Mr. Chairman and distinguished members of this Subcommittee, thank you for the opportunity to discuss the Department of Defense’s fiscal year 2002 programs for military installations and facilities. Our military installations and facilities are integral components of military readiness. I look forward to working with you to ensure that they continue to support America’s military superiority and the men and women who live and work at our installations.
I will address our infrastructure and our plan for its improvement, our military construction and family housing request, our operations and maintenance request, proposed legislation, the Installations’ vision for the future and our action plan.
Renewing the Installations Framework
For years we allowed our installations and facilities to deteriorate due to competing budget priorities and ill-defined requirements. Last year’s Installations Readiness Report showed 69% of the Department’s facilities are rated C-3 (have serious deficiencies) or C-4 (do not support mission requirements). Much of our infrastructure – the seen and the unseen – is old and in various stages of decline. Our average facilities age across the Department is 41 years. Without adequate sustainment and recapitalization, facility performance degenerates, operational readiness and mission support suffer, service life is lost, and total costs rise.
This Administration is committed to restoring our installations and facilities to perform as designed. Secretary Rumsfeld has stated that the fiscal year 2002 budget balances “preparation for the future with current needs – through robust funding to improve morale, boost readiness, transform defense capabilities and upgrade aging facilities.” We are breaking the current cycle of “pay me now or pay me much more later,” and our fiscal year 2002 budget initiates an aggressive program to renew our facilities.
For fiscal year 2002, we are requesting a total of $10.0 billion for military construction, family housing and base realignments and closures, an increase of $2 billion over the previously submitted fiscal year 2002 budget request. The amended fiscal year 2002 request represents the down payment on a long-range plan to streamline and improve the performance of our facilities and housing. Key to achieving the long-range goal will be successful implementation of the Department’s Efficient Facilities Initiative (EFI), designed to realign and reduce base infrastructure by approximately 25 percent, and ultimately, save several billion dollars annually. We must also fully sustain our facilities and halt, actually, reverse the unacceptable aging of the Department’s facilities by accelerating our recapitalization rates. Finally, we must restore the readiness of inadequate facilities, modernize facilities to meet future challenges, and dispose of, or demolish, obsolete facilities.
(Estimated President’s Budget as amended - $ Billions)
Fiscal Year 2002
Real Property Services (O&M)
New Footprint (MilCon)
Two principles guide our effort to improve and maintain our infrastructure: first, the quality of our infrastructure directly impacts readiness; and second, it is more cost effective in the long term to ensure facilities perform as they are designed than it is to allow them to deteriorate and replace them when they are not useable. By investing money now and sustaining that investment over time, we will restore and sustain readiness, stabilize and reduce the average age of our physical plant, reduce operations costs, and maximize our return on investment. We plan a comprehensive review of our infrastructure needs through 2020 during the ongoing Quadrennial Defense Review.
As you know, Secretary Rumsfeld has made it quite clear that he intends to significantly change the business practices of the Department. Not that terminology causes change, but it certainly sends a rhetorical signal that the Secretary is serious about not just transforming our force structure but also our infrastructure by virtue of military requirements and necessity. We use outcome-oriented terms that emphasize performance – sustainment, restoration and modernization (SRM) – rather than the misleading legacy term “real property maintenance” (RPM) that represents just one activity of many. Our Facilities Sustainment program funds the required and scheduled maintenance and repairs for the inventory using operations and maintenance funds. Sustainment preserves the inventory and allows it to reach its expected service life. Our Facilities Restoration and Modernization program repairs or replaces damaged or obsolete facilities and implements new or higher standards where necessary. The restoration and modernization terminology recognizes the contribution of both military construction and operations and maintenance appropriations to recapitalizing our facilities and housing. Military Construction and Family Housing Request
The fiscal year 2002 amended budget request for the military construction and family housing program is robust. Over $2 billion was recently added to the military construction request, targeted towards replacing or renovating what we currently own. This investment takes the Department from a recapitalization rate of 192 years to a rate of 101 years – much closer to the Department’s goal of a 67-year replacement cycle. Most importantly, this funding should aid the Department in moving towards restoring its facilities to at least a C-2 readiness condition.
Our fiscal year 2002 request for military construction is $5.9 billion, of which $5.2 billion is for regular military construction – an increase of 46 percent over last year’s request, $163 million is for NATO Security Investment, and $524 million is for implementing previously legislated base realignments and closures.
We are requesting $1.1 billion for family housing construction and $3.0 billion for operating and maintaining our almost 300,000 family housing units. This budget request reflects the Department’s initiative to restore and modernize its existing facilities and also reflects President Bush’s initiative to improve housing for our service members and their families. On February 12, 2001, in a speech to the troops at Fort Stewart, Georgia, President Bush stated that “we owe you and your families a decent quality of life. We owe you the training and equipment you need to do your jobs… You and your families are the foundation of America’s military readiness.” Secretary Rumsfeld added $400 million to the program to make this a reality, increasing the family housing construction program by over one third. A substantial portion of this increase will be utilized to increase our housing privatization efforts, which allow us to leverage our appropriated funds and improve the quality of our housing more rapidly.
Comparison of Military Construction and Family Housing Requests
(President’s Budget as amended - $ millions)
FY 2001* Appropriation Request
FY 2001 Final Appropriation
FY 2002 Appropriation Request
NATO Security Investment Program
*Does not include FY01 supplemental request.
*Does not include general provision (sec. 125 and 132) reductions. Contingency Funding: Military construction projects typically include contingency funds to address problems that arise due to changes in missions changes or design, unanticipated site conditions, or other unexpected circumstances. The Department’s fiscal year 2002 budget request includes a five percent contingency for all of the Services and Defense Agencies. NATO Security Investment Program: The NATO Security Investment Program (NSIP) provides for the acquisition of common use systems and equipment; construction, upgrade and restoration of operational facilities; and other related program and projects in support of NATO. The request for the NATO Security Investment Program (NSIP) is $163 million in fiscal year 2002. The Department anticipates recoupments of approximately $11 million, and together with unliquidated balances of $25.4 million from prior years, the NSIP program will total $199.4 million. Completion of Prior Base Realignment and Closure (BRAC) Rounds: The fiscal year 2002 budget requests $524 million in BRAC appropriations to complete prior rounds, which is less than half of our fiscal year 2001 request. Over 86 percent is for environmental cleanup and the balance will support operations and maintenance costs. We currently estimate that the four previous BRAC rounds will save approximately $15 billion through FY 2001 and generate an estimated $6 billion in annual recurring savings thereafter. Overseas Construction: The fiscal year 2002 budget for military construction at overseas bases is $720 million for regular construction and another $28 million for family housing construction and improvements. Over $350 million is directed toward projects that support quality of life issues such as child development centers, family housing, enlisted barracks, school facilities and medical/dental facility upgrades. The remaining projects are operational or support facilities.
Operations and Maintenance Request
We are requesting $10.3 billion to fund installations’ operations and maintenance costs in fiscal year 2002. Of this total, $4.0 billion will provide real property services (RPS) support and $6.3 billion will provide for facilities sustainment, restoration and modernization (SRM) and the demolition of unneeded facilities. RPS is a must-pay cost, and it funds contracts such as grounds maintenance, painting and elevator and crane maintenance. Sustainment funds pay for the day-to-day maintenance and repair costs. Restoration and modernization funds major repairs and upgrades to damaged or obsolete facilities and infrastructure.
The demolition program has been a success story for the Department. In May 1998, we set a goal to eliminate 80 million square feet of obsolete facilities by 2003. Over the past three years, the Department demolished and disposed of over 44.9 million square feet of excess and obsolete facilities and other structures, such as fuel tanks and engine test pads, and the program is 5.5 million square feet ahead of our goal. The program has been expanded to include several Defense Agencies and will continue past its current planned completion in 2003.
Possible Enabling Legislation
During this past year, we have actively solicited ideas from the Services, our public employees, private industry, and local communities to improve the operation and management of our installations. Based upon this feedback, we have submitted several legislative proposals for your consideration, and we are also examining other innovative ideas:
Amend Section 2805 of title 10 United States Code to increase the minor construction threshold from $500,000 to $750,000 and from $1,000,000 to $1,500,000 for projects involving life safety issues. The current threshold limits the Department’s ability to complete projects in areas with high costs of construction. Without this relief, there may be a two or three year delay in completing smaller, unforeseen construction projects if the Department of Defense Components must submit such projects for military construction appropriations.
Amend the 1990 and 1988 base closure statutes to revise the guidelines for leasebacks. The proposed legislation seeks authority for Federal tenants to obtain facility services and common area maintenance directly from the local redevelopment authority (LRA) or the LRA’s assignee as part of the leaseback arrangement rather than procure such services competitively in compliance with Federal procurement laws and regulations. The proposed legislation also expands the availability of the leaseback authority to property on bases approved for closure through the 1988 base closure statute.
Amend Section 2853(d) of title 10 United States Code to exclude environmental hazard remediation from the 25 percent allowable cost increases on construction projects. This provision would not change in any way our environmental responsibilities. It would give us flexibility to use existing funds to respond to requirements while moving ahead with construction. Experience has shown that unforeseen environmental cleanup costs alone can account for more than 25 percent of cost increases, a problem that becomes unmanageable if construction costs are also higher than anticipated. With the current situation, some military construction projects must be stopped prior to completion so as not to exceed the current 25 percent cap. Excluding unforeseen environmental hazard remediation from the cap provides greater flexibility and enables the Department to more expeditiously execute contracts and respond to the unforeseen environmental conditions.
Amend Section 276a of title 40, United States Code to increase the thresholds for application of the Davis-Bacon Act from $2,000 to $1,000,000. This threshold has remained unchanged for over 35 years. Increasing the threshold reduces costs, provides greater flexibility in purchasing commercial items, simplifies acquisition procedures and competition requirements, and enables the federal government to conduct business in a more commercial manner. The Department could achieve savings of $190 million in fiscal year 2002 alone if this threshold is increased.
Ideas Undergoing Departmental Consideration
The Efficient Facilities Initiative is an effort by the Department to achieve an approximately 25 percent reduction in base infrastructure. This initiative is key to allowing the Department to more efficiently support force structure, increase operational readiness, and facilitate new ways of doing business.
The Department is considering the possibility of extending the authorities contained in the Brooks Air Force Base Development Demonstration Project (Section 136 of the Military Construction Appropriations Act, 2001, Public Law 106-246) to all military installations. This effort would permit the Military Departments to explore ways of supporting their missions and people more effectively and at less cost while maintaining operational readiness.
We are considering the amendment of Section 2801 (Alternative Authority for Construction and Improvement of Military Housing), Chapter 169 of title 10, United States Code to provide permanent authority to the Military Housing Privatization initiative (current program authority expires in December, 2004). We are also examining the MHPI to determine any lessons learned and recommend any legislative changes to improve the process.
To ensure that our facility deficiencies are eliminated in the long run, the Department is articulating a long-term Facilities Strategic Plan with a time horizon consistent with the military operations that installations support. The Facilities Strategic Plan is the foundation for long-term initiatives directly linked to our mission, our vision for installations, our goals, and the needs of our customers. Our installations’ vision recognizes that America’s security depends on installations and facilities that are available when and where needed with the capabilities necessary to support current and future military requirements. The Facilities Strategic Plan is based on four goals: right size and place, right quality, right resources, and right tools and metrics. Accomplishing these four goals will enable us to create the installations required to support a 21st Century military. Right Sizing and Locating Our Installations and Facilities: We must shape and size our infrastructure on the basis of military necessity. Our first goal is to improve the balance between the installations and facilities inventory on hand and the inventory required by today’s and tomorrow’s military forces and missions. This also includes preserving access to and integrity of the Department’s operational test and training ranges from encroachment issues. Rightsizing through the Efficient Facilities Initiative also allows the Department to align operational forces with the installations best suited to their 21st Century missions. Our Facilities Strategic Plan assumes that 25 percent of the current inventory will become excess to future needs and can be disposed through additional base realignments and closures.
The Department has been successful in reducing infrastructure through previous base closures and realignments. By the end of FY 2001, the Department will complete implementation of the Base Realignment and Closure recommendations, to include the closure of 97 and realignment of 55 major installations. We are looking at ways to enhance the initiative to privatize our utility infrastructure and are revisiting program guidance and goals to incorporate lessons learned and input from industry.
Providing the Right Quality Installations and Facilities: Our second goal is to provide facilities that possess the qualities needed to support military operations, training, maintenance, housing and community support, which in turn, enable readiness. “Right quality” means facilities capable of meeting warfighting missions and enhancing quality of life for our service members and their families. As General Shelton, Chairman of the Joint Chiefs of Staff, said during a speech at the Defense Orientation Conference Association Annual Meeting on October 4, 2000 “…we must not continue to ignore the aging infrastructure at our posts, bases and stations that has such a dramatic impact on our service members’ quality of life.”
The Department has accelerated the restoration of degraded facilities by requesting $4 billion for fiscal year 2002 for facilities restoration and modernization. Many facilities with current readiness ratings of C-3 or C-4 will be improved to C-2 readiness condition as a result.
Providing the Right Resources: Our third goal is to allocate the right resources to achieve the right size and quality of our installations and facilities. Sustainment requirements are computed using the Facilities Sustainment Model, which determines sustainment costs based on commercial benchmarks and the planned inventory. Recapitalization requirements are computed using a standard design life on average for all facilities of 67 years. New footprint construction is determined based on Service and Defense Agency requirements to meet new missions or to satisfy long-standing deficiencies.
Using the Right Tools and Metrics: Our fourth goal is to develop analytical tools and metrics to allow us to more accurately develop our requirements and assess our level of improvement. We are implementing management tools and performance measures to enable us to assess the current and future condition of our physical plant and directly link them to our Installations’ Readiness Report.
Over the past year, the Department has made major strides in improving our management tools and metrics. We developed a standard Department-wide terminology for facility classification, which has been institutionalized across the Department. The Facilities Assessment Database (FAD), which incorporates the Services’ real property databases, has expanded to include personnel data, weapon system inventory and costs of real property maintenance activities and base support, where available. In addition, the FAD has transitioned into the source database for other Department-wide databases and management tools, including the Facilities Sustainment Model. Another effort involves improving the Base Information System databases and integrating them among the Services so more accurate tools are available to guide and monitor management decisions.
The Facilities Sustainment Model was used by the Services to determine sustainment requirements for their fiscal year 2002 budget submissions, and the Facility Aging Model enables us to assess the impact of planned facility actions on the useful life of the facilities’ inventory. In its second year, the Installations’ Readiness Report has effectively characterized the effect our installations and facilities have on military readiness.
We are also developing a tool to capture recapitalization requirements and predict restoration and modernization requirements. In a companion effort to the Facilities Sustainment Model, the Department restructured its Program Elements to reflect the new focus of sustainment, restoration and modernization.
America’s security, today and in the future, depends on installations and facilities that support operational readiness and changing force structures and missions. The fiscal year 2002 budget request demonstrates our dedication to that mandate. We have taken a four-pronged approach to achieve our vision: right size and place, right quality, right resources, and right tools and metrics for our installations and facilities. We developed the Defense Facilities Strategic Plan to provide the framework for accomplishing these goals and enable us to provide ready and capable facilities for our warfighters.
We will continue to transform our installations and facilities into those required for the 21st Century, both through increased resources and through better use of existing resources. We will capitalize on the strengths of the private sector through housing and utilities privatization and competitive sourcing initiatives. We will also develop a plan for managing unused and underutilized property and facilities and actively explore opportunities for outleasing.
We look forward to continued collaboration with Congress and welcome your ideas for identifying additional opportunities to provide the right quality and quantity of installations in the most cost-effective manner.
This concludes my prepared testimony. In closing, Mr. Chairman, I sincerely thank you for giving me this opportunity to describe our new focus on installations and facility programs and for your very strong support for a robust military construction program.