant progress in the past year in planning for the relocation of Marines from Okinawa to Guam. The environmental impact statement for Guam is under way with a targeted record of decision and time for construction in fiscal year 2010.

The government of Japan ratified the international agreement on 13 May 2009 and appropriated $336 million -- fiscal year 2008 equivalent dollars -- to complement our own investment for fiscal year 2010. We expect to see Japan's contribution deposited in our Treasury by July.

Finally, it has been an honor and privilege to serve this great nation and the men and women of our Navy and Marine Corps team -- the military, civilian personnel and their families.

Thank you, this committee, for your continued support and the opportunity to testify before you today.

REP. ORTIZ: Thank you, Mr. Secretary.

Secretary Ferguson, it's good to see you and you can begin with your testimony now.

MS. FERGUSON: Thank you, Mr. Chairman, Congressman Forbes and distinguished members of the committee. On behalf of America's airmen, it's my pleasure to be here today.

I'd like to begin by thanking the committee for its continued support of your Air Force and the thousands of dedicated and brave airmen and their facilities serving our great nation around the globe.

Today, more than 27,000 airmen are currently deployed in support of ongoing operations in Iraq, Afghanistan, the Horn of Africa and many other locations daily demonstrating their importance in support of joint combat operations.

Within the secretariat for Installations, Environment and Logistics, we fully appreciate the impact our efforts have in support of these airmen and how it affects their ability to positively influence our Air Force's war fighting ability and capacity to counter hostile threats.

Military construction, family housing and BRAC programs form the foundation of our installation structure. Our installation service is the primary platforms for the delivery of global vigilance, reach and power for our nation and our fiscal year 2010 investments reflect a direct connection to this vital work.

As we continue to focus on modernizing our aging weapons systems, we recognize that we cannot lose focus on critical Air Force infrastructure programs.

Our FY 2010 present budget request of $4.9 billion for military construction, military family housing, BRAC and facility maintenance is a reduction from our 2009 request of $5.2 billion. This reflects an increase in MILCON and fact-of-life reductions due to the anticipated completion of the housing privatization and BRAC 2005 round implementation.

Using an enterprise portfolio perspective, we intend to focus our limited resources on the most critical physical plant components by applying demolition and space utilization strategies to reduce our footprint, aggressively pursue energy initiatives, continue to privatize family housing and modernizing dormitories to improve the quality of life for our airmen.

In regards to military family housing, our master plan details our housing MILCON, operations and maintenance and privatization efforts. Since last spring, we have completed new construction or major improvements on more than 2,000 units in the United States and overseas, with another 2,286 units under construction in the U.S. and almost 3,000 units under construction overseas.

Our FY 2010 budget request for military family housing is just over $567 million. The Air Force request for housing investment is $67 million to ensure the continued improvement of our overseas homes. Our request also includes an additional $500 million to pay for operations, maintenance, utilities and leases for the family housing program.

At this point, I'd like to address our efforts in support of base realigning and closure.

BRAC 2005 impacts more than 120 Air Force installations. Unlike the last round of BRAC where 82 percent of the implementation actions affected the active Air Force, in BRAC 2005, 78 percent of implementation actions affect the Air National Guard and Air Force Reserve. In fact, the Air Force will spend more than $478 million on Air National Guard and Air Force Reserve BRAC MILCON projects.

The Air Force total BRAC budget is approximately $3.8 billion and which the Air Force has fully funded. Our FY 2010 BRAC 2005 budget request is approximately $418 million and less than 20 percent of that is for BRAC MILCON projects. I'd like to emphasize the Air Force BRAC program is on track to the meet the September 2011 deadline.

Air Force, MILCON, family housing and BRAC initiatives will continue to directly support Air Force priorities. It is imperative we continue to manage our installations by leveraging industry best practices and state-of-the-art technology. Our civil engineering transformation efforts, now entering their third year, continue to produce efficiencies and cost savings that enhance support for the warfighter, reduce the cost of installation ownership and free resources for the recapitalization for our aging Air Force weapons systems.

More importantly, these investments reflect effective stewardship of funding designed to serve our airmen in the field, their families and the taxpayer at home.

Mr. Chairman and Congressman Forbes, this concludes my remarks. Thank you and the committee once again for your continued support of our airmen and their families. We look forward to your questions.

REP. ORTIZ: Thank you so much.

I see that we have a tremendous turnout of members this morning. It's either that things are going so well and maybe they're not. And I'm pretty sure that they might have a lot of questions.

I'm going to be brief. I'm going to ask one question and then allow -- and I want to allow the members of this committee -- I want to give them a chance. I know that I've met with some of the freshman members. They say, oh, my! It takes a long time before it gets down to the front for them to ask a question.

But I want to ask Secretaries Penn and Ferguson: I know you'll be starting the process to determine the location of a variety of aviation assets, including the Joint Strike Fighter, is pretty, pretty loud.

And there's people who like the sound of freedom and there's other people who are not too happy with the loud noise. Could you explain how the noise associated with the Joint Strike Fighter will influence basing decisions and whether these communities have been contacted? Also, can you explain how this committee -- Joint Strike Fighter basing criteria included in the House report to the 2008 Defense Authorization Bill will be incorporated into those basing decisions? Secretary Ferguson or Penn -- whichever is ready, we'll give you the opportunity to respond to that question.

MS. FERGUSON: I can answer the Air Force section.

REP. ORTIZ: Could you get a little closer to the mike so that --

MS. FERGUSON: Closer to the mike, okay here we go. Based in part with what we saw as we bedded down, tried to bed down the Joint Strike Fighter at Eglin and the noise issues associated with that. The chief of staff of the Air Force and Secretary Donnelly asked us to look at doing an enterprise wide look for the basing of the Joint Strike Fighter across the United States Air Force.

Back in February we accomplished a rapid improvement event where we looked internally in the Air Force how we made basing decisions and a couple of results came out of that and we're implementing those right now, one of which was the stand-up of robust and basing shop within the Air Force and we had lost some of that as we had gone through the previous round of BRAC, we had lost some of that capability and we're now going to build that back up.

The second thing we've done is stood up an Air Force senior basing executive steering group which I chair and we have cross functional representation across the half at the general officer level that oversees the basing process for the Air Force at the strategic level.

One of the objectives for the chief of staffing secretary was for the Air Force to have a defendable repeatable transparent process as we worked through basing, not just for the Joint Strike Fighter but for all weapons systems across the Air Force.

Where we are right now specifically with the JSF -- in fact tomorrow morning I have a briefing where Air Combat Command is the lead for the JSF bed-down process will come in and brief the executive steering group on proposed criteria to bed that down. We briefed the chief and secretary on that proposed criteria at the end of June, and then that criteria will be applied across the inventory of installations across the United States. As part of that criteria, we expect there will be some consideration for noise and mission capabilities, mission requirements and we'll get that criteria over to the committee once that's approved by the chief and secretary.

REP. ORTIZ: Secretary Penn?

MR. PENN: Yes, sir. We've been working closely with the airports, they're emitting the noise analysis for us and the facilities that we're looking at or we're considering thus far in the Navy are those that are really not in a populated area; they're really quite isolated. So I'm thinking that's going to be good. We've looked at the noise from day one and it's very difficult to get the noise specifications on the aircraft. It is closer, it is a lot more noisier than the tactical aircrafts that Mr. Arny and I are used to, but we're working so that we will not be infringing -- we're trying not to infringe on the areas around the bases.

REP. ORTIZ: Thank you. Now I yield to my good friend Mr. Forbes and I would like to see all the members who are here with us today be able to ask questions this morning.

REP. FORBES: Thank you, Mr. Chairman. And I'm going to try to keep my questions relatively brief to again thanking you all for what you've done and for being here today. And I'm going to address these questions to Mr. Arny and Mr. Penn. And I want to preface it by saying when Secretary Gates was here, he indicated that we could ask for everybody's personal opinions and we didn't have to just get department opinions or what was there. So I want to address mine under the caveat that I would like for your personal opinion on this issue because we respect the totality of evidence and experience each of you bring to the table.

But the Navy's FY '10 unfunded requirements list includes a shortfall of $395 million for aviation and ship depot maintenance. Now we've heard a lot of people say that that shortfall, it's much greater than that. The aviation shortfall is bouncing all over the place, depending on which day we see it, it's either 120 planes, or next day it may be more than double that.

Second thing, ship depot maintenance. Last year we were looking at maybe 120 million (dollars), this year we're talking about upwards of 400 million (dollars). But whatever -- the official list is 395 million (dollars) for aviation and ship depot maintenance. In light of such critical maintenance requirements, do you think it is justified to put $76 million, a fourth of the total amount that we have in there, on infrastructure improvements for Mayport on a project that we're being told hasn't even been approved yet?

MR. PENN: Yes, sir, I do. First the MILCOMM project we have for Mayport is for two projects. Pier Charlie One where we put the small boys is the deteriorating. I was in Mayport a couple of weeks ago, and at this time, we cannot drive a truck up to a ship that's built at Charlie One to offload supplies because the piers -- it has sinkholes in it and everything else. At this time, we have to park the vehicles where we're loading supplies on the ships at Charlie One about 50 feet away, crane them across to the ship because of that inconvenience which is a real -- it's a real hardship on everyone concerned.

As I say, there are two projects. Secondly regards to the outcome on the QDR on the carrier, we need to be able to transit -- we need to put a carrier into Mayport for transient. We're not looking at the home porting now, I mean we get the message, no home porting for carrier in Mayport. But just to be able to put a carrier into Mayport, we have to dredge it. The nuclear carriers, as you know, have different requirement, different depths, and that's what we're striving for.

REP. FORBES: Mr. Arny?

MR. ARNY: I concur with Mr. Penn. I was stationed on a conventional carrier out of Mayport and due to a maintenance accident some of our maintenance people installed a pump backwards and the ship sank at the pier and didn't go down very far. So to bring nuclear carriers in to have the right safety for supply and resupply, you need to have the dredging done. And Mr. Penn's right, the pier apparently is falling down, whether you station a carrier there or not or whether you just for -- that's more of a maintenance of the facility rather than for a specific ship.

REP. FORBES: When you're talking about the $76 million that has been allocated in, though, it would be fair to say that most of that dredging project and pier work would only be needed, a large portion of that, if you were trying to put a nuclear carrier in there. Is that not correct?

MR. ARNY: Not for the pier work, sir.

REP. FORBES: How much would the pier work be, Mr. Penn?

MR. PENN: Yeah, the pier work alone is 30 million (dollars).

REP. FORBES: It's 30 million (dollars)?

MR. PENN: Yes, sir.

REP. FORBES: And what's the remaining 46 million (dollars)? Would that be to dig the ditch?

MR. PENN: Yes, sir, that's for the ditch.

REP. FORBES: Well, the reason I ask that is because, you know, basically we know that there are some of these needs, the aviation needs -- there's a 100 percent need that we have there, we know that there's a 100 percent need for the depot maintenance, I think both of you would agree on that.

And the last question I'll just ask you is this. Most of the concern that's been expressed about needing to do that dredging and get the nuclear carrier in that port was based on the fact that we would only have one naval base capable of home porting a nuclear carrier that has access to the Atlantic Ocean and that a natural disaster, terrorist attack could shut down the Norfolk's Naval facility. And so the question I would ask you is what risk assessment has been given to you and who has given it to you that outlines the risk that such an attack would take place. And if you could just contrast that with the fact that we know we've got a 100 percent need for the aviation shortfall and a 100 percent need for the depot maintenance shortfall; in other words, have you ever asked what that risk assessment is? Is it a 10 percent risk, 5 percent risk, 20 percent risk, who gave you the risk assessment and what was that risk assessment?

MR. PENN: Sir, I think it's very difficult to quantify a risk assessment, either man-made or natural.

REP. FORBES: Did you ever ask for it?

MR. PENN: I have and -- I've asked my own staff for it. I haven't gone to the Navy and asked the operators for it.

REP. FORBES: Did you ask the admiral that did the strategic dispersal plan? The one that we based the need to move the carrier and have an -- a --

MR. PENN: I did not. No sir.

REP. FORBES: Do you know of anyone in the Department that did?

MR. PENN: I'll have to get back to you on that. I do not know. I'd have to --

REP. FORBES: If I told you that the admiral said that no one has ever asked him for that risk assessment, would that be contrary to any evidence that you have to rebut that?

MR. PENN: I'll have to get back to you on that because he has a large staff working for him and, you know, sometimes we go with the AO level to get responses.

REP. FORBES: But normally he would know if that question had been asked of his staff or to him, wouldn't he?

MR. PENN: Not necessarily, sir.

MR. ARNY: Not necessarily.

REP. FORBES: Okay. Then Mr. Arny, do you know of anyone who's ever asked that question?

MR. ARNY: No, I do not.

REP. FORBES: And I would just finally ask you don't you think it would help to have asked what the risk assessment was?; in other words, we might have a meteor that falls out of the sky tomorrow, but we aren't putting money in the budget to cover that because we don't think the risk is very high. And I'll just tell you that when I asked him if anyone had ever asked him that question his answer to me was no. And secondly, when I asked him if he could quantify that risk, he said it would be very, very small, less than 10 percent.

And so my just comment to you is that when we're looking at situations where budgets seem to be driving our Defense strategy -- and I know we can argue whether that's true or not -- it just doesn't make much sense to me when we're taking 25 percent of the cost that we basically know we need for aviation shortfall and for depot maintenance and we're putting it to a situation where the admiral that writes the strategic dispersal plan will tell us that it is less than a 10 percent chance that we would ever need that.

But if you would go back and check with him and see if anyone's asked that question and if you could respond to us on the record as to whether or not that question's ever been asked to him and what the answer would be --

MR. PENN: I will ask that question today, sir.

The only problem, and I think you'll agree, is the loss of a carrier us unacceptable.

REP. FORBES: I don't think anybody disagrees with that, but the shortfall in planes is unacceptable too, shortfall in depot maintenance when we have ships that are failing our inserv inspections, that's not acceptable to us either. And Mr. Arny, somebody slipped you a piece of paper. If you want to get that in the record, go ahead.

MR. ARNY: Well, sir, the -- again, the -- I didn't question it because I do believe that dredging is needed whether you home port a carrier there or not because we're constantly bringing -- even when we had a conventional carrier there, we'd bring in nuclear carriers and we've got to light load them to get in and got to come in at high tide. It puts tremendous restrictions on it. We needed -- in my opinion we needed to dredge that out whether you homeboard a nuclear carrier there or -- because you're going to bring them in. You may not homeboard them there but you're going to bring them in and out as part of your annual operations.

REP. FORBES: And my time's up so I'll yield back the balance of my time. But if you would, get back to me on that risk assessment question as to whether or not anybody's ever asked it. And if you could give it to us for the record we'd appreciate it.

Thank you, Mr. Chairman. I yield back.

REP. ORTIZ: The gentleman from Mississippi, Mr. Taylor.

REP. GENE TAYLOR (D-MS): Mr. Chairman, with your permission I'm going to yield my time to Mr. Kissell and take his when his is due.

REP. ORTIZ: Mr. Kissell?

REP. LARRY KISSELL (D-NC): Thank you, Mr. Taylor, for yielding your time. I just wish you'd give me your questions because Mr. Taylor always asks the best questions. But I'll try to make do with a couple I came up with.

Mr. Calcara, I noticed unless I misread the numbers that Army National Guard construction money is down $460 million from -- in the 2010 request from what was actually approved in 2009. And for Army families, housing construction down $180 million from what was requested versus what was approved. I'm just wondering what the thinking is behind that.

MR. CALCARA: Okay. On the Army housing side, most of those dollars are tied to capital investments into the RCI Program. And as we continue to build out the RCI, we're at a 98 percent level. We don't require as much capital investment from the military construction account for those projects to keep going. On the Guard side, the numbers are down.

I think if you compare request versus request from last year and you look at some of the facilities that we're buying through the base closure on the reserve side, we're actually bringing more capabilities to the Guard than was requested last year. What I mean by that is if you look at about $300 million worth of the Army reserve projects, about half of those are shared with the Guard. So if you add those two numbers together and you compare that to last year's request, we're within about 10 (percent) to 15 percent on the numbers.

REP. KISSELL: And Secretary Ferguson, in a previous hearing it was indicated -- and I can't give you real specifics on this but there was just some indications that either through not having the fighter planes available for our Air Force Guard, the Air Guard, but somehow we're de-emphasizing the Air Guard. Just wondering if you could give me some reassurance that we're going to have those good pilots that are training and planes that when we need them that they're going to be there.

MS. FERGUSON: The Air Force is not looking to de-emphasize the Air National Guard in any way. The Air National Guard and the Air Force Reserves are tremendous multiplier for the Air Force. They're deployed alongside our active duty members at all times. I can get you a better answer for that, but in all of my meetings I've had I've seen no indication from the Air Force that there's any emphasis to do that.

REP. KISSELL: So the emphasis is going to be there as we have seen it in terms of the equipment they can train on and the budgeting process so that they can continue to be there?

MS. FERGUSON: Absolutely.

REP. KISSELL: And Secretary Arny, one question -- and I hope this is not too much home cooking. I'm from North Carolina and my district goes right to the edge of Fort Bragg and we have most of the military reservation but none of the base. Tremendous BRAC changes at Fort Bragg; tremendous incoming commands, and we're very, very tickled with that. And there's going to be -- I think, the most flag officers outside of the Pentagon will be at Fort Bragg when all is said and done.

But it's been mentioned to me that we're not going to have an Air Force officer of flag rank on the base, but there's still going to be a significant amount of Air Force presence and there's some concern that if we don't have an officer of equal rank that there might be some difficulty in going back and forth in terms of communication and getting things done. It was suggested that there might be a possibility of bringing in an additional ranking officer and staff. Just wonder if you know any on that?

MR. ARNY: No, sir, that subject hadn't come up. As a former officer myself, I don't see where that would be a problem. I would defer to my Air Force and Army colleagues on the specifics of it.

REP. KISSELL: Do you all have any knowledge of any discussions on this? And once again, I know this is getting down in detail, but this is a pretty big operation on what will be our largest Army base. So if you all could get back to me on that I would appreciate that. Thank you.

Thank you, Mr. Chairman. Thank you, Mr. Taylor.

REP. ORTIZ: I recognize my good friend, the chairman of the Intelligence Committee from El Paso, Texas.

REP. SILVESTRE REYES (D-TX): Thank you, Mr. Chairman and I thank all the secretaries for being here with us this morning.

I just wanted to start out by taking a few moments to talk about what is, from my perspective, something very frustrating, and that's the overseas rebasing decisions -- and actually indecisions is a better word. I think this morning I am frustrated beyond words with the latest edict that has come down that we're going to restudy this whole issue.

I think, Mr. Chairman, this is an issue that has been studied and restudied. It was studied by the rebasing -- overseas rebasing commission, by the BRAC Commission. We thought that these decisions were made and had already been ratified, only to find out that we're in the process of delaying the move of our troops back to the U.S., which, in my opinion is a great waste of time and money and a disservice because most importantly, it leaves soldiers and their families in old facilities, substandard facilities, and it also forces our troops that are primarily going to be deploying to places like Iraq and Afghanistan to train in ranges that don't look anything like the areas that they're going to go into combat in.

I think as a committee, Mr. Chairman, we need to really stand strongly on this. The other thing that frustrates me is the fact that we seem to be rewarding the very countries that are reluctant to keep their part of the bargain in places like Afghanistan. They're refusing to add additional resources and troops to help us out in Afghanistan, which puts a further burden on our troops.

I think we ought to take the stand that if you're not going to help us in these areas of the world that are critical -- not just to us but to the whole world -- then we stick with the original strategy and bring them home.

I guess my question this morning, I would like to ask Secretary Arny or Secretary Calcara, the fact that the Secretary of Defense recently announced that he planned to stop the growth of the Army brigade combat teams at 45; that means not creating the 46th, 47th and 48th brigades as had been announced and planned under the Grow the Army concept. And he also said that while he's stopping those three brigades, he's going to continue with the same levels that have been approved by Congress.

Part of the issue for me is that the secretary said that he -- in his words -- he was going to thicken the force and then in doing so, help to decrease the dwell time between deployments, which I think all of us agree we fundamentally need to address.

But my question is this. Where does the department plan to base the over 10,000 soldiers slated to serve in the now-cancelled three BCTs? I assume that we have a detailed plan, and a detailed plan has been discussed, has been presented before the decision was made by the secretary to cancel out those three brigades. So can you tell this committee what that plan is, how we're going to accommodate those 10,000 troops?

MR. ARNY: Sir, the answer is probably more detailed than we could get into today. We've essentially looked at those population spreads and where they are across the Army and there are incremental adjustments at certain locations.

I guess what I'm saying -- and the short answer is we've identified Bliss, Carson and Stewart as getting one less brigade because of the announcement. (Here ?) there is a 3,500-person population delta at each of those locations -- not exactly working out that way. In some places we had BCTs who were not at full strength, so they will be getting some of those people. At Fort Bliss, Fort Carson and Fort Stewart, we didn't have people at full strength. They will be getting some people.

So I don't have a display for you available today going base by base where those numbers are spread, but the answer is, wherever we had shortages in combat teams and combat configurations across the Army.

REP. REYES: When will that be available? And Mr. Chairman, if we can get that information, I would appreciate it. And when will that be available?

MR. ARNY: We're having a working session tomorrow with staff, and we will try to provide that information tomorrow.

REP. REYES: Well, can we get that, Mr. Chairman?

REP. ORTIZ: Sure, we can get that. And I think that the gentleman has raised some very important questions that hopefully we can get to the bottom of it. I know that we do have a lot of soldiers who are injured and incapacitated. And even though they're on active duty, they can go back for combat duty. But you've raised some very interesting questions, and I think we need to follow up.

REP. REYES: Thank you, Mr. Chairman.

REP. ORTIZ: Ms. Fallin.

REP. MARY FALLIN (R-OK): Thank you, Mr. Chairman.

I had a couple of questions about the public-private partnerships on the housing. And I'm pleased that we have made such tremendous progress and are working with the private sector to create better living conditions for our soldiers, so thank you so much for doing that.

I was reading where the Department of Defense plans to privatize or hopes to have about 87 percent of the family housing units privatized, including 188,000 units by 2010. And I've had the opportunity in my state to visit some of the facilities that we've had the public-private partnerships in, and my state has been very pleased with that in Oklahoma.

But I wanted to ask you a couple of questions. It has been indicated that 36 percent of the awarded privatization projects will have occupancy rates that are below the expectations, from some of the things I've read. And I guess my question is, what challenges will that present? And how do we plan to address that issue to ensure that we can increase those occupancy rates so that we can optimize these facilities and make sure that we're getting people in that need to be in there?

MR. ARNY: Yes, ma'am. Let me take a shot at that. We've seen some of those reports, and we're working with GAO. And they had one that said that 36 percent of the occupancy rates were below expectation. And more recently they said it was 29. Our data shows 10 percent.

We think they're including -- the house is occupied -- we have what we call the waterfall effect. The house is available for rent to an active-duty member. If no active-duty member wants the house, then we go down through a waterfall of Reserve members, civilians living on the base, till you eventually get to -- you can have civilians from the outside come in with the proper clearances.

Early on, we saw rates that were lower than expected because the management on the bases didn't quite understand how that worked. That's changed. And what we've seen are occupancy rates of 90 percent or greater. Within the Navy, we were looking at occupancy rates of like 95 percent. So, again, we have a disconnect with GAO. We're trying to figure out where they're getting their numbers from if they're not including some of these people. If the house is occupied by an active-duty member or a DOD civilian, it's still occupied.

Now, the difference between everybody other than active-duty military is that they could only do a one-year lease. An active-duty military person has a lease for as long as they're stationed there. So the waterfall effect still, while it protects our occupancy, we think we've balanced it to protect our service members.

REP. FALLIN: Okay, that makes sense. And let me ask one other thing, if I can, Mr. Chairman.

When you think about the housing market in the United States and the foreclosure rates and the availability of homes that are on the marketplace, and even the credit that's available to build facilities, how will the financial markets affect the ability for the partnership to be able to get the credit they need to be able to build these housing units? And will the foreclosure rates, the vacant home rates, affect, I guess, the occupancy and the need?

MR. ARNY: We are seeing, in effect -- most of our housing projects were done prior to the -- I'd say the bulk, the majority, were done prior to the market changing. And we've seen some debt servicing issues. We don't have any. We're still considered a good risk. But we are seeing the fact that our rates aren't quite as good that we can get.

So essentially what we're having to do is lengthen the development. We're lengthening the development time in order to accommodate that. We believe we have enough flexibility in there. It's not perfect. We liked it when the market was great, but we're accommodating that.

REP. FALLIN: Okay, thank you very much.

And Mr. Chairman, if I could yield the balance of my time to Congressman Fleming.

REP. ORTIZ: Go right ahead. With no objections, go ahead, sir.

REP. JOHN FLEMING (R-LA): Thank you, Mr. Chairman. And thank you to the gentlelady for yielding.

My question -- I have a very specific question to Mr. Calcara. My district, 4th district of Louisiana, is countercyclic to the rest of the country. We have two large bases, Barksdale and Fort Polk, and both of them are growing rather than declining. And we're real happy about that, of course.

But we do have a problem in Fort Polk. It's doubling in size, taking in acreage, and at the same time, building by brigade strength, and it's surrounded by a rural area. So we have a housing problem there. And so I'd like to ask you if you know specifically what your plans are to help solve that, and if not, generally how we're going to attack that problem.

MR. CALCARA: Yes, we are looking at Fort Polk, and we have been. It's not a simple answer from a privatization perspective because of the market issue there.

One of the things that we have to look at is the ability to work within the authorities' limits on cash investment, as well as priority or preferred returns that the private sector is now requiring on equity. When we originally started this program, payouts in that range were in the 5 to 10 percent. We're now looking at equity premiums in the 16 to 20 range.

So as we start paying more for private financing, as interest rates creep higher, as the long bond grows and spreads against the long bond grow, our ability to make privatization work there is limited. But we think that is the best solution. We just think the timing to do that right now is probably problematic. But we're not ready to give up yet. We are looking at it, and we will continue to try to find a solution for the housing problem there.

REP. ORTIZ: Thank you.

Mr. Reyes -- I mean, correct that. Mr. Marshall.

REP. JIM MARSHALL (D-GA): Thank you, Mr. Chairman. You actually may have read my mind, because I was going to bring up what Mr. Reyes has already spoken about.

It's terribly important, for readiness purposes, Mr. Chairman, that we have the active cooperation of the communities surrounding our installations as we attempt to grow those installations. For example, the local community has to make certain investments in order to meet the needs of the population that's going to be brought in. And that's particularly true of parts of our country which are more rural. And an awful lot of our installations are located in more rural areas.

If you're going to increase the size of the force by 3,000 or 4,000 people, that effectively means 5,000 to 10,000 people are coming into this rural community. If the rural community does not prepare for that at our request, then when those new troops arrive, the facilities simply aren't there to meet their needs, the needs of their families, the needs of their children.

The decision to reduce from 48 to 45 brigades causes a real problem for the communities that surround Fort Stewart, Georgia. This is a rural part of the country. Those communities are smaller communities that don't simply have excess capacity available to meet the needs of 3,000 to 10,000 people being brought in by DOD.

So at DOD's request, at Army's request, those communities invested north of $450 million getting ready to receive a new brigade. And that money is the sort of investment that we ask our partner communities to make routinely.

I think readiness in the future suffers if we don't live up to our end of the bargain, if we don't live up to our word, to our commitment to these communities, that causes them to reasonably (rely on ?) our request. And I think we need to seriously look at the decision to reduce brigades, encouraging the Army and DOD generally to figure out what compensating decisions can be made in order to mitigate the negative impact of a decision like this.

Let's assume that, in fact, we're not going to have the additional brigades. The Army nevertheless is not shrinking. It's growing. Certainly we can put warm bodies into Fort Stewart to, you know, basically meet the obligation that we have to those communities that have relied upon us in going ahead and meeting our need to bring new troops in. And Mr. Chairman, with -- and I think maybe we need to have some committee report at the very least that directs that something along these lines be done.

And with that, Mr. Chairman, I'd like to yield the balance of my time, if there's no objection, to Mr. Kratovil from Maryland.

REP. ORTIZ: Sure, with no objection.

Well, go ahead, Mr. Kratovil.

REP. FRANK KRATOVIL, JR. (D-MD): Thank you very much. Thank you for yielding.

I was recently at Fort Meade in Maryland and toured the installation there and went to some of the housing -- the privatized housing -- which was very impressive. The units were wonderful; it had a community -- great community room. There was certainly other very nice amenities to it.

I noticed it, though, that the occupancy rates at a lot of these -- in the lot of the (relationships ?) that we have in these housing -- privatized housing arrangements are not where they should be or at least where it was expected.

One, is that true? And two, why is that and what can we do to change that? And if we don't change that, are these private partners going to be able to continue their investment in the long term?

MR. ARNY: Sir, we don't see the same low rates. As a matter of fact, we have people standing in line. My son just moved into the area and there's a line for Fort Belvoir. So he rented in the private sector.

And again, DOD-wide, only 25 percent of our people are living on base and 75 (percent) living outside. We believe there are enough -- first of all, we don't have the evidence to show that occupancy rates are low. If they are low, then the private sector partner is allowed to rent to other-than-active-duty military people. He can rent to reservists, to government civilians. And eventually, he can rent to private citizens.

So if there's a lot occupancy rate, we'll take a look at it, but there shouldn't be one.

REP. KRATOVIL: Go ahead.

MS. FERGUSON: If I can answer from the Air Force perspective, sir.

I don't certainly have the info on Fort Meade, but what we found in the Air Force is in the initial development period our occupancy rate is lower then once the developer gets in there and they build new houses or renovate houses.

And for our last quarter, the Air Force overall was at 90 percent, which was our highest that we've had since 2006. We've continually seen an increase. But to also get to you point, as we continue to privatize the remaining bases that we have in the Air Force inventory -- we have 22 bases left to privatize -- we're going to go in with lower numbers than what we think we need and then build to those higher numbers when occupancy dictates it. So we're going with a more conservative approach upfront based at some lessons learned that the Air Force has had in earlier projects.

REP. KRATOVIL: Okay.

MR. ARNY: Sir, you also --

REP. KRATOVIL: Go ahead.

MR. ARNY: You also can't compare occupancy rate under privatized with our own occupancy rate in the old days, because in the old days, if a house was taken out for maintenance, it wasn't counted as being occupiable.

With a private sector guy, if he has an empty house -- whether it's down for maintenance or it doesn't have -- it's an empty house. So his numbers will be different.

REP. KRATOVIL: Okay, thank you.

I was also recently at a hospital in Harford County, just outside of Aberdeen. And the hospital was saying that, you know, there's of been a lot of discussion in terms of infrastructure related to roads surrounding the installations and preparing for this growth that, of course, we're very happy to have in Maryland.

But they were saying that in terms of they're very concerned about infrastructure in terms of health care to prepare for these folks coming. Are you hearing similar concerns at all in terms of the communities where you're going?

MR. ARNY: It depends on which community, but I haven't heard the health care issue other than -- I've heard some of the road issues, especially around the more urban locations at Fort Belvoir and so forth, but not around --

REP. KRATOVIL: Right. But is that an issue that we considered in terms of looking at the growth that's going to occur with the changes with BRAC and the consequences of that on the surrounding communities?

REP. : Will the gentleman yield, Mr. Chairman?

REP. ORTIZ: He was given time from another member.

REP. KRATOVIL: Mr. Chairman, I have no time to yield back and please don't blame me! (Laughter.)

REP. ORTIZ: We'll see if we can have a second round.

But I want to go back to some of the questions that were asked. You know, I've been here and I've gone through, I think, about five base closures.

This last base closure I was able to see for the Base Closure Commission and QDR Commission -- they were never able to synchronize with one another.

And I think this is one of the reasons that we're having the problem that we're having today. And this is one of the reasons why the local communities are going to where we're going now. We made some horrible mistakes at the expense of local communities.

But now I'd like to yield to Ms. Bordallo, the lady from Guam.

DEL. MADELEINE BORDALLO (D-GUAM): Thank you very much, Mr. Chairman. This is a very importance hearing for me and my constituents.

To all of our witnesses, thank you very much. Secretary Arny, Secretary Penn, a most important thank you to you, because you've had a real leading role in the Guam military buildup. And also to Secretary Calcara and Secretary Ferguson.

I also want to express my general support for the $787 million in total military construction funding in the fiscal year 2010 budget for all of Guam's military installations -- including the Guam National Guard.

Secretary Arny, let me start with you: As you know, on April 9th, GAO report called on more senior-level involvement from the DOD to make sure that Guam's local infrastructure issues were given more consideration in the federal budget process.

Specifically, the reports calls for a meeting of the economic adjustment committee for executive level coordination with other federal agencies. When can we expect the EAC to begin meeting to address the Guam buildup and how will Guam's local infrastructure concerns be addressed?

MR. ARNY: Yes, Ms. Bordallo. The Economic Adjustment Committee -- we're working to set up a meeting. I don't have a date at this time, but it may not be -- with the agencies not having their political appointees in place, it may not occur for another couple of months.

DEL. BORDALLO: All right. As soon as we hear of that date, do correspond with us.

Secretary Penn, it is very promising to see some $412 million requested for the Navy and Marine Corps construction, as well as $259 million for the new hospital on Guam.

Obviously, one of the impediments to executing these funds that I am confident this Congress will authorize and appropriate for, is the completion of the draft EIS in the record of decision. Mr. Secretary, can you update the committee on its status and when we can expect to see a draft EIS?

And along these lines, I'm also interested in learning more about how the department plans on using mitigation funding that this Congress authorized in section 311 of last year's NDAA. Can we expect to see roughly 5 to 9 percent set-asides in each MILCON project for such mitigation efforts? And is this something that we can count on from DOD?

MR. PENN: Ma'am, we hope to get the -- the master plan out so we can do the construction. We want to start in fiscal '10. That's our goal.

And we're at this plan for the EIS, we're looking 86 different studies to make sure we do Guam right, okay? And for saying the mitigation before we completed the studies would be very difficult -- would not be good on our part.

I know I specifically talked with the Department of Agriculture yesterday on things we can do as far as the mitigation measures are concerned. I think we need to -- we need the analysis completed before we do the mitigation. There will be some that requires a more significant amount of funding than others. But until we have that analysis -- the baseline -- I don't think we can say what a specific percentage would be for the mitigation measures.

We are looking to mitigate all the areas that are impacted. That will be done. It's the right thing to do. I mean, the law requires it, but it's the right thing to do. So we're not going to destroy anything.

DEL. BORDALLO: Mr. Arny, do you have any comments on that?

MR. ARNY: No, I don't. I'm not sure of the section you're referring to. And I'd like to get with your staff and figure that out.

DEL. BORDALLO: Good. All right.

I'm also concerned about support needed, but seemingly absent, from DOD for local and federal cooperating agencies in the EIS.

It is my understanding that some lawyers in the department contend the economic act precludes DOD from helping to fund cooperating agencies for the Guam military build up.

I hope that this can be resolved, especially for our local cooperating agencies that do not have the funds to review the EIS. So how can we get it right and done on time if DOD's not fully funding the EIS? Can you comment on this matter and how it is being resolved, Secretary Penn?

MR. PENN: Yes, ma'am. We are fully funding the EIS. The EIS is the DON responsibility and that's what we're doing.

We have brought all the local agencies in. In fact, as a major -- EPA is having a meeting later this month on Saipan looking at the Marianas. And I think Mr. Arny and I both met with the EPA Region Nine last month.

DEL. BORDALLO: So that, for the record, will be fully funded by DOD?

MR. ARNY: Exactly.

DEL. BORDALLO: And then I have one last question. Mr. --

MR. ARNY: (Off mike.)

DEL. BORDALLO: Go ahead, Mr. Arny.

MR. ARNY: You may be referring to a request from Guam EPA for funding for them to review.

DEL. BORDALLO: Yes.

MR. ARNY: We are not allowed to fund Guam EPA to review our documents in this particular case. This is not like -- we don't have a (D-Samoa ?) to work that. And I can work with your staff on the details, but I believe the government of Guam says they will review the documents with the staff that they have.

DEL. BORDALLO: All right.

Mr. Chairman, I have just one question and then no second round for me, if you don't mind.

REP. ORTIZ: Make it short, because --

DEL. BORDALLO: All right.

Ms. Ferguson, thank you for your funding for the ISR and the strikes, as well as northwest field activities as Anderson Air Force Base.

As you know from past correspondence, I've been concerned about the Air Force's commitment to Andersen's military construction needs. We don't see these projects to be overshadowed or unnecessarily compromised due to increased Navy and Marine Corps program needs on Guam with the build-up. Can we expect similar commitments in future years for Andersen? (Audio break.)

MS. FERGUSON: (In progress after audio break) -- as you can tell from the '10 budget, we have one project in there that supports the Strike FOL bed down, as well as three projects that help facilitate the movement of folks off the Korean Peninsula. I can't comment on any projects that we have beyond FY '10 in this session.

DEL. BORDALLO: All right. Thank you.

And, Mr. Chairman -- just to you, with recent developments from North Korea, and their plans to now launch long-range missiles, with supposedly Guam as one of their targets, it is our responsibility to provide security for the U.S. citizens of Guam. So, I urge everyone to work together to get this military movement right. Thank you.

REP. ORTIZ: Thank you so much.

Now, I'll yield to Mr. Fleming.

REP. JOHN FLEMING (R-LA): Thank you, Mr. Chairman. Mr. Chairman, in light of the fact that I had my question answered, I'm going to yield the balance of my time to the gentleman from Texas, Mr. Conaway.

REP. ORTIZ: No objection.

Mr. Conaway.

REP. MICHAEL CONAWAY (R-TX): Well, thank you, Mr. Chairman.

Thank you, Mr. Fleming -- appreciate that.

Mr. Penn, real quickly, did you say that the EIS has been expanded on Guam, to include all of the range areas that are necessary to make this thing work?

MR. PENN: No, sir, I did not say that.

REP. CONAWAY: What did you say? You said the EPA --

MR. PENN: I said we're conducting 86 studies for the current EIS.

REP. CONAWAY: You just said you're bringing somebody in to talk about the Marianas.

MR. PENN: I said EPA is having a meeting on Saipan -- I think it starts at the (22nd ?) of this month --

REP. CONAWAY: Okay, so --

MR. PENN: -- (inaudible) -- all the EIS.

REP. CONAWAY: That's unrelated to the work --

MR. PENN: Correct.

REP. CONAWAY: -- that has to be done for that. Okay.

MR. PENN: Right.

REP. CONAWAY: While we're talking about the Guam movement, can the Marine Corps waive the flight safety issues at the replacement facility at Schwab?

MR. PENN: No, sir. That is not the intent at all. We do not intend to do that.

REP. CONAWAY: Well, how do you intend to make that system work? If the Navy -- how do you, how are you going to use that facility to replace the Futenma facility if you can't waive the flight safety issues that the Navy has?

MR. PENN: And I don't know of the flight issues -- flight safety issues you're referring to, but with aircraft, there are many, many things you can do to mitigate -- everything from reducing the weight, operating at different temperatures, all of those things are factors that are always done on a daily basis.

In the pilot's pocket checklist, before I would launch -- except from the carrier, I would go through and check my outside air temperature -- (inaudible) --

REP. CONAWAY: Well, yeah, but --

MR. PENN: -- and everything. And that's how you mitigate it. You can go down 1,000 pounds and get within limits. Okay, these are not intended -- we are not going to violate safety. We're not going to bend any safety rules at all to operate out in the field.

REP. CONAWAY: Okay. Is this like a boxing match, with one hand in your pocket?

MR. ARNY: No, sir --

MR. PENN: I don't think so.

MR. ARNY: (The Pacific commander ?) said with the length of the runway, and the length of the overruns required, that they can meet all their operational requirements. And the Marine Corps has agreed with that.

REP. CONAWAY: Okay, so the Navy will certify that is a safe (air place ?)?

MR. ARNY: -- (inaudible) --

MR. PENN: (Yes ?).

MR. ARNY: There may be some need for waivers, in terms of -- practically every field we have in America has waivers, but we will make sure they are mitigated, or taken out, or that we all agree that they're, that the risk is minimal.

REP. CONAWAY: Okay. And then we can reduce the capacity of what we're trying to do to get under those guidelines. Okay.

You know, construction budgets fluctuate, unlike a, say, a personnel line, where that's really pretty consistent. So, going up and going down is not automatically a flag.

Mr. Arny, how do you look at system-wide -- Mr. Calcara mentioned something about "requests being met" is a better indicator, versus just simply the budget number changing. How does (the ?) system look at system-wide construction needs, to say, you know, what percentage of those needs are being funded rationally; and maybe, how do you look at your overall plan for deploying all these scarce resources against a spectacular array of needs?

MR. ARNY: Well, what Mr. Calcara was referring to is that the Guard budget, in particular, the Congress is grateful and -- we're grateful to Congress. They (don't ?) usually add to that request. So, we measure it from what we requested the year before, not from where Congress appropriated it.

On the overall budget, we do look at it from year to year, which is one of the reasons we're trying to go to this Q-rating, so that we have a measure of what buildings need to be replaced, and when they need to be replaced.

Part of the budget is also for new aircraft, new ships, new tanks, and the facilities that go with that. And we rely on the Services -- always do rely on the Services to meet their operational needs, and then we oversee it and make sure it's there.

REP. CONAWAY: Did you just tell us that you intentionally under- budget because you know that Congress is going to add money on top of it?

MR. ARNY: No, sir. We compare our budgets to what we requested --

REP. CONAWAY: Well, I thought you said earlier that --

MR. ARNY: Just for the Guard.

REP. CONAWAY: -- that you --

MR. ARNY: For the Guard part of it, we compare our request for '10, for instance, to our request for '09. We believe that fills the needs. If Congress adds things on that makes us -- that makes that Guard budget -- it puts it in better shape. We believe that the request will satisfy our needs.

REP. CONAWAY: Okay, but you're counting on Congress plussing that up.

MR. ARNY: No, sir, we aren't.

REP. CONAWAY: All right. I'm just making sure I didn't misunderstood.

(Mr. Calcara ?), the Army's got 5 million acres short of places to run tanks and helicopters, and all that kind of stuff. You dropped the request at Pinon Canyon from 400,000 to 100,000. How are we going to keep training the kids we need to train with this kind of a shortfall?

MR. CALCARA (?): Yes, the shortfall is there. It has been validated through, you know, GAO and how we -- (inaudible) -- compute it.

In the short-term, our position is to only acquire property in areas where the local delegation is supporting us. In the case of Pinon Canyon, the mitigations are on battle mixes, on configurations, on tempo.

We are still accomplishing a lot of training at Pinon Canyon. The question is, how efficient and effective could we get by acquiring more training? As communication systems develop, unmanned vehicles develop, we require more physical square footage to really truly test those types of equipment.

We are compromising some of that, obviously, with a reduced footprint, but we are still training there and there are work-arounds. We just continue to work at it. We think we had a plausible strategy for Pinon Canyon. We had a willing seller, at one point, who changed course on us. We're going to continue to work it hard.

REP. CONAWAY: Thank you, Mr. Chairman. I yield back.

REP. ORTIZ: Mr. Loebsack.

REP. DAVID LOEBSACK (D-IA): Thank you, Mr. Chair.

I'd like thank all of you on the panel for being here today and for your service to our country. And I'm very glad and very relieved to see that the three remaining BRAC 2005 sites in Iowa are, in fact, funded in this budget request for 2010. Those three, of course, are Iowa National Guard and Reserve centers in Cedar Rapids, Middletown, and Muscatine.

Those facilities were constructed in 1916, 1950 and 1973, respectively. They're less than half the current authorized size for such structures, and improvements to these buildings will enhance training, recruitment and retention, and, I think, in particular, in light of the increased role that our National Guard and Reserve components have been playing overseas in our two conflicts and, potentially, in conflicts down the line.

I'm also very glad to see that funding is included for equipment and infrastructure modernization at the Iowa Army Ammunition Plant -- that's near Burlington, Iowa. Most of the infrastructure in that plant -- and I've toured that plant, is over 60 years old and requires significant modernization in order to assure the safety of our workers, continuity of operations and timely delivery to or service members.

I just have two questions related to these two issues. I understand that funding for the Muscatine Reserve center may be moved up to 2009; the decision may be coming soon. Could either of you either -- Secretary Calcara or Secretary Arny address yourself to that question?

MR. CALCARA: Yes, we currently have Muscatine tracking at about $8.8 million in total program. We are experiencing some savings in projects as we are opening bids. Our intent would be, you know, once we think we've got past the lion's share of the program, to try to pull some projects forward.

I would tell you it would probably be in the next 30 to 45 days where we would make that decision. We would like to get that one in at $9 million, if we could.

REP. LOEBSACK: Okay, thank you.

And then my second question has to do with, not just the Iowa Army Ammunition Plant, but plants like it, in general. There appears to be perhaps inattention to the deteriorating infrastructure of Army ammunition plants, including the Army ammunition plant in Iowa.

Can you highlight how this budget supports modernization of infrastructure at these facilities, including security, for example, and also energy efficiency enhancements. Does the Army, or does DOD have a long-term plan to address these issues? And either one of you, or both of you could speak to that issue.

MR. ARNY: Over a long term basis we -- we used to look at sustainment rates of 70 (percent), 75 percent. We're now at 90 percent. We'd like to go to 100 if the budget would allow. We're also looking at development this Q-rating plan, which will allow us to better measure the condition of our facilities, and then we'll be able to defend ourselves, in the mil con world, against the procurement folks, to say, look, if you want -- if you wanted a Navy, Marine Corps, Air Force, Army that's capable, you've got to expend this much money.

We're also -- we were also beneficiaries this year of the stimulus funds, so we got an additional $7.4 billion. And also in the '10 budget we were able to sustain our sustainment funding in the latest budget round. So, we're doing much better and we have a better long term way to do it. It's not there yet, but it's much better than we've done over the past 10 to 15 years.

REP. LOEBSACK: All right. Thank you very much.

And I'll yield back the balance of my time, Mr. Chair.

REP. ORTIZ: The gentleman from Mississippi, Mr. Taylor.

REP. TAYLOR: Thank you, Mr. Chairman.

I will thank our panel for being here today.

Mr. Arny, I am concerned, and I'm going to ask for your personal oversight on the transfer of the property of Roosevelt Roads. I think that all of our Defense Department has a bad habit of buying high and selling low. And I think, again, whether it's paying too much for ships or aircraft or taking things that are of substantial value and selling them for less than they're worth, we have got to do a better job.

I'm going to give you a "for instance" that I still haven't had an adequate response on. In my congressional district at Gulfport, Mississippi, a Navy retirement home purchased 10 acres of land with two homes on it. One of the homes had a pool, with riparian rights, which means it had access to build a pier out on the Gulf of Mexico. They purchased that 10 acres in 2003 for $5.7 million.

In less than 12 months, they sold off the two homes, the swimming pool and the riparian rights for $1 million -- less than $1 million. So that means you paid $570,000 for acreage timber that you could not access from the road, but you turned around and sold homes and 3.4 acres for an average of $280,000 an acre. That's a bad deal. That's a terrible deal for the taxpayer. And, quite frankly, I believe something's rotten there. I think somebody in your system gave away a public -- literally gave away a public resource.

The reason I say that is, number one, I want that looked into. That's in my own congressional district, but I want it looked into. I don't want to see that happen. I have visited Roosevelt Roads on several occasions. That is a phenomenal piece of property. Now, I realize the market right now for real estate is at an all-time low.

So the first question is, do we want to be selling this phenomenal piece of property when the market is terrible, or do we want to wait a few years and get actual value for that property when the economy recovers? And I believe it will. Has anyone given any thought to that?

And the other perfect example I'll give is, in our quest to balance the budget around 2004, 2005 -- I'm sorry -- yeah -- in our quest to balance the budget during the Clinton years, shortly after the '94 election, we sold off the oil shale reserves when the price of oil was at $11 a barrel. What did it reach last summer -- almost $150?

So, again, there is a pattern here where we're not being good stewards. We're in a rush to make this year's books look good. We do a very poor job long term. And I'm curious, what is going to be done to kind of change that mentality so we try to buy things for the best price and sell things at the best price for the taxpayer?

MR. ARNY: Mr. Taylor, I agree with you completely. Let me mention the Mississippi situation. A year or so ago, you had raised this and I put it in the system. I don't believe that the home falls under DOD anymore. And I'm not sure -- I was in the Navy for six years. That never came under our purview. I think it's a separate management. When I was at OMB in the mid '80s, late '80s, the various homes were separate agencies from DOD. They were not controlled by DOD.

REP. TAYLOR: Mr. Arny, again --

MR. ARNY: And I remember --

REP. TAYLOR: -- the funds collected from soldiers, sailors, airmen and Marines fund that. So I think there's very much a DOD nexus.

MR. ARNY: Yes, sir.

REP. TAYLOR: Okay.

MR. ARNY: And again, but it's not something that -- it's a separate little agency, if I recall. And I read the articles, and I agree with you, that should be investigated.

Secondly, on Roosevelt Roads, if it were -- and I did base closure for Mr. Penn -- if you will recall, four or five years ago we sold several bases in California and brought in over $1.1 billion in revenue that then we used to monetize cleanup. That's the position that departments prefer to be in, where land has real value.

We would like to have the flexibility to be able to sell what the community doesn't need in terms of direct economic development conveyances. However, as you well know, we are frequently pressured, as we're being again this year, to give things away for nothing.

So I would argue that if you leave -- the services have now plenty of tools in their tool box to provide benefit to the communities and to provide value back to the taxpayers of the country where land is valuable. And they also have the ability to wait to sell if they're not pressured to change their rules now.

REP. TAYLOR: Again, I want to get it on your radar screen, because I hope someone, before a contract is let, is going to look at that and say, "Wait a minute. Is that a fair price for the taxpayers? And shouldn't we just wait a little while until the market recovers?" You sold that property in California when the market was red hot. That was a smart move. But I would certainly hope that someone is going to take the time to make sure that what we get, should it be sold, is a fair price for the taxpayer.

MR. ARNY: Well, there are measures, I am told, that will be in your bill that will demand that we do no-cost transfers.

REP. TAYLOR: Thank you, sir.

REP. ORTIZ: Mr. Kratovil.

REP. KRATOVIL: Thank you, Mr. Chairman. I apologize for going over my initial time. I was so excited to be able to ask a question, I couldn't contain myself. So thank you.

Sort of a general question. Can any of you discuss -- I guess Mr. Arny -- the progress in the realignment process of Walter Reed to the Naval Bethesda Hospital?

MR. ARNY: Yes, sir. I can't give you all the details, but it is on track. The construction is underway. You know, we have a plan that the movement will be complete on time and the facilities will be there.

REP. KRATOVIL: So as of right now it's on track --

MR. ARNY: Yes, sir.

REP. KRATOVIL: -- and we anticipate that it will be completed as scheduled.

MR. ARNY: Yes, sir.

REP. KRATOVIL: All right. Fort Meade's Warrior Transition Unit right now is about -- my understanding is about 150. My understanding is there hasn't been any decision as to whether or not that's going to be a permanent unit, apparently still pending.

The concern that I have is that they are -- that those numbers are continuing to grow. And without a final determination, the resources necessary to deal with that growth are not forthcoming.

My question is, assuming -- until that decision is made, assuming the unit remains at that level or continues to grow, can Fort Meade count on the resources necessary to deal with it?

MR. ARNY: We have Warrior Transition Units all over the Army. And I think our strategy is to meet surges and spikes where we have capabilities for care. In the Fort Meade situation, we are monitoring it closely. The center was sized based on the best information available. The best I can tell you is I don't have any reports that it's undersized or they're experiencing any difficulties at this time.

REP. KRATOVIL: My understanding was the estimates were around 80, and now it's about 150. And it's continuing -- the expectations are, because I was just there, are continuing to grow. And again, my concern is, at the same time we're having these units to provide obviously necessary resources, we want to -- we're going to set ourselves up for failure if we don't have the resources in the places where we're sending these soldiers. So it's something I'd ask you to keep an eye on, particularly as it relates to Fort Meade.

MR. ARNY: We will. And again, we are applying an enterprise concept for Wounded Warrior Units, looking across the Army where capacity exists.

REP. KRATOVIL: Thank you.

I yield back.

REP. ORTIZ: Mr. Kissell.

REP. LARRY KISSELL (D-NC): (Off mike.)

REP. ORTIZ: General, going back to what the Navy buys and sells, without having to mention any service at all, we have a piece of land in my district that they could have bought for about $700,000. But they waited and waited and waited and waited. And they came back. Now they're going to have to pay $11 (million) to $12 million or more.

So this is why some of the members are disturbed, and rightly so, you know. I mean, to us, taxpayers' money is very sacred. And I don't have to mention the agency's name. I think some of you know who I'm talking about.

But anyway, we're going to have votes in a few minutes. We're going to have about five votes, which means that if we don't finish our questioning, you guys will have to stay here for the next 45 minutes to an hour. And we're not going to punish you like that.

So I just have one last question for my good friend, Secretary Arny. This round of BRAC was unlike any previous round. And the implementation of the BRAC Commission recommendations were complex and interrelated.

Is the department going to complete all the realignment proposed by the BRAC Commission by September 2011? If so, what extraordinary measures will the department adopt to meet this deadline? Maybe you can clue us. Are you going to be able to meet this deadline?

MR. ARNY: Yes, sir, we are going to meet that deadline. And in our HASC Mil Con hearing, you know, all the services agree we're all on track. We're going to meet it.

REP. ORTIZ: (I'm waiting ?) for a long time. I trust you.

MR. ARNY: (Laughs.)

REP. ORTIZ: Hearing no further questions, this has been a very good hearing. You can understand the concerns of the committee and their interest as to why they ask some of these questions.

But thank you so much for your service and thank you so much for joining us today.

And, hearing no further questions, this hearing stands adjourned.

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