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Hearing Of The Military Construction, Veterans Affairs And Related Agencies Subcommittee Of The Senate Appropriations Committee - Fiscal Year 2010 Budget Request For The Department Of Defense And The Department Of The Navy Military Construction Budget


Location: Washington, DC

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SEN. JOHNSON: Good afternoon. This hearing will come to order. I'll welcome everyone to today's hearing to discuss the president's FY '10 budget request for military construction and family housing. Today we will hear from the Defense Department comptroller on the Navy. Welcome to the students and faculty of my alma mater, the University of South Dakota.

Our procedure is to have opening statements by the chairman and the ranking member and opening statements from our witnesses. In addition to the oral statement, all prepared requests (sic) from the witnesses will be entered into the record. I request that the members limit their questions to six-minute rounds. Our first panel today will be the DOD comptroller, Mr. Robert Hale, and Mr. Wayne Arny, the deputy undersecretary of Defense for installations and environment.

Mr. Hale, Mr. Arny, thank you for coming. We look forward to your testimony. The president's military construction budget request for 2010 totals $22.9 billion; $2.1 billion below last year's request. I understand that the primary reasons for this decrease are decreasing requirements for BRAC 2005 construction funding and for military family housing funding due to the progress made in privatization. However, this committee carefully watches funding for the Guard and the Reserves; and I notice that funding for the Guard -- (Army ?), Guard is 26 percent below last year's request and 54 percent below last year's enacted level.

I am pleased to see funding increases for the other Reserve components, but believe we can and should do more for our Guard and Reserve forces. Today, we would like to focus on several issues in the budget request including the status of the services' future-years defense plans, incremental funding, globalization and the homeowners' assistance program. When we get to Navy issues, with the second panel, I am very interested in the status and the marine buildup on Guam. We have a lot of ground to cover today so I will limit my opening remarks.

Senator Hutchison, would you care to make an opening statement?

SEN. KAY BAILEY HUTCHISON (R-TX): Yes, Mr. Chairman. Thank you very much. I appreciate having this hearing, of course; and I look forward to discussing the overall construction needs that will be presented here today.

It was just a year ago Mr. Arny, that you and Mr. Penn and General Payne were here to discuss the FY 2009 request. As we begin the budget process for fiscal year 2010, there are several significant issues with the military construction budget. As the chairman mentioned, the overall request of $23 billion is an 18 percent decrease from the '09 level. This includes $7.5 billion to implement BRAC actions as that program continues to race to meet the 2011 statutory deadline.

I understand we're coming to the end of the BRAC process, but this amount is nearly 15 percent below the 2009 enacted level; and does not give the services much leeway in completing the immense program on time. I'm anxious to hear from Mr. Arny on this program and how we are going to meet the 2011 deadline. Full funding of BRAC has been a priority of mine because it's the easiest target that we've had through the years. And people have borrowed from it, but we have assured that it was always paid back. So we want it to be used for making that 2011 deadline.

I also understand that the administration has a policy prohibiting the Office of the Secretary of Defense and the services from sharing the current FYDB with Congress. To go a step further, I know that the Guard and Reserve is required by law to present a FYDB to Congress, but has been directed not to. In essence, you're asking Congress and this subcommittee to invest in the MILCON program without the knowledge of how these programs will fit into the larger defense posture.

I know you have a quadrennial defense review taking place that will not be completed until the fall. But I think it is the responsibility of the department to work with Congress on these plans. I don't see the wisdom of this policy; and especially since the subcommittee has a history of not allowing congressional inserts unless the project is a validated DOD requirement in a FYDB. We've been very disciplined about that.

So I will ask both of you to speak to that. And I also want to talk about the brigade combat teams being lowered to 45, which we learned -- well, we've learned in the news, but also we discussed at our last hearing with the Army. But I want to know how it's going to affect the overall DOD defense posture and the MILCON master plan.

Last week when we talked about the Army budget request, I brought up the subject of the lowering of the number of brigade combat teams. I received assurances at that time that the Army MILCON plan for the brigade combat teams at Fort Bliss has not changed, and they are proceeding accordingly. I was pleased to receive this assurance. I've discussed this issue with the secretary of defense and the chief of staff of the Army because I'm concerned that we have the construction already in progress at Fort Bliss for the teams as has been provided by the department of defense and in BRAC.

The secretary of defense and the chief of staff of the Army -- and if either of you can discuss these decisions, I hope that you will. Also, the Army's desire to expand Pinon Canyon Range at Fort Carson has been held up for over three years. Yet the Army told this subcommittee that they have not begun working on a plan B. In addition, I have to ask would it make sense to put another brigade combat team at Fort Carson if they don't have this training capacity.

Also relocating marines to Guam, we're moving 8,000 marines from Okinawa to Guam and establishing a joint base Guam combining the Navy base and Andersen Air Force Base with the Navy as the lead. This will bring an additional 17,000 people to the island. The government of Japan is contributing $6 billion to the move and the United States $4 billion. After three years, we have yet to see a master plan to spend the $10 billion; and have been told that the costs could be much higher.

So I think it is time for us to see if there is a master plan; and that this committee be able to know what it is so that we can appropriately plan for that.

Also, it is against this backdrop that we begin to examine the budget request for military construction in the Department of the Navy's $3.8 billion is in the Navy request. And the Marine Corps, of course, has now -- it successfully completed its increase to its end strength and we need to talk about that with the second panel. I'm anxious to hear from Secretary Penn, General Payne and Admiral Handley about their needs and priorities for 2010.

I support the Navy's emphasis on quality-of-life facilities. And I'm sure that they remember that we talked about this last year; and encouraged the Navy to do exactly that. The Marine Corps's growth to 202,000 as a result of the greater force initiative certainly is well planned. And I'm pleased to see that the MILCON and housing requests to train and house these additional personnel and their families is going forward in an expeditious manner.

So Mr. Chairman, I thank you for the hearing. I think that we have several items to discuss. And I look forward to hearing from the witnesses.

SEN. JOHNSON: Thank you.

Secretary Hale, Mr. Arny, thank you again for appearing before our committee. Your prepared statements will be placed in the record. So I encourage you to summarize your remarks to allow for more time for questions.

Secretary Hale.

MR. HALE: Well, thank you, Mr. Chairman and Senator Hutchison. I thank the committee for all the support to our armed forces. We depend on the Congress for the resources we need to meet national security needs; and we appreciate your help.

I'll provide a brief overview of the budget with a focus on military construction; and then ask Mr. Arny to talk about more details. As you know, the president's base budget asks for $533.8 billion of discretionary budget authority, up $20.5 billion, about four percent, two percent, 2.1 after adjustment for inflation. This is a reform budget, and I worked in and around the defense budget for several decades now. We use that term loosely sometimes, but I do believe this is one of a handful of budgets that qualifies as a reform budget. If it is approved, I think it will change the way the department does business.

This budget lays out, and the secretary has described it in terms of some themes; and let me just mention them briefly, because I think they are a good context for discussion of MILCON. First, this budget affirms our commitment to take care of our people. For example, it fully funds all the personnel in the budget in the base portion rather than with all the war time budget.

Second, the budget tries to reshape the Department of Defense to focus more on the wars we're fighting today -- conventional and regular wars, while maintaining a balance of conventional capability. So for example, we've added a lot to special operations personnel, to intelligence, surveillance and reconnaissance. And we have to pay for these so we have completed the program of record; and then have to propose any procurement of the F-22 and C-17 aircraft.

And third, the budget reforms what we buy and how we buy it. There is a people side to this, for example, beefing up, reinvigorating our acquisition corps. But also a hardware side as we looked at troubled programs in terms of cost schedule performance; and recommended terminating or restructuring a number of them, including the future combat system and missile defenses.

Turning to the military construction, we've asked for $23 billion for military construction and family housing. I think it meets all three of these themes or supports them, but probably particularly the taking care of our people and reshaping and modernization. Overall it's an 8.4 decline -- percent decline as was mentioned in your opening statement. That sounds ominous but it reflects our successful achievements actually in base realignment and closure and housing privatization. Well actually, it's down 14.8 percent, but we believe we have fully funded BRAC; and we expect to meet the September 2011 deadline.

And the housing is down 38 percent, but that is because, as again you know, we have moved aggressively to housing privatization. We just don't need as much construction funds in our own budget. We factor out these two categories BRAC and housing privatization; and MILCON is up by about three percent between fiscal '09 and fiscal '10.

The department's base budget meets our key goals for military construction. We continue to invest in facilities that support well the force, and in fact the force has grown and it has met its targets. There are (extra ?) brigade complexes. Base budget, we'll provide facilities that keep pace with fielding of new systems and capabilities, as well as necessary training. The request includes a significant investment in recapitalizing aging medical facilities and schools consisting of our -- take care of our people, warrior in transition complexes.

It also contains a substantial investment in the global defense posture including those 8,000 marines moving from Okinawa to Guam. Before I leave the budget -- base budget, let me talk about the issue of the out-year plan. We are currently conducting the quadrennial defense review and the program budget review. We'll develop a five- year plan as part of that in the fall budget review and submit it next year.

For the moment, we don't have a plan beyond fiscal '10 consistent with administration policy. It is not our desire to tell anybody they can't submit it, we don't have one to submit. So for the moment, the only thing we can do is answer your fiscal '10 questions in detail. And we can talk later about how we work with you with regards to other issues because I understand that there are issues for this committee and others.

Let me just mention briefly, that war time portion of the budget which we now call the overseas contingency operations or OCO, I like to call it Washington's newest acronym. We are asking for $130 billion for overseas contingency operations. It represents our best estimate of the full costs of funding our efforts in Iraq and Afghanistan in fiscal year '10. And I hope -- it is not a supplemental, it's part of the base budget. Again, as you know, I hope we do not have to submit a supplemental, but if the situation -- war time situation changes, or the president were to change his deployment plans, then we do need to retain the right to request supplemental funding if we need it.

The $130 billion for OCO includes $1.4 billion for military construction. That's all for Afghanistan. Given the limited pre- existing infrastructure there, we need to build roads, we need to build runways, we need to build parking aprons. There's a lot of things we need to build in support of our war time effort.

Also, I want to express my gratitude to the Congress for the $7.4 billion in defense-related funding that we got in the American Recovery and Reinvestment Act; it's easier to call it the stimulus bill. It's $4.3 billion for facilities to sustain that restoration and modernization. Another $2.2 for military construction; as well as the housing assistance program and some energy investments in RDT&E. Investment of this additional funding will allow us to improve facilities, to break down our backlog in a way we couldn't have otherwise done and to help our people. For example, we're able to replace two hospitals and to construct child development centers, wounded warrior complexes and troop housing facilities.

I am happy to report there are more 4,200 projects funded by the stimulus bill in all 50 states, two territories and the District of Columbia. All the projects have been identified and we're working as hard as we can to implement them. These projects will not only stimulate the economy, they will help improve the quality of life for our service members and their families.

And lastly, Mr. Chairman, I'd like to remind the committee that we recently submitted a supplemental request. SAC (ph) has acted on it, we very much appreciate the timely action. It includes $0.9 billion for military construction in Afghanistan as well as another $1.4 billion for military construction in other critical areas, including warrior and transition complexes.

We stand by to assist you and -- both of you or any other members on both the fiscal '09 supplemental request and the fiscal year 2010 request.

To help our troops, we ask that you enact this remaining supplemental. We'd like it by Memorial Day, but as soon thereafter as possible. We really appreciate the speed with which both the Senate and the House are moving on the supplemental requests.

Again, on behalf of the men and women of the Department of Defense, who are faithfully serving our nation, thank you for your strong support. Thank you for the opportunity to testify; and after Mr. Arny completes his statement, I'd be glad to try to answer your questions.

SEN. JOHNSON: Thank you, Secretary Hale.

Mr. Arny.

MR. ARNY: Thank you Chairman Johnson, Senator Hutchison, thank you for the introduction. I am honored to appear before you today.

For the last 10 -- 20 years, the department has come a long way in improving the facilities and infrastructure in which our military and civilian work force and families work and live. We could not have progressed so far as we have without the continued support of Congress and particularly this subcommittee. Today, we manage over 500,000 facilities worth over $700 billion, located on approximately 29 million acres. In comparison, about 10 years ago, we had 115,000 more facilities in our inventory, which is in part a testimony to our continual efforts to right size the department's infrastructure to match our operational needs.

A (critical ?) program that has helped us balance the infrastructure is the BRAC authority. In using that, we have been able to close over 121 major installations and realign 79 major bases after five rounds. The 2005 decisions alone effect over 800 locations and include 24 major closures, 24 major realignments and 765 lesser actions. As of the FY '10 president's budget, BRAC represents a $35.2 billion investment over 2006 to 2011; and $4 billion in annual savings after full implementation.

However, it is not enough to have closed bases and moved functions; at the same time we have tried to focus on how we conduct our business so as to become more efficient caretakers of the taxpayers' resource. The actual example of that is joint basing. As part of the BRAC 2005, we are required to form 12 new joint bases from 26 separate existing bases so that installation management functions will be provided by one component and not two or three as it is currently. The joint basing implementation process is complicated. Almost 50 different areas of responsibility on these bases have been identified for consolidation including food services, environmental management, child and youth programs, facility management -- maintenance rather, and many others.

But I can report that it is well on the way to achieving success. In January 2008, we began issuing a series of joint-base, implementation-guidance documents; and for the first time, established a set of common definitions and standards for the installation and support to be provided by each joint base. We established a schedule that divided the 12 planned joint bases into two implementation phases. Each joint base will develop a detailed implementation plan including the personnel and financial arrangements for the combined base.

Five joint bases involving 11 installations were placed into phase one. They had an October 2008 milestone for IOC; and this includes -- I'm sorry, and an October 2009 date for full operating capability or FOC. This includes the transfer of personnel and funds. The remaining seven bases involving 50 installations were placed into phase two with an October 2010 FOC. The services have signed all the right agreements for the first five installations. And we've reached IOC on them; and we expect FOC for the second phase in October 2010, which is well ahead of our BRAC statutory deadline.

Now these are just the beginning of where I see the department going in the application of full funding of common levels of service across all our bases. As for housing, a decade ago we were maintaining over 300,000 family-housing units, two thirds of which were deemed inadequate by the military departments. With this year's request, over 98 percent of DOD's housing inventory in the United States will be funded for privatization.

With regards to barracks, it was about 17 years ago that we began an ambitious modernization program to increase the privacy and amenities in permanent party, bachelor housing. Using military construction funding and a government-owned business model, we've made a lot of progress, but there is still $15 billion to go. So we're looking at other ways to do it. We've begun -- we're looking at ways to take off on our privatization in housing to do privatization of barracks. We've seen innovative concepts where the Army has added bachelor housing quarters and senior-enlisted, bachelor quarters to its existing family-housing units at Fort Bragg, Fort Stewart, Fort Drum, Fort Irwin; and a fifth project is planned for Fort Bliss.

In contrast, the Navy is mainly focused on unaccompanied housing privatization to bring shipboard junior-enlisted sailors ashore using a special pilot project. Their first project was begun in December 2006 in San Diego, with a second in Hampton Roads in 2007; and a third project under way for Jacksonville Mayport. Both of the first two have demonstrated that with the authority to pay junior-enlisted members less than full housing, we can privatize single, junior- enlisted on a less costly basis -- I'm saying less-costly on a life- cycle basis than traditional government-owned model.

I view this as just a starting point and ask for the subcommittee's support for the department's continued progress to shift the mind-set in which the federal government has to build and maintain, to one where we only need to -- we only need to build and maintain what we can't privatize. Issues in answer to one of your questions, issues, budget signals, it does signal a banner year for MILCON. With about $23 billion in military construction, $8 billion in facilities sustainment, restoration and modernization, that level of military construction is very robust. Especially compared to the $8 (billion) to $9 billion we were receiving only 10 years ago.

Similarly, our sustainment budget this year is also more robust. Ten years ago, we used a percentage of unsubstantiated maintenance and repair backlog to come up with our budget request, and it didn't work. Although much remains to be done, we've made steady headway over the last decade to improve the overall conditions of our facilities by using a programmatic model. The development and use of the facilities sustainment model has given us a sound target to measure our sustainment budgets. And more importantly, we've been able to defend those budgets in -- defend those requirements in the budget process.

Recap has been another problem. We tried to use 67 years on a recap model that didn't work. When I was with the Navy secretary, we saw that when we put a large amount of money into one place, as we did at -- after Hurricane Ivan hit Pensacola, all of a sudden there was a sudden infusion of funds. Our recap rate went way below the 67 years that we all knew we'd only invested money in one base. It didn't take account for the other priorities we had.

Since I was dissatisfied with that model, I asked my staff to go and work with the services, go back to the basics, and we've reopened the dialogue using what are called quality ratings. We're required to report these under the federal real property advisory group, which has mandated that all federal agencies report these in our property records. We are going to use UAQ ratings for every building we own. We are looking at a method to go in; and we will start tracking those Q ratings and planning our budgets to keep those Q ratings -- we'll plan our budgets to make the Q ratings to the point where we believe they're satisfactory for all our services.

In the summer, my staff will work closely with military departments to set up the program guidelines for determining which facilities require priority funding, assessing how those Q ratings are conducted and their frequency. And most importantly, reestablishing how the department views and uses master planning at the installation level. Also, in cooperation with our policy secretariat, the joint staff, the combatant commands and the services, we hope to initiate joint, installation-master plans at each -- in each overseas combatant commander's region.

In closing, I'd like to thank you sincerely for the opportunity to testify on our installations. We believe we're working on the right issues now. And while we cannot fix them overnight, we appreciate your continued support and look forward to working with you and the subcommittee to provide the quality installations our forces and their families need and deserve.

Thanks, sir.

SEN. JOHNSON: Thank you.

Secretary Hale, as you know, the secretary of defense has put a hold on providing Congress with updated FYDB for 2010. This committee works very closely with the authorizers to ensure that the projects we fund are mission critical and are in the MILCON pipeline. (Overall ?), one of four -- one in six were -- (inaudible) -- to prepare and to submit to Congress an annual FYDB. Doesn't the current -- (inaudible) -- plan to vacate that law? And can you suggest another way for this committee to do its due diligence and vet military construction projects if we cannot determine whether the projects are in the FYDB?

MR. HALE: Mr. Chairman, as I said, we don't have an out-year plan. And it's not without precedent; it was the same situation in 2001 and 1993, at the beginning of the Bush and Clinton administrations. We need to go through the quadrennial defense review and the fall program and budget review in order to have a plan that fully fits with the administration's priorities. So it's not that we're not trying to get it to you, we don't have one.

I understand that it creates problems. We have a year-old FYDB, which you have. It's not consistent with administration policy, but it's at least a start. And we will be glad if there are specific projects to try to work with you to provide what information that we can.

I know it's a difficult situation. And we need to -- to help you all we can, but there is no out-year plan and not by design. Frankly, it takes six to nine months to do this. We had about three and we made major changes in the fiscal '10 budget; and I just didn't haul that out. I mean, there is no way we could have gotten it done.

SEN. JOHNSON: Would you please take a message back to the secretary and urge him to reconsider what is the -- (inaudible) -- if they have a helpful policy for both Congress and the services.

Secretary Hale, if you sought authority to increment projects from the OMB? And what is your position, as the one who writes the checks, in incremental funding?

MR. HALE: I believe in full funding, Mr. Chairman, with limited exceptions. I think it's the right way in terms -- on both sides of the river. It requires that we face up to the full cost of projects whether it's military construction or aircraft or ships. Now there are limited exceptions such as advanced procurement on the weapons side.

And I know that we have sometimes incrementally funded military construction. But I think they ought to be rare exceptions, and those violated OMB's policy; and so we are not doing it in this budget. I believe that is the right way to go, and I think it's consistent with transparency and accountability to face the full cost of budgets.

SEN. JOHNSON: Using for example the FY '10 budget request, includes $800 million for a National Security Agency project in Utah, and $226.9 million for a pier replacement project in Virginia. There is no way that the department could execute that amount of money for a single project in one year.

MR. HALE: Well, MILCON is five-year money. So we have plenty of time to obligate it. I think that's not the issue in my mind. There may be some projects that are so large that they just create unacceptable budget spikes. And there we may need to look at some kind of incremental funding, but I'll repeat my statement. I believe full funding is the right way on both sides of the river. And I would want to see it, if I had my way, as a fairly rare exception.


Mr. Arny, what is the status of the two brigade combat teams in Germany? And how can the department go forward with MILCON projects, including some that were funded last year, when we don't know how this issue will be resolved?

MR. ARNY: Mr. Chairman, I defer to my Army colleagues when you talk to them. But as I understand the BCT issue, we're not changing the force structure in terms of troops, but we are changing the organization. We are looking as part of the -- as part of the global posture here, exactly how we will change the structure. But we believe for 2010 our military construction is needed no matter what the end result is in terms of number of BCTs.

SEN. JOHNSON: Secretary Hale, the OMB's construction pricing guide is generally not as responsive to changing economic conditions as the private sector. Is the department working with OMB to develop a pricing system that is more timely and agile than the current system?

MR. HALE: (Inaudible) -- inflation adjustments, Mr. Chairman?

SEN. JOHNSON: With the current economic environment, are you seeing any significant trends with regards to bids versus costs estimates?

MR. HALE: Well unfortunately, I think that we probably have solved temporarily the problem of high inflation in the construction industry with the recession, but let's hope that ends quickly. Now we do accept generally OMB inflation indices; and I think we'll continue to do that. I understand there may be certain areas in the construction industry when the economy has recovered that have extraordinarily high rates of inflation for special reasons. I mean, my personal reaction to that is that we ought to look at the projects in that area and cost them in a way that takes into account special circumstances rather than trying to build in some new deflator, which would be a challenge. We would have to talk OMB into it; and probably derive an inflator.

So that will be my suggestion where to go, but it's not a problem at the moment unfortunately. Yes, I think we are seeing bids that are lower than we expected. Let's just hope it doesn't last too long.

SEN. JOHNSON: Thank you.

Senator Hutchison.

SEN. HUTCHISON: Thank you, Mr. Chairman.

I just wanted to follow up on one of the questions that the chairman asked; and that is, the FYDB for the Guard and Reserve. Are you taking the same position even though it is in the law that they have to provide a FYDB -- that it can't be done? Or are you making an exception there?

MR. HALE: We don't have one either in the sense that we have not gone through the process that would determine a level of military construction for the actives or the Guard that is consistent with overall administration policy. Again, I understand the problem. We can go back to the last FYDB, it's at least some guide. Although I think you have to understand it's not consistent with current administration policy.

And on specific projects, we can try to work with the committee to provide what information we can. I know it's not an ideal solution, but I think it's a common one at the beginning of administrations. You have two months to do something and it normally takes nine. And we need the output of the quadrennial review and the fall budget program review before we have a worked out future year's defense plan.

SEN. HUTCHISON: Are you prepared to say what is not part of the current administration's plans, that was a policy of the previous administration?

MR. HALE: No, not beyond fiscal '10. I mean, in fiscal '10 we can of course. But that's the problem, we don't have that information. We really haven't gone through the review process.

I think inevitably, a number of projects that are on the '10 or the '11 and out-year columns of the fiscal '09 FYDB will stay. I mean, you don't redo everything. But some won't, there will be new ones; and some will come off. So I don't know a better solution then to try to work with you on individual projects. It isn't a gag order, it's not that we're trying to stop people from supplying information. It's that we don't have the information.

SEN. HUTCHISON: Would you be prepared to say that the BRAC that Congress enacted is going to continue as Congress has directed?

MR. HALE: Yes, I mean, I think we're close enough.

I'm going to ask Wayne Arny to correct me if I'm wrong, but we're pretty close on that. I mean, after all, we have a detailed plan in fiscal '10. And September, 2011 is the goal, so I don't know what 2011 will look like, but it's got to be coming down sharply at that point. So I think we're in pretty good -- we're going to do BRAC as it was stated by the Congress. We think we fully funded it.

SEN. HUTCHISON: And the military construction that would prepare for it?

MR. HALE: Yes.

SEN. JOHNSON: The secretary did commit to that. Even in this new administration, we would fully fund BRAC.

SEN. HUTCHISON: Mr. Arny or Mr. Hale, either of you can answer this, but it's back to my question on Fort Carson and Pinon Canyon. Are you looking in your QDR about the difficulties that clearly we're facing with Pinon Canyon? And as you know, when I asked last week, the Army said they really didn't have a plan B. for not having that training capability that they certainly expected to have when a new brigade combat team was scheduled to move to Fort Carson.

My question is is there going to be a plan B pretty soon? Because no one seems to be fighting all of the environmental concerns about Pinon Canyon. And should we begin to start looking at a different priority than for that brigade combat team, especially with the lowering of the number; and perhaps that that one might be directed somewhere else?

MR. ARNY: Ma'am, I think we would safely say that all the factors involved in those bases are being taken into consideration.

SEN. HUTCHISON: Would it be part of the expectation of this committee and Congress that you would have a plan B. that would be part of the quadrennial review if Pinon Canyon is going to be off limits. And I think this administration is pretty strong on the environmental concerns for Pinon Canyon. And at least Secretary Salazar has been very plain about it. So are you looking at a near term for making decisions on that?

MR. ARNY: I cannot say specifically, but I know that the Army in their plans are going to look at all the factors that effect their training when they make their decision. I'm sorry I can't be more specific than that.

SEN. HUTCHISON: But timetable for the decision?

MR. ARNY: I would say within the next few months as part of the QDR.

SEN. HUTCHISON: That's what I was trying to find out. The buildup on Guam, where do we stand on a plan for that? And there have been a lot of reports of infrastructure needs --

MR. ARNY: Difficulties.

SEN. HUTCHISON: Difficulties. Where do we stand on addressing those and coming forward with a plan that we know is going to be able to be executed within the 10 billion (dollars) that has been allocated?

MR. ARNY: We're looking very hard, the services especially -- (inaudible) -- to put together the environmental impact statement, which is more than just the environmental impact statement. It is -- it has less to do with the environment than it does with the lay down and the mitigation of that. Included in that, will be the planning for how to put the buildings in, the raw things that you expect.

But also, the mitigation on how we'll do -- how we will mitigate in the private sector. How we will bring in the work force because the island does not have a work force large enough to support that level of construction. How to work through the port with the power, with housing, with all the aspects.

And like I said, a major part of that will be included in the environmental impact statement. Of that process this is the -- since the advent we've built bases, obviously, in the past, but we've never built one this big since the advent of the environmental impact statement. So it is a very complex operation. We have to take into account far more different laws and effects than we did before. And I would say that you would -- I would defer my answer to the Navy as to the specifics, but it would be within a matter of months to have that plan.

MR. HALE: I would like to add to that and just underscore the administration remains fully committed to moving the marines off of Okinawa into Guam. We've signed an agreement with the Japanese and we remain fully committed. We know there are significant challenges and we will work through them.

SEN. HUTCHISON: Thank you very much.

Thank you, Mr. Chairman.

SEN. JOHNSON: Senator Pryor, do you have any questions -- (inaudible)?

SEN. MARK PRYOR (D-AR): I do, Mr. Chairman. Thank you for having this hearing and your attention to this.

Secretary Arny, let me ask you, if I may, about the Office of Economic Adjustments, which you know, obviously, helps when a base or facility is being downsized. Can you, if you know about specifically the Pine Bluff arsenal, which is in Arkansas; but the other facilities around the country who are going through the process of destroying their chemical weapons. I think we're going to lose somewhere in the neighborhood of 1,100 jobs at Pine Bluff. Do you have any progress report on that and any plans that you're making for not just Pine Bluff but the other facilities?

MR. ARNY: I have a paper that I'm going to look at here to refresh myself. But I can say that OEA does have a responsibility and is funded to provide communities that are growing or decreasing. Whenever there is a change that we in the department caused; they're required by law, to go in and assist with grants for funding and also advice. I don't know that Pine Bluff specifically, but I could almost guarantee you that they will be working -- we have -- OEA works for me, and we've got people scattered all over the country. We'll be working with the community to help them recover and take into effect that downsizing.

SEN. PRYOR: That would be great. And if you could just keep us posted on that, that would be great. I know the community is very supportive of the arsenal and all the things that the arsenal does even though they handle some very dangerous material there. But nonetheless, they are very, very supportive. And I just want to make sure they have a good transition; and hopefully come through this thing in good shape.

Let me ask also, if I may, about the -- really the advent of UAVs, which didn't exist just a few years ago; and now, I think we have thousands of them in our inventory. A lot of those are in theater right now, but there will be a day when I think we'll need a pretty sizable UAV training system here in this country. And of course we have -- you all have to work through those issues with FAA about having rated pilots versus just other folks flying these. And it gets into big airspace issue.

Are you -- is the DOD in the process right now of lining up more airspace and looking for new areas where they can meet the needs of this rapidly-growing technology?

MR. ARNY: Senator -- (inaudible) -- it sounds like a human issue. I want to make sure that there is nothing but rated pilots working this. (Laughter.)

I'll look into that for you. It popped on my scope, but I don't have an answer. I'll work with the services. I would be amazed if the Air Force, the Army and the Navy who are working with UAVs are not -- I know it's a rated pilot, because in the magazines that I get monthly, I see discussions on both sides of it. So I'll get an answer back for it, but I'd be dumbfounded if they are not trying to consider that now.

SEN. PRYOR: Yes, that would be great. And another question is just the money involved and, you know, is there -- is this one that takes money? Or is it more just a, you know, working out agreements with FAA, et cetera? We just need to be prepared for the future because I think UAVs will have a big presence in the future of our military needs.

And one other thing and this is also sort of a space issue; and I know there are a lot of bases, et cetera that are constrained by various geographical considerations around their areas of operation. But your air and land ranges, as I understand it, you're getting to a point at least in some areas where those ranges are used, I won't say over-used, but they're kind of hitting the max. They're bumping up against the ceiling in terms of the amount of training that can be done at those. Especially, as I understand it, at Eglin; and let's see maybe at Fort Bragg that you -- have y'all, do you know anything about that? Have you been working on that issue to make sure that there is sufficient air and land ranges?

MR. ARNY: Not those specifically, but you may time the Navy and -- (inaudible) -- we have -- we've been working very hard over the last 10 to 15 years on finding ways to fight encroachment. Our REPI program has been very active with help from the Congress where we go out and buy easements on land around our bases and around our ranges to make sure that we have buffer zones. And frankly, where -- as we tried to do with Pinon Canyon, where we think we need more ranges, where we'll go out and try to acquire land. I know in the Navy we acquired land down in Mississippi in a range down there.

I know the Marine Corps is looking to expand 29 Palms. So where we can and where it's required, we'll use military construction funding and the land acquisition to expand it. Where we feel we have enough ranges, but we need buffer zones, then we're using REPI and other program -- cooperative programs with the private sector. And now in that Pensacola area, the local community is very active. The local community will actually buy up land around the bases to ensure that they are okay.

SEN. PRYOR: Right. Now I think that Eglin may be an issue with the F-35 Joint Strike Fighter going there. And maybe some of the --

MR. ARNY: Yes, sir, I agree that's more of a perceived noise issue than it is actually a training-range issue. And we'll have to work through -- and if you look at -- I was down in San Antonio, the Air Force base down there, and in the '30s, the ideal was you put all the housing and admin facilities between the two runways. Well nowadays, you wouldn't think about doing that.

So it's a matter of things have changed. Oceana on the East Coast is a lot of housing around it. In the '50s, we bought 18,000 acres in the San Joaquin Valley, and easements in another 12,000 acres to build, to enable our station Lamore -- where both my sons have been. So it's a different mentality and we have to accommodate as things move.

SEN. PRYOR: Thank you.

Thank you, Mr. Chairman.

SEN. JOHNSON: Secretary Hale and Mr. Arny, thank you so much. And you may be excused.

I am pleased to welcome our second panel of witnesses. The Honorable B. J. Penn, assistant secretary of the Navy; Major General Eugene G. Payne, Jr., assistant deputy commandant for installations and logistics; Rear Admiral Mark A. Handley, deputy commander, Navy Installations Command. Thank you all for coming. We look forward to your testimony and again your full statements will be entered into the record.

Secretary Penn please proceed.

MR. PENN: Thank you, Mr. Chairman. Chairman Johnson, Senator Hutchison, members of the subcommittee, it is a privilege to come before you today to discuss the Department of the Navy's installation efforts. I am joined this afternoon by major General Payne, the Marine Corps assistant deputy commandant for installations and logistics, and Rear Admiral Handley, director of the Navy's Shore Readiness Division.

I would like to touch on a few highlights in the department's overall facilities budget request; a healthy $14.4 billion or 9 percent -- 9.2 percent of the department's -- (inaudible). In MILCON, fiscal Year 2010 continues the Marine Corps's grow the force initiative 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 Office of Management and Budget's policy and the DOD financial management regulation that establishes criteria for the use of incremental funding. The use of incremental funding in this budget has been restricted to the continuation of projects that had been incremented in prior years. Otherwise, all new projects are fully funded or are complete in usable phases.

In family housing, our budget request for $550 million protects the continuation of investment funding for locations where we still own and operate military family housing; and where additional privatization is planned. Prime requests reflect our accelerated program to address additional housing requirements associated with the Marine Corps's grow the force 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. (Unrelated ?) to BRAC, we continue our request for appropriated funds in the amount of $168 million as we have exhausted all (land fare ?) revenue. We've 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 revenues from the sale 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 September 2008. In exchange for leasing 149 acres of naval-support activity in New Orleans, the headquarters Marine Forces Reserves 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 this 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 own costs increases to a modest two percent for the implementation period of 2006 to 2011. We have made significant progress in the past year in planning for the relocation of the marines from Okinawa to Guam. The environmental impact statement for Guam is underway with a positive record of decision in time for reconstruction in fiscal year 2010.

The government of Japan ratified the international agreement on 18 May, 2009 and appropriated $336 million, fiscal year 2008 equivalent dollars to compliment our own fiscal year 2010 investment. We expect to see Japan's contribution deposited in our treasury by July.

Finally, it has been an honor and a privilege to serve this great nation and the men and women of our Navy and Marine Corps team, the military-civilian-leadership personnel and their families. Thank each of you for your continued support and the opportunity to testify before you today.

SEN. JOHNSON: Thank you Mr. Penn.

Major General Payne.

MAJ. GEN. PAYNE: Sir, I have no statement this morning -- or this afternoon.

SEN. JOHNSON: Rear Admiral Handley.

ADM. HANDLEY: Sir, it is a privilege to be here again in front of this committee and yourself Senator Hutchison. And again, no formal statement, but we'll defer to your questions.

SEN. JOHNSON: General Payne, the commandant of the Marine Corps, General Conway recently testified on DOD's plan to move 8,000 marines and 9,000 dependents from Japan to Guam. He suggested that the $4 billion cost estimate for the move is way short of what the move will really cost. Could you comment on the projected cost of the Guam buildup; and what the military is doing to ensure the adequacy of essential services on the island? And I believe there is some concern over the availability of training ranges on Guam, and that the marines could not -- (inaudible) -- training range co-located with its forces; would the move to Guam still make any sense?

GEN. PAYNE: Yes, sir, I'd be glad to comment on that. I think the commandant's comments pertained to several things in particular. When the initial budget for Guam, the $10 billion budget, was developed; it did not include considerations for infrastructure improvements on the island of Guam. Because at that time, quite frankly, I don't think we knew the extent of what improvements might be required.

Since then, it appears it has become apparent that the island of Guam does need some assistance on those infrastructure improvements. So, that would be additive to your $10 billion. And then, with regards to the other comments you made, which is absolutely correct, sir, and that is with respect to the ranges. Our analysis today indicates that we can put some small-arms ranges on Guam. But the -- our larger weapons systems and combined arms training in particular, will have to be at other ranges. And it is our intent at this point to analyze the viability of putting those ranges in the Northern Mariana Islands, principally the islands of Tinian and Pargun (ph).

And the reason that it is difficult to pinpoint the specific additive cost today is that the analysis is still underway on Guam relative to the infrastructure. And we have not had an opportunity to analyze from an EIS standpoint and understand what mitigation may be required, the range possibilities in the Northern Mariana Islands.

SEN. JOHNSON: General, so many strategic issues have come to be dependent on the outcome of the upcoming QDR, including the Guam buildup. What impact might the QDR have on the kind of buildup of forces in Guam?

GEN. PAYNE: Sir, that's an excellent question. I'm not one to second guess the QDR; but I could speculate to the extent that I think it's going to give us guidance relative to potential force capabilities required on Guam in order to support the combatant commander. I don't think it's going to be terribly detailed. I think it's going to address however the combatant commander's requirements; and will give the Marine Corps some guidance in that regards. We do not in any way anticipate that it's going to negate the current plan to move to Guam and move marines and marine families to Guam.

SEN. JOHNSON: Admiral Handley, the BRAC plan for the relocation of Walter Reed to the Bethesda Navy Medical Center campus includes two traffic and -- (inaudible) -- projects to be funded in FY '10 and '11. Could you outline the costs and nature of these projects?

ADM. HANDLEY: Mr. Chairman, I'll have to get back to you on the specific ones within the BRAC program. That doesn't necessarily fall under my direct purview, but I do recognize that there were mitigation projects involved with the Bethesda project. And we'll give those specific details to you, sir.

SEN. JOHNSON: How far along in planning is the proposal to connect the Metro to the hospital if they had a -- (inaudible) -- tunnel turned out to be too difficult or expensive; is there a plan B?

AD. HANDLEY: Sir, again my apologies for not having them on hand today, but again that is -- (inaudible) -- outlined in the current plan. I'm not personally familiar with the backup plan for that. But I will look specifically into that and get specific details back to you and your staff.

SEN. JOHNSON: With the additional funding for Walter Reed and Fort Belvoir in the supplemental, what is the target date for completion?

ADM. HANDLEY: Again, my apologies on that, I know there is a 2011 deadline in that, I believe, as Secretary Arny previously testified that we are on track for the BRAC requirements for 2011 as well.

SEN. JOHNSON: General Payne, the budget request includes over $700 billion with military construction in Guam. How can Congress determine the validity of these projects without a FYDB to see how things fit into the long-range planning for Guam?

GEN. PAYNE: We certainly are understanding of the desire for a longer-range plan, but in answer to the FY '10 projects in particular. These are all projects that essentially address infrastructure needs. They are projects that include the hall (ph) road, upgrade to the wharfs, and other infrastructure projects that quite frankly we think would set the stage for any growth on Guam whatsoever.

SEN. JOHNSON: Senator Hutchison.

SEN. HUTCHISON: Mr. Chairman, I think -- I don't really have questions. The Guam issue I think you have covered well. And I just believe that in general the Navy has done well in focusing on quality- of-life issues; and the Marine Corps I think is doing well in preparing for its end-strength increase. And so, we want to continue to monitor that and also help in every way possible. I think the Guam issue is one that we really need to work together to plan for; and assure that we are doing everything to make that transition as seamless as it can be. But I think you realize that.

So we'll work with you and try to accommodate that need. Thank you very much.

SEN. JOHNSON: I would like to thank all of our witnesses for appearing before this subcommittee today. We look forward to working with you in what is likely to be a very compressed schedule.

For the information of members, questions for the record should be submitted by the close of business on May 22.

This hearing is adjourned.

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