• $18.6 million for unspecified minor construction, $33.3 million for planning and design and $142.0 million for construction projects for other Agen

cies.

CONSTRUCTION FOR FAMILY HOUSING AND BARRACKS

The $4.3 billion the Department is requesting for family housing and barracks supports the high priority placed on quality housing by the Secretary. Our military members deserve no less. Of that amount, $2.9 billion would pay for the operations and maintenance of over 300,000 family housing units in fiscal year 2000. In addition, the Department military construction program includes $636 million in fiscal year 2000 to construct, replace or refurbish approximately 5,400 family housing units; and $800 million for 44 projects to construct or renovate barracks, a dining hall and transient housing.

OVERSEAS CONSTRUCTION

The fiscal year 2000 budget for military construction at overseas bases is $457 million for regular construction, including the U.S. contribution to the NATO Security Investment Program of $191 million, and another $212 million for family housing new construction and improvements. Many of the projects support quality of life issues such as child development centers, family housing and enlisted barracks.

NATO SECURITY INVESTMENT PROGRAM

The request for the NATO Security Investment Program (NSIP) is $186 million and for NATO Enlargement is $5 million.

NATO strategy has shifted from a forward deployed, static defensive posture, to one that is mobile, flexible and responsive to a wide range of contingencies, such as the mission in Bosnia-Herzegovina and, now, potentially Kosovo. The investment program that supports NATO has been restructured accordingly. General George Joulwan, former Commander in Chief, U.S. European Command, considered the NATO Security Investment Program to be the most successful burdensharing arrangement in the NATO Alliance. Over the last few years, the Department has invested over $1 billion in the NATO Security Investment Program. While these funds are included in the military construction program, they are used not only for facilities, but also vital command and control systems that are currently in need of a major modernization and reorientation to support the new Alliance strategy. U.S. industry has received more than $1.7 billion in NATO command and control equipment contracts and over $100 million in facility construction contracts over the last few years.

NŠIP also supports enlargement of the Alliance as a practical expression of U.S. military and political commitment to successfully integrate former adversaries into the family of western democracies. Now that the Alliance has agreed to enlargement, the NSIP will play a central role in consolidating NATO's collective defense capability. The anticipated U.S. contribution to cover the cost of enlargement is $5 million in fiscal year 2000.

COMPLETE IMPLEMENTATION OF PRIOR BRAC ROUNDS

Our current BRAC rounds are estimated to save approximately $14 billion by 2001, after one time implementation costs have been offset, and generate an estimated $5.7 billion in annual recurring savings thereafter. The fiscal year 2000 budget requests $706 million in new appropriations for fiscal year 2000, plus an advance appropriation of $577 million for fiscal year 2001. This is a 21 percent decrease from the fiscal year 1999 appropriation. This decrease reflects the impact of declining BRAC implementation requirements as we approach the end of the implementation period for our previous 4 BRAC rounds.

REAL PROPERTY MAINTENANCE

While not part of the Military Construction Bill, maintenance and repair are vital to protecting our investment in facilities. Lack of proper maintenance and timely repairs leads to facility failures that jeopardize military missions and readiness, and expensive renovations in the future. Proper maintenance and repairs saves money in the long run by preventing deterioration that often results in wasted utilities and emergency fixes, that are costly and often disruptive. Further, maintenance and repair helps insure an environment of enhanced worker safety. Keeping facilities operational enables them to contribute to high mission capability. A modern, well kept maintenance shop will reduce downtime for a tank or an airplane, and enable such

weapon systems to continue operating at a fraction of the cost of buying additional weapons.

For fiscal year 2000, we are requesting $4.9 billion for real property maintenance, a 7 percent increase over the fiscal year 1999 program of $4.6 billion. As I will discuss shortly, the Department's infrastructure exceeds the requirement. However, facilities that are excess still require caretaker maintenance. Getting the most from maintenance and repair requires that the Department manage its facilities in the most effective manner and eliminate unneeded facilities, either by disposing or demolishing excess facilities or by closing unneeded bases.

The President has recently increased the defense program in part in response to strong arguments by the Secretary and the Joint Chiefs. While some of the additional funding went to real property maintenance, it was not enough to meet all the requirements of the Military Departments.

In fiscal year 2000, the Department has followed recent congressional practice and budgeted real property maintenance funds in both regular O&M and in the Quality of Life Enhancements, Defense appropriation. The total is $1.8 billion. Funds budgeted for repair and maintenance of quality of life facilities are included in this latter account to give it special emphasis, protect it from diversion to other O&M requirements, encourage better management of the funds and optimize its effectiveness by giving it a 2-year life.

RESHAPING THE INFRASTRUCTURE

The Department is pursuing various initiatives that will reshape its infrastructure. Eliminating unneeded installations through additional base realignments and closures is the foremost initiative. I will present our BRAC legislative proposal and describe the other strategies that, together, will reduce the size of the Department's base structure, restructure it to match changing mission requirements, and enhance management of its facilities.

ADDITIONAL BRAC AUTHORITY

As the Secretary has recently stated before the Illinois State House of Representatives," vast sums of money that we waste on unneeded facilities are robbing our men and women in uniform of needed training, of modern weapons and of a better quality of life." That sums up two important points: We continue to maintain excess base capacity, and the savings from two future BRAC rounds can be better spent on our forces.

On April 2, 1998, the Secretary of Defense forwarded his report on Base Realignment and Closures to Congress. Central themes of this report are: (1) Even after four previous rounds of BRAC, we still have more infrastructure (approximately 23 percent) than needed; (2) Additional rounds of BRAC in 2001 and 2005 would yield savings of over $20 billion in the years 2008-2015, the period covered by the Quadrennial Defense Review, and save approximately $3 billion every year thereafter; (3) BRAC is critical to the success of our defense strategy; (4) BRAC can spur economic growth and development; and (5) Now is when we must plan for defense in the 21st Century so timely BRAC authorization is essential.

The major points of that analysis are still very relevant today. We still have far more infrastructure than we need or can afford. At the end of BRAC 95, both thenSecretary William Perry and the Chairman of the last Base Realignment and Closure Commission commented that more closures were required. Our 36 percent force structure reduction has not been offset by an appropriate reduction in our base capacity, which has only been reduced 21 percent through the four current BRAC rounds. The estimated 23 percent excess base capacity exists right now, and that excess continues to draw resources away from our fighting forces. We really need to reverse that. But we need to do more than just eliminate excess base capacity. We need to "reshape" our entire infrastructure by properly aligning base structure to support the military's changing mission requirements and support operations. This requirement adds a different dimension to future BRAC authority, and it makes securing that authority even more essential.

We have determined that two future BRAC rounds in 2001 and 2005 are required to address the excess problem and reshape our infrastructure. We have also estimated that these two future rounds could generate approximately $3 billion in annual recurring savings starting at the end of the implementation period. Those funds, together with the accumulated net savings up to that point, will go a long way toward supporting our future force structure.

We need legislative authority now. BRAC provides a fair and open process to closing bases. Alternative approaches to identify specific bases to close have not been

successful, because they have not been based on a fair evaluation of all bases, audited by an independent Commission, or made transparent to the public.

We need to ensure that we have the resources available to meet our future needs. Absent BRAC authority, we would need to identify other potential sources of funding, whether they be further cuts in infrastructure (leading to a further deterioration in quality of life), further cuts in force structure, or reductions in training and readiness. For these reasons, the Chairman and Joint Chiefs of Staff believe that the BRAC process is critical to ensure the readiness of our forces and enable the Department to modernize its weapons.

Additional BRAC rounds also will permit the Department to align its base structure to support the military's changing mission requirements and support operations. Each of the major Defense Reform Initiative (DRI) thrusts-reorganization, civilian reductions, consolidations, outsourcing and BRAC-contribute to these goals. Some will generate savings or revenue. We expect outleasing of underutilized property to provide at least $100 million per year and BRAC to save $3 billion a year. None will achieve needed reforms alone; each contributes to the effectiveness of the others. Without BRAC, the effectiveness of other reforms will be diminished. Eliminating the uncertainty of future BRAC rounds as soon as possible will permit us to plan on how to use this tool as part of our overall DRI implementation strategy.

OVERSEAS REALIGNMENTS

To date, the Secretary of Defense has announced his intention to return or reduce operations at 975 overseas sites. Since 1990, the result is a 58 percent reduction in our infrastructure overseas; a 63 percent reduction in Europe. The Department has established the European Theater enduring force structure at about 100,000 personnel and a Pacific Theater enduring force structure of about 100,000.

Our enduring overseas facilities remain essential. It is imperative that we provide a high quality of life for our forces and families overseas. Our people experienced a great deal of turbulence as the force and base structures contracted. On top of that, our overseas forces deploy frequently, adding further stress to families left in foreign countries. We are concentrating on the appropriate facilities, readiness, operational capability, quality of life and modernization for the remaining forces that protect our national security interests in those regions. We need your support to repair, maintain and build the infrastructure that will guarantee our economic and national security.

RESIDUAL VALUE OF OVERSEAS FACILITIES RETURNED TO HOST NATIONS

As this committee knows only too well, the issues of when, how much and in what form the U.S. Government receives value for its excess facilities overseas has been the subject of continuing Congressional interest. Unfortunately, the result of this discussion is a reporting and oversight process that serves neither the taxpayers nor the Department as well as it might.

Our negotiators continue to press for compensation for the residual value of U.S. funded improvements returned to the host nations. Since 1989, the Department has realized monetary compensation from host governments of about $166 million, plus approximately $351 million worth of construction to support our remaining forwarddeployed forces.

I want to emphasize that the Status of Forces Agreement with Germany recognizes that government's obligation to compensate the U.S. funded improvements that have reuse capability. However, the U.S. holds no claim to the land and many of the facilities must be demolished prior to any reuse. For these reasons, it is unrealistic to expect compensation from returned overseas facilities that would reflect anything near our original investment in those facilities. Also, GAO, in its January 1996 report on "Overseas Installations: Efforts to Recoup the Residual Value of Closed Facilities" emphasized "it may be unrealistic to expect DOD to recover amounts near the value of its investment in the facilities returned."

DEMOLISHING EXCESS FACILITIES

Installation commanders have repeatedly reported that they often are forced to divert scarce resources to operate and maintain obsolete and excess structures. Such O&M costs come at the expense of more important requirements, and could be avoided by investing in the demolition and disposal of these excess facilities. In 1997, the Military Services surveyed their installations and identified over 80 million square feet of buildings, including more than 8,300 individual structures, which could be demolished in the near term.

In May 1998, Secretary Cohen directed the Military Services to fund the elimination of the 80 million square feet by 2003. In fiscal year 1998, the Department eliminated about 16 million square feet, exceeding the fiscal year 1998 goal of 11 million. In fiscal year 1999, the Department plans to eliminate an additional 14 million square feet. At the same time, DOD continues to identify additional excess facilities with an eye on further savings.

PRIVATIZING UTILITY SYSTEMS

The Department spends nearly $2.5 billion a year on energy for its installations, consuming over 70 percent of all energy used by all Federal facilities. This represents tremendous procurement leverage, yet excessive management attention and funding have been directed towards the operating and maintaining of DOD's large power infrastructure. Taking a lesson from industry, I believe DOD's energy requirements can be better met by relying on the private sector for our utility infrastructure and concentrating our management focus on energy use and cost.

Section 2688 of Title 10, United States Code, provided DOD authority to convey all Defense utility systems, including electric, water, wastewater and natural gas, as well as steam, hot and chilled water and telecommunications systems. The Department's current focus, as captured by a Defense Reform Initiative (DRI), is to privatize all electric, water, wastewater and natural gas systems. The objective is to get the Department out of the business of owning, managing and operating these systems. Competition for ownership of the utility infrastructure and the provision of utility service is key to effectively resourcing the DOD energy requirement.

We are requesting that Congress modify section 2688 of Title 10, United States Code, to allow the Military Departments to use military construction funds specifically appropriated for construction, repair or replacement of a utility system to upgrade the system to be conveyed to private ownership. Improving a utility system to the current standards of efficiency and reliability will facilitate the transfer to private ownership and save the Military Department money in the long run through lower operation and maintenance costs.

Initially the DRI goal called for the privatization of all systems (in the four categories mentioned above) by January 2000. As the Services reviewed their inventories at both major and minor installations worldwide, the scope grew to over 2300 candidate systems. After reevaluating the original goal, Deputy Secretary Hamre reset the timeline. The Services have now submitted revised plans targeting_the award of privatization contracts for all utility systems by September 2003. Two major interim milestones will help monitor the success of this undertaking: (1) all analysis studies will be completed by September 30, 2000, and (2) all solicitations will be released not later then September 30, 2001. Although not part of this timetable, I intend to also aggressively review privatization of telecommunications systems to assist our installations in meeting modern information technology challenges.

A final note on utility systems privatization. The Defense Reform Initiative also issued guidance on utility systems privatization by establishing the criteria for exempting systems from the privatization program. Any privatization deal must have a long-term economic benefit. Economics aside, we must minimize any adverse impact of privatization on operational missions.

IMPROVING QUALITY OF LIFE: HOUSING/BARRACKS

Quality of Life, and housing in particular, remains a high priority for the Department. The Department established clear goals last year for improving the quality of housing for our military people. Specifically, the Military Services have detailed plans to eliminate their inadequate family housing inventory by 2010. Their plans provide a framework for this and future budgets.

Two years ago, the Department directed the Services to program resources to eliminate the worst barracks conditions that our single service members endure permanent party gang latrine barracks-no later than fiscal year 2008. Last summer's program review and the formulation of the fiscal year 2000 budget focused on achieving this goal. The Army, Navy and Marine Corps now report that they have programmed sufficient funds to eliminate gang latrine barracks by fiscal year 2008. The Air Force bought out its last gang latrine with their fiscal year 1999 program. The Services are also continuing to implement the 1+1 barracks standard. The Army expects to achieve the new standard by fiscal year 2008, the Navy by fiscal year 2013, and the Air Force will eliminate its dormitory deficit by fiscal year 2009. The Marine Corps plans to build to an interim 2+0 standard by fiscal year 2036.

PRIVATIZING FAMILY HOUSING

Our housing privatization initiative has progressed considerably over the last year. Last fall, noting concerns that military construction projects were delayed pending decisions about privatization, we took steps to speed implementation. We devolved more execution authority to the Military Departments while maintaining basic oversight within OSD. Deputy Secretary Hamre met with Congress to underscore his support of this vital program to improve quality of life for our service members and their families. In October 1998, we provided Congress with plans for each of the Military Departments and are carefully monitoring their timelines. We recently forwarded to Congress a progress report on implementation for the first 3 months. We also sent Congress the proposed solicitations for 11 new projects encompassing over 23,000 housing units.

Continuing to move these projects to completion is critical as it provides sorely needed housing, which will improve the quality of life for our people, as well as providing the Department with a solid foundation of success when we seek permanent authorities next year. The Department expects to have privatized 30,000 family housing units by the end of fiscal year 2000. I firmly believe these private sector tools are critical to providing quality housing over the long haul. Current estimates indicate that we could privatize more than 150,000 additional houses through fiscal year 2005. This will significantly contribute toward meeting our goal of revitalizing or divesting our inadequate housing by 2010 using both traditional MILCON and privatization authorities.

ENERGY MANAGEMENT AND UTILITY PROCUREMENT

The Department continues to make great progress in reducing its energy consumption. In buildings and other facilities alone, energy use per square foot has come down over 19 percent since 1985. To help continue this trend, the Department has programmed $32 million in fiscal year 2000 for the Energy Conservation Investment Program. The DOD spends over $2 billion on energy for its buildings and facilities each year. Conserving energy, therefore, saves substantial amounts of money as well as benefits the environment.

Our strategy to reduce energy consumption has two parts; one directed at what we own currently, the other at what we plan to build. The strategy for existing structures focuses on using public and private sector capital to finance energy-savings investments through shared savings contracts and area-wide agreements. The Department has multi-regional Energy Savings Performance Contracts, which cover all 50 states and the District of Columbia, with a combined private sector investment capacity of $3.2 billion, available for use by all Military Services and Defense Agencies. Additionally, where it makes sense, we are continuing to pursue demandside management agreements with public utilities. In fiscal year 1997, these agreements resulted in the Department saving more than 817 billion BTUs and $15 million.

The strategy for reducing energy consumption in new buildings calls on the Military Departments to take advantage of new design techniques and energy efficient materials to increase energy efficiency. The Department intends to utilize the principles of "sustainable design" in all construction designed after fiscal year 2000, where it has been determined to produce the lowest life-cycle costs. Sustainable design methods use the most energy efficient and environmentally sustainable products, optimize architectural design to incorporate local natural conditions, such as day-lighting and passive/active solar and solar-thermal applications, and provide for indoor workplace environmental quality. Demonstration projects undertaken by the Military Departments have shown this approach to design produces 30-50 percent in energy savings with minimal investment.

Aside from our initiatives for existing or new facilities, a Defense Reform Initiative to stand up the Defense Energy Support Center is continuing to enhance our efforts to increase energy efficiency. The Center is becoming involved in all facets of our energy program and we believe it has significant potential for making an important contribution to the Department's conservation efforts.

DOD LABORATORIES

As the members of this subcommittee know very well, our nation has the best warfighting technology in the world. Our nation's security depends on maintaining that winning edge to shape future events to our advantage. Doing so depends on the technology developed and, demonstrated today in the laboratories of the DOD, industry and academia.