<DOC>
[106th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:56508.wais]
VULNERABILITIES TO WASTE, FRAUD, AND ABUSE: VIEWS OF THE DEPARTMENTS OF
DEFENSE, STATE, AND VETERANS AFFAIRS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON NATIONAL SECURITY,
VETERANS AFFAIRS, AND INTERNATIONAL
RELATIONS
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
MARCH 2, 1999
__________
Serial No. 106-5
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.house.gov/reform
______
U.S. GOVERNMENT PRINTING OFFICE
56-508 CC WASHINGTON : 1999
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpr.gov Phone (202) 512ÿ091800 Fax: (202) 512ÿ092250
Mail: Stop SSOP, Washington, DC 20402ÿ090001
COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida GARY A. CONDIT, California
THOMAS M. DAVIS, Virginia PATSY T. MINK, Hawaii
DAVID M. McINTOSH, Indiana CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELEANOR HOLMES NORTON, Washington,
JOE SCARBOROUGH, Florida DC
STEVEN C. LaTOURETTE, Ohio CHAKA FATTAH, Pennsylvania
MARSHALL ``MARK'' SANFORD, South ELIJAH E. CUMMINGS, Maryland
Carolina DENNIS J. KUCINICH, Ohio
BOB BARR, Georgia ROD R. BLAGOJEVICH, Illinois
DAN MILLER, Florida DANNY K. DAVIS, Illinois
ASA HUTCHINSON, Arkansas JOHN F. TIERNEY, Massachusetts
LEE TERRY, Nebraska JIM TURNER, Texas
JUDY BIGGERT, Illinois THOMAS H. ALLEN, Maine
GREG WALDEN, Oregon HAROLD E. FORD, Jr., Tennessee
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
JOHN T. DOOLITTLE, California (Independent)
HELEN CHENOWETH, Idaho
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
David A. Kass, Deputy Counsel and Parliamentarian
Carla J. Martin, Chief Clerk
Phil Schiliro, Minority Staff Director
------
Subcommittee on National Security, Veterans Affairs, and International
Relations
CHRISTOPHER SHAYS, Connecticut, Chairman
MARK E. SOUDER, Indiana ROD R. BLAGOJEVICH, Illinois
ILEANA ROS-LEHTINEN, Florida TOM LANTOS, California
JOHN M. McHUGH, New York ROBERT E. WISE, Jr., West Virginia
JOHN L. MICA, Florida GARY A. CONDIT, California
DAVID M. McINTOSH, Indiana JOHN F. TIERNEY, Massachusetts
MARSHALL ``MARK'' SANFORD, South THOMAS H. ALLEN, Maine
Carolina EDOLPHUS TOWNS, New York
LEE TERRY, Nebraska BERNARD SANDERS, Vermont
JUDY BIGGERT, Illinois (Independent)
HELEN CHENOWETH, Idaho
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
Lawrence J. Halloran, Staff Director and Counsel
J. Vincent Chase, Chief Investigator
Samantha Sherman, Professional Staff Member
Jonathan Wharton, Clerk
David Rapallo, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on March 2, 1999.................................... 1
Statement of:
Toye, Nelson, Deputy Chief Financial Officer, Department of
Defense; Stanley Soloway, Deputy Under Secretary of Defense
for Acquisition Reform; Edward A. Powell, Jr., Assistant
Secretary for Financial Management, Department of Veterans
Affairs, accompanied by Mark Catlett, Deputy Assistant
Secretary for Budget, and Frank Sullivan, Deputy Assistant
Secretary for Finance; and Bert Edwards, Chief Financial
Officer, U.S. Department of State, accompanied by Patrick
Kennedy, Assistant Secretary of State for Administration... 2
Letters, statements, etc., submitted for the record by:
Blagojevich, Hon. Rod R., a Representative in Congress from
the State of Illinois, prepared statement of............... 15
Edwards, Bert, Chief Financial Officer, U.S. Department of
State, prepared statement of............................... 45
Powell, Edward A., Jr., Assistant Secretary for Financial
Management, Department of Veterans Affairs:
Information concerning remediation....................... 77
Prepared statement of.................................... 32
Soloway, Stanley, Deputy Under Secretary of Defense for
Acquisition Reform:
Information concerning operational and maintenance
savings................................................ 59
Information concerning overrun and costs................. 55
Prepared statement of.................................... 21
Toye, Nelson, Deputy Chief Financial Officer, Department of
Defense, prepared statement of............................. 5
VULNERABILITIES TO WASTE, FRAUD, AND ABUSE: VIEWS OF THE DEPARTMENTS OF
DEFENSE, STATE, AND VETERANS AFFAIRS
----------
TUESDAY, MARCH 2, 1999
House of Representatives,
Subcommittee on National Security, Veterans
Affairs, and International Relations,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2247, Rayburn House Office Building, Hon. Christopher
Shays (chairman of the subcommittee) presiding.
Present: Representatives Shays, Mica and Tierney.
Staff present: Lawrence J. Halloran, staff director and
counsel; J. Vincent Chase, chief investigator; Samantha
Sherman, professional staff member; Jonathan Wharton, clerk;
Earley Green, minority staff assistant; and David Rapallo,
minority counsel.
Mr. Shays. I would like to call this hearing to order.
Last week the General Accounting Office [GAO], and the
Inspector Generals identified high risk programs and
significant management challenges at the Departments of
Defense, Veterans Affairs and State. They cited longstanding
financial management and procurement weaknesses at DOD,
inefficient health care infrastructure and slow benefits
processing at the VA, and the need for enhanced security and
information systems at the Department of State.
Today, we invite those three important departments to
address the same subjects. We do so for two reasons. First,
these hearings give the subcommittee an opportunity to survey
key issues with our oversight partners, and refine our agenda
for this Congress. Second, this broader perspective helps us
discern common problems that might yield governmentwide
solutions.
While each department faces unique challenges, all three
have at their disposal the same powerful set of tools that can,
if energetically applied, help fix broken systems, improve
program performance and increase accountability. The Government
Performance and Results Act, which requires clear performance
goals and measurable results, offers troubled agencies and high
risk programs an incremental but inevitable path out of
bureaucratic thickets and inefficiencies once thought
intractable.
As the Results Act process matures, performance measures
will have a greater impact on administration budgets, on
authorizations and on appropriations, and on Congress as well.
So we ask the departments to describe their Results Act
compliance efforts and to identify the key indicators by which
they, and we, will measure their performance in the years
ahead.
We welcome all our witnesses today, and it is my
understanding that we will have two statements from the
Department of Defense, and given the size of the budget that
seems reasonable, and then one testimony from the Veterans
Affairs and one from State. But, all of our witnesses at the
table will be invited to respond to questions, and let me just
introduce our witnesses.
From the Department of Defense, Nelson Toye, Deputy Chief
Financial Officer, and then we have Stanley Soloway, Deputy
Under Secretary of Defense for Acquisition Reform, speaking
about acquisition.
And then from the Department of Veterans Affairs we have
Edward A. Powell, Jr., Assistant Secretary for Financial
Management, accompanied by Mark Catlett, Deputy Assistant
Secretary for Budget, and Frank Sullivan, Deputy Assistant
Secretary for Finance.
Department of State, we have Mr. Bert Edwards, Chief
Financial Officer, U.S. Department of State, accompanied by
Patrick Kennedy, Assistant Secretary of State for
Administration.
Our practice is that we swear everybody in beforehand, and
if you would stand and raise your right hands, please.
[Witnesses sworn.]
Mr. Shays. For the record, all our witnesses responded in
the affirmative.
Now, is anyone missing from that list? OK. We are going to
start with you, Mr. Toye, and we will go from there. And if you
would bring your microphones somewhat closer.
STATEMENTS OF NELSON TOYE, DEPUTY CHIEF FINANCIAL OFFICER,
DEPARTMENT OF DEFENSE; STANLEY SOLOWAY, DEPUTY UNDER SECRETARY
OF DEFENSE FOR ACQUISITION REFORM; EDWARD A. POWELL, JR.,
ASSISTANT SECRETARY FOR FINANCIAL MANAGEMENT, DEPARTMENT OF
VETERANS AFFAIRS, ACCOMPANIED BY MARK CATLETT, DEPUTY ASSISTANT
SECRETARY FOR BUDGET, AND FRANK SULLIVAN, DEPUTY ASSISTANT
SECRETARY FOR FINANCE; AND BERT EDWARDS, CHIEF FINANCIAL
OFFICER, U.S. DEPARTMENT OF STATE, ACCOMPANIED BY PATRICK
KENNEDY, ASSISTANT SECRETARY OF STATE FOR ADMINISTRATION
Mr. Toye. Thank you, Mr. Chairman. With your permission, I
ask that my formal written statement be included in the record,
and at this time I would like to provide a summary of the
statement.
I want to thank you for the opportunity to be here today to
discuss ongoing financial management reform within the
Department of Defense. I welcome the opportunity to address
what we have done and what we are doing to improve financial
management within the Department.
I want to begin by stating that financial management reform
within the Department continues to be a high priority. The
Department's ongoing financial management reform initiatives
represent the most comprehensive reform of financial management
in the Department's history. Our objective is to put into place
policies, systems and practices that will enable us to produce
accurate financial information in a timely manner.
While we are proud of the significant progress that the
Department has achieved to date, we are very well aware that
much more remains to be accomplished. Today I want to briefly
address the challenges we face, the progress we have made, and
our short-term and long-term strategies for lasting reform.
First, our challenges. The size and complexity of the
Department alone makes financial management reform a big
challenge. Compare us, for example, with General Motors, the
No. 1 Fortune 500 company for 1998. GM had approximately $178
billion in annual revenues and $228 billion in assets. In
contrast, the annual budget for the Department of Defense is
over $260 billion and we have over $1 trillion in assets.
Beyond size, our complexity is equally challenging. We
maintain over 500 bases in 150 countries and territories
throughout the world. Additionally, the Department of Defense
has hundreds of appropriations and accounts managed by 4
military services, 14 defense agencies and numerous other
subordinate organizations.
Additionally, the standards that the Department now is
asked to comply with are still evolving. As the Department
strives to comply with standards that only recently have been
established, still more changes are occurring. In fiscal year
1998 alone, four new auditable financial statements were
required for DOD's reporting entities. New reporting
requirements also continue to be imposed. This is a significant
challenge for the Department of Defense because it is akin to
hitting a moving target. Despite these challenges, we have made
significant progress.
First, the Department has consolidated over 330 financial
management field sites scattered throughout the world into 5
centers and 18 operating locations. This was completed in July
1998, almost 2 years ahead of the Department's original
schedule.
Second, to remedy the problem of numerous and incompatible
financial management systems, we have embarked on a major
streamlining effort. As of October 1998, we had reduced the
number of finance and accounting systems by 66 percent.
However, we are not simply reducing the number of finance and
accounting systems. Our objective is to replace old, outdated,
noncompliant systems with more modern systems that can meet
today's standards.
In addition to consolidating operations and reducing
systems, the Department has over 150 other initiatives underway
to improve and streamline financial management and to improve
the timeliness and accuracy of its accounting data. Despite
these accomplishments, the Department still faces significant
obstacles in transforming its financial operations, but we are
getting the job done one step at a time.
The Pentagon of today is not the Pentagon that our fathers
knew. In this new Pentagon it is no longer adequate to keep
just a checkbook balance of the Department's funds.
Increasingly, the Department of Defense is being judged by new
standards, as generally accepted accounting practices prevalent
in the private sector are being applied to the Federal
Government.
So how is the Department going to improve financial
management? We are moving toward our goal with both a long-term
and a short-term strategy.
The Department's systems were not designed to meet current
commercial-type standards and therefore are not capable of
complying with recently enacted standards. To overcome this
problem, the Department is taking a two-track approach. The
first track is to improve or replace the Department's current
systems with systems that will meet current standards. But the
Department does not expect to have financial systems that can
produce fully auditable financial statements prior to the year
2003. Because of the desire and indeed the necessity to achieve
progress before that date, the Department has undertaken a
second track that is an interim effort, and includes the use of
contractors to address many of the Department's more
significant problems. As a result, the Department expects to
make progress each year toward resolving its financial
management challenges. Financial management within the
Department is a work in progress. There have been notable
successes, but it is impossible to reverse decades-old problems
and inefficiencies overnight and implement necessary reforms
without several years of initiatives.
In summary, the Department of Defense faces significant
financial management challenges in the near term. To be
successful in our reform efforts, we need a dedicated effort
from the Department's financial community and the cooperation
of every community that feeds data to the Department's
financial management systems. We are getting both. This is a
Departmentwide management initiative involving participation
across all functional areas. Success should enable us to
generate better financial data for decisionmakers and
ultimately get more ``bang for the buck'' out of the defense
budget.
Mr. Chairman, this completes my oral testimony, and I will
be happy to answer any questions for the record.
[The prepared statement of Mr. Toye follows:]
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Mr. Shays. Thank you, Mr. Toye.
Let me just mention at this time that we have Mr. Tierney
from Massachusetts with us. And I don't know if the gentleman
would like to make a comment, but I would like to do some
bookkeeping while we have a Member here.
I ask unanimous consent that all members of the
subcommittee be permitted to place any opening statements in
the record and that the record remain open for 3 days for that
purpose. Without objection, so ordered.
[The prepared statement of Hon. Rod R. Blagojevich
follows:]
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Mr. Shays. And I also ask further unanimous consent that
all witnesses, which is your request, be permitted to include
their written statements in the record, and without objection,
so ordered.
Let me now ask Mr. Soloway to make his statement.
Mr. Soloway. Thank you very much, Mr. Chairman. It is a
pleasure to be here.
A little over a year ago Secretary Cohen launched the
Defense Reform Initiative [DRI], a broad-based and ambitious
program to fundamentally change the way in which the Department
of Defense operates, internally and externally. His call for
major departmental reform followed the completion of a
comprehensive review of our national military strategy and
defense posture. Although it was founded on four initial
pillars--elimination, re-engineering, consolidation and
competition--the DRI is now the Department's overall framework
for change and reform in all aspects of defense.
For the purposes of today's hearing, allow me to briefly
touch on our progress in each of these areas.
Base realignment and closure or BRAC is our No. 1 priority.
Only through BRAC can we right size the Department and reduce
unneeded infrastructure to free up the funds we need to meet
the challenges of the 21st century. As such, we will be seeking
congressional approval for two more rounds of base closure.
Second, re-engineering, which includes both internal
business processes and acquisition reform. In truth, real
reform began to take shape some 6 years ago in a vital and
rewarding partnership between the Department and the Congress
which resulted in passage of the Federal Acquisition
Streamlining Act [FASA], and the Clinger-Cohen Act, both of
which signaled the common vision and commitment of the Congress
and the Department.
At the same time, within the Department, internal change
had already begun. Then Secretary of Defense William Perry
created a new demand for performance specifications rather than
design-specific military specs and standards, and then Under
Secretary of Defense-Comptroller, now Deputy Secretary John
Hamre, had put into motion a substantial series of internal
management reforms.
The DRI embraced and expanded on all of these, and helped
create within the Department a critical partnership committed
to change and reform that encompasses all aspects of defense.
For example, through the DRI the Department has put in place
its first ever Financial Management Improvement Plan. We are
working toward continuous improvement in the business practices
associated with the Defense Working Capital Funds. We have
increased, as well, our focus on electronic commerce, the
electronic mall on the internet, and of course the purchase
card. By the year 2000 we will be obtaining over 90 percent of
our low-value purchases with the card.
Acquisition reform has opened the door to important new
flexibility and decisionmaking as well as a new focus on
performance. Many programs, including the Defense Acquisition
Pilot Programs, are reaping major benefits for both the user
and the taxpayer.
For example, the program costs of the Joint Air-to-Surface
Standoff Missile or JASSM have been reduced 44 percent, and the
unit costs of the Joint Direct Attack Munition or JDAM have
been reduced by approximately 60 percent from the estimated
cost. Cycle time for the JDAM has been reduced 35 percent with
a 30 percent reduction in program staffing.
In addition, the Single Process Initiative, where we seek
to replace non-value added government specifications on
contracts with commercially proven, performance-focused
processes, is proving to be a real success as well. Overall,
the Defense Contract Management Command reports that the Single
Process Initiative has now gone past the half billion dollar
mark in savings and long-term cost avoidance, and we have only
just begun.
We are also developing new strategies for reducing the
long-term operations and support costs of both our new and
existing systems, which today represent an enormous drain on
our budget. As Congress has directed, for instance, we have
identified 10 weapons systems as pilot programs for reduced
total ownership cost and are pursuing a range of management
actions to achieve that critical goal.
These are but a few ways in which our acquisition world has
changed for the better. However, we have a long way to go and
our commitment to acquisition reform remains unabated. It is
driven by our continued commitment to implementing best
business practices, as well as our very real need to access the
full range of technology and technology suppliers to help meet
the challenges of the future. The barriers to doing so remain
significant and must be removed. As such, the Department will
be proposing a series of legislative initiatives designed to
help us overcome those barriers.
The third area is consolidation, where the story is shorter
and simpler. At the outset of the DRI, Secretary Cohen made
clear his commitment to re-engineer and reduce headquarters
staffs. To date, the Department is right on target to reduce
the Office of the Secretary of Defense by 33 percent by the end
of this fiscal year; the Joint Staff by 29 percent by fiscal
year 2003; the defense agencies by 21 percent by fiscal year
2001; and the DOD field and related activities by 36 percent by
fiscal year 2001.
Competition is also a pillar of defense reform, and on that
important topic I would like to make just a couple of brief
comments.
First, the key word here is competition. Our goal is to
exploit the many advantages of the competitive environment to
the benefit not only of the American taxpayer but the
warfighters, our customers in the field. Competition saves
money and can improve quality. Hence, our goal is not
outsourcing, it is competition.
Second, we must recognize that with innovation and
creativity come vastly different ways of doing business. When
many of the rules and statutes governing competitive sourcing
were put in place, we were contemplating very clear choices.
Today, particularly as we seek to access the best and most
contemporary technologies, the choices are more complex and
sometimes lead us to solutions that are virtually impossible to
directly compete between the public and the private sectors.
It is the Department's hope that the Congress will continue
to work with us in support of implementing such innovation,
while we at the same time seek to provide appropriate
assistance in cases where the best solutions for the taxpayer
and the warfighter result in adverse impacts for our work
force.
Third, what we seek is not just lower costs but the best
overall value. We have collectively agreed that in selecting
commercial suppliers, low cost does not always equal the best
value to the government, and it is time for our statutes to
recognize that fact for public-private competition as well.
And fourth, as I stated earlier, one of our overarching
goals in acquisition reform is our ability to access the full
range of technologies and suppliers that exist for any given
requirements. So too must this be our goal in competition. Our
competitions must be fair, clear and conducted in such a manner
that all parties, public and private, walk away, win or lose,
feeling like they have been given a fair shake.
The Department has also fully embraced the principles of
the Government Performance and Results Act, as evidenced by its
fiscal year 2000 GPRA performance plan. In the fiscal year 2000
plan, DOD has established two corporate level goals.
Shape the international environment and respond to the full
spectrum of crisis by providing an appropriately sized,
positioned and mobile force.
And prepare now for an uncertain future by pursuing a
focused modernization effort that maintains U.S. qualitative
superiority in key warfighting capabilities. Transform the
force by exploiting the revolution in military affairs and re-
engineering the DOD to achieve a 21st century infrastructure.
Our two corporate goals form the basis for using GPRA as a
management tool. The performance goals are supported and
evaluated by quantifiable output, which is assessed by using
performance measures or performance indicators. Performance
measures and indicators quantify the output of the defense
program for key measures associated with providing a ready
force and preparing for the future. The Department's plan
includes 41 performance measures and indicators, all of which
have baselines and goals.
Mr. Chairman, members of the committee, the Department of
Defense is changing the way that we do business, and the
Defense Reform Initiative provides the overarching framework to
enable us to achieve these many and crucial goals.
Yesterday, Secretary Cohen and Deputy Secretary Hamre
reiterated their commitment to stay on course in the pursuit of
real change in the Department. In so doing they also explained
how the defense reform umbrella has expanded well beyond the
initial four pillars to include quality of life initiatives,
logistics reform and homeland security, all in an effort to tie
together the many elements of reform and the reality that each
is an important part of the Defense Department we envision for
the future.
At their press conference they also unveiled a new CD-ROM
designed to communicate accomplishments to date and describe
the challenges ahead. Further, the CD-ROM includes score cards
for most major areas of reform that will enable us to track the
progress that we are making. In this regard the Secretary and
Deputy Secretary have firmly restated our commitment to
performance measures and meaningful results. With your
permission, Mr. Chairman, I would like to submit for the record
a copy of the CD-ROM as well as a text version. Every Member of
Congress did receive a copy of this CD-ROM yesterday prior to
the press conference.
In closing, it is fair to recognize that defense reform is
not yet a way of life in the Department. We are, however,
making real progress. As we continue to move forward, to
encourage and adopt more and more innovation and creativity,
mistakes will be made. And just as we have learned from those
that we have already seen, so too will we continue to learn
from our mistakes as we continue down this complex and
difficult road.
Defense reform would never have been possible without the
support, encouragement, and partnership we have enjoyed with
the Congress, and we are counting on that continuing
partnership, that shared commitment to creating a Department of
Defense that is optimally prepared to meet the challenges
ahead.
I thank you for your time, and we will be happy to answer
any questions.
[The prepared statement of Mr. Soloway follows:]
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Mr. Shays. Thank you. Now we will hear from the Department
of Veterans Affairs, Mr. Powell, who is accompanied by Mr.
Catlett and Mr. Sullivan.
Mr. Powell. Thank you, Mr. Chairman and Congressman
Tierney. I am pleased to appear before you to testify on the
actions we are taking at the Department of Veterans Affairs to
address the management issues identified by the General
Accounting Office and the VA's Inspector General. I have
submitted my full statement to the subcommittee and request
that statement be made a part of the hearing record.
The VA is facing two major management challenges: improving
the infrastructure of our health care system and resolving the
shortcomings in our benefits claims processing. I believe this
supports what you have already heard from our IG and the GAO.
These challenges are not new, nor are they easily conquered.
Indeed, we have been dealing with both issues for a long time.
By their very nature, they may never go away completely. We
will always be looking to identify and implement better ways to
deliver our services and benefits.
This morning I wish to update you on a few of the
initiatives underway at VA which demonstrate our commitment to
providing first class service to veterans and managing the
resources entrusted to us.
VA has long been regarded as a leader in the Federal debt
management community. Over the past year, we have been moving
closer to our goal of consolidating all major VA debt programs
into one centralized automated collection system. We have made
significant progress toward automating the billing and payment
processing of first party medical receivables, and have laid
the groundwork for consolidating the management of all debts at
our Debt Management Center in St. Paul, MN. Debt collection is
a high priority for the Department, and we expect to see
continued success in this area in fiscal year 1999.
VA has completed the year 2000 renovation of its entire
mission critical computer software applications. This includes
all payment related applications and applications supporting
health care. We have placed 97 percent of these applications
into production and have verified their ability to successfully
process year 2000 dates. At the same time, all VA offices are
verifying the readiness of their physical plants and workplace
equipment, as well as other software, to ensure that they will
continue to operate after December 31, 1999.
We are collaborating internally and with other Federal
entities such as Treasury and the U.S. Postal Service in
preparing and implementing business continuity and contingency
plans. These plans will ensure that payments to veterans,
fiduciaries, employees and vendors are made without
interruption on January 1, 2000 and beyond.
It was gratifying to learn Congressman Horn awarded VA an
``A minus'' for our progress in preparing for the year 2000. We
are confident we can raise that grade to an ``A'' in the next
reporting cycle.
My top priority as the chief financial officer is to obtain
an unqualified opinion on VA's fiscal year 1999 financial
statements. We are down to one qualification, and we fully
expect to resolve that issue before the end of this fiscal
year.
VA has made significant progress toward developing and
implementing a results-oriented framework for managing and
evaluating our programs. Major advancements are highlighted in
our fiscal year 2000 performance plan which was delivered to
Congress on February 1. Foremost among those advancements are a
greater emphasis on outcomes; a greater focus on highest
priority goals and measures; increased attention to validation
and verification of data, and the identification of total
budget resources for each program.
Our medical care program deserves particular note in this
area. The results of the Government Performance Project just
conducted by Syracuse University gave VA's Veterans Health
Administration an ``A'' for managing for results. As a side
note, VHA received the only ``A'' among the 15 Federal entities
evaluated.
During the last year the issue of data validation and
verification has been a major focal point for the Department.
Our fiscal year 2000 performance plan includes a very frank
discussion of VA's problems with data quality. However, it also
identifies the actions we are taking to resolve those problems.
We are working closely with VA's Office of Inspector General on
a series of detailed performance audits.
At GAO's invitation, we met with their staff last month to
discuss our data validation and verification efforts. GAO is
preparing a best practices report on this topic. They have
identified VA as one of the agencies they intend to commend in
their report.
Finally, we have had notable success in identifying the
total staffing and funding associated with each of our
programs. We expect to make additional progress in this area as
activity-based costing methodologies are implemented throughout
the Department.
Mr. Chairman, the Department of Veterans Affairs is fully
aware of the challenges we face. We are proud of the progress
we have made, but understand we have much work yet to do. I
assure you we are approaching our challenges thoughtfully and
resolutely, and look forward to continued success.
This concludes my opening statement. I would be happy to
answer any questions you or the Members may have.
[The prepared statement of Mr. Powell follows:]
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Mr. Shays. Thank you very much, Mr. Powell.
Now we will hear from Mr. Edwards, who is accompanied by
Mr. Kennedy.
Mr. Edwards. Thank you, Mr. Chairman.
Last week you heard from the GAO and the various Inspectors
General, and I was responsible for the State Department's
provision of information to the GAO's National Security and
Internal Affairs Division which prepared the report ``Major
Management Challenges and Program Risks--Department of State.''
Together, Mr. Kennedy and I have responsibility for many of the
issues in the GAO report and the Inspector General's letter and
testimony last week.
I think it is significant in his transmittal accompanying
the GAO report Comptroller General David Walker stated, ``The
State Department has made progress in addressing the many
challenges that GAO has identified. State is now devoting
substantial resources to developing a strategy to enhance its
information technology capacity and security as well as its
financial management systems. In fact, State received an
unqualified opinion on its most recent financial statements.''
We would like to review today the challenges identified by
the GAO and several additional ones in the letter to Secretary
Madeleine Albright, that the subcommittee sent to her. I would
like to review those in the order that the GAO report
identified them.
The first challenge was enhancing the management of
security programs for our overseas personnel and property.
Clearly the bombings in our embassies in Nairobi and Dar es
Salaam last August have refocused attention on the safety of
our people and our facilities. Congress worked quickly to enact
an emergency supplemental appropriation to address State's
immediate needs from this tragedy.
The 1999 emergency supplemental provides a total funding of
$1.4 billion for a total of six different program areas. In
order to document how we are managing the emergency
supplemental, we have established a coding structure in our
financial management system to report obligations and
expenditures against these six activities, and have established
a monthly reporting internally to monitor our progress. Our
objective is to expend these security funds both wisely and
promptly. However, the scope of our financial needs to address
these worldwide security requirements is daunting.
As a result of our negotiations with OMB on the fiscal year
2000 budget, the President has proposed $36 million in
additional funding to begin planning on up to eight embassy
construction projects to be commenced beginning in fiscal year
2001. In addition, the President's budget proposes an advance
appropriation for the construction of $3 billion for the fiscal
years 2001 through 2005, with $300 million in 2001 and
increasing by $150 million a year through 2005.
Subsequent to the budget submission, the Accountability
Review Board, which was chaired by Admiral Crowe, substantiated
the Department's facilities and security deficiencies and
recommended $1.4 billion per year for construction for 10 years
to meet these needs. We are continuing our discussions with OMB
on appropriate funding for security upgrades and facility
relocations.
Finally with respect to physical security, most experts
agree that a principal factor is setback. The farther a
facility is from potential blasts, the less damage results.
Lack of this setback is a problem for 88 percent of our
embassies and consulates; 229 of our 260 posts lack our 100-
foot setback standard. We are addressing this through a
vigorous program to expand the setback around our facilities
through adjacent property acquisitions, street closures,
bollards and barricades, and other devices.
The second GAO challenge was improving our information
management systems. Certainly no other management area at State
has received more extensive attention than information
management. As the GAO report indicates, within the past 6
months a number of substantial achievements have been attained.
First, we created a separate Information Resources
Management Bureau under a new Chief Information Officer who has
25 years of experience in information technology.
Second, we have implemented a total of six major
improvements, and those are in my statement and I won't read
them for you to enumerate those, but these are all very major
information technology accomplishments.
Third, we have instituted a capital planning process. Our
Information Technology Program Board and our Information
Technology Review Board have met numerous times over the past
year to rigorously review and approve over 100 projects
totaling over $200 million in funding. Furthermore, we will
complete final enhancements to our capital planning process to
fully comply with OMB's Circular A-11 guidance in time for the
next budget cycle.
Fourth, we have created an IT tactical plan that has been
favorably cited by GAO and OMB and other agencies which
describes in detail how we are carrying out over 70 key
modernization projects this year and next year.
Fifth, we have created an IT vision paper which contains a
number of groundbreaking goals for the years 2001 through 2005.
This paper was featured in an article in Government Computer
News this past month.
Last, we have enhanced our security program in a number of
ways. We have a Departmentwide security infrastructure working
group. We have appointed a Department-level information systems
security officer; we have published a critical infrastructure
protection plan; we have installed a state-of-the-art intrusion
protection software; and we have developed a network security
architecture plan. All of these are in accordance with GAO
standards and guidelines.
With respect to the Y2K issue, the Department is confident
our program to achieve compliance will succeed and our systems
will be ready before the year 2000. At the Department's monthly
Y2K Steering Committee meetings chaired by Under Secretary
Cohen and attended by all Assistant Secretaries with mission
critical systems, and also attended by John Koskinen, chairman
of the President's Council on the Year 2000 Conversion, Mr.
Koskinen noted the great strides the Department has made toward
meeting OMB's goals.
Briefly, State has 59 mission critical systems, and at our
February 19, 1999, meeting we reported that we had the
following results: 21 legacy systems are compliant; 18 systems
completed repairs and replacements by the February 19 meeting
and are now compliant; 16 additional systems will complete
implementation and be compliant by March 31, 1999; two systems
will complete implementation in April; and two systems will
complete implementation, one in May and one in the July or
August timeframe.
The systems that are beyond March 31, that will be
completed in April and May, are sister systems to nearly
identical systems already implemented elsewhere in the
Department, and the July/August system is the last of a
multiple system installed at a number of locations.
To summarize, over 90 percent of our mission critical
systems will be compliant by March 31, the OMB deadline; 95
percent by April 30; 98 percent by May 31; and 100 percent by
this summer.
Moving on to financial management systems--and in your
opening statement, Mr. Chairman, you cited that issue--I am
happy to say, when I was asked to join the Department last year
as the CFO, I was pleased to learn that we had made sufficient
progress to permit our financial management systems to produce
auditable financial statements, and we received an unqualified
or clean opinion from our Inspector General and the IG's CPA
contractor. We were only 1 of 11 agencies last year which
received such an unqualified report, and we expect a similar
result for the fiscal year 1998 audit which is now in the wrap-
up stage as we speak this morning.
In addition, our Foreign Service Retirement and Disability
Fund, which is a separate pension system covering 13,000
retired Foreign Service employees and 11,000 active Foreign
Service officers, has received an unqualified clean report for
the past 5 years.
Finally, State also operates the International Cooperative
Administrative Support Services, the ICASS system, which
manages and allocates over $700 million annually in overseas
support costs for the 35 agencies which have employees in our
embassies and consulates. ICASS is separately audited, and also
received an unqualified or clean auditor's report in fiscal
year 1997, and we expect the same this year.
Our independent auditors and the Inspector General have
identified a number of areas where we can achieve improvements,
and we are working to resolve these issues. In addition, our
1998 Federal Managers' Financial Integrity Act report will show
that the Department has successfully resolved eight material
weaknesses during the past 3 years, and we only have two
remaining to be resolved.
I am going to ask one of my colleagues to distribute our
1997 accountability report to accompany this testimony. This is
an experimental program authorized by the Government Management
Reform Act, and provides in a single document information
mandated under a total of seven different laws, including our
audited financial statements and our GPRA comments. And also
that report would be repeated for 1998. It is in process, and
we expect that to be issued in June 1999.
The third GAO challenge was effectively managing our visa
process. We have an increasing number of visitors entering the
United States each year. Our accountability report on page 10
shows that for nonimmigrant visas we have----
Mr. Shays. I am going to ask you to summarize your last
three points.
Mr. Edwards. I will be happy to do that, Mr. Chairman.
Our visas are constant, but we have a visa waiver program
covering 12 million visitors in addition to the 7 to 8 million
who get visas, and this of course has impacted our economy
favorably with a total of 20 million visitors a year.
The fourth GAO challenge was effectively reorganizing our
foreign affairs agency. Mr. Kennedy, who is here with me,
prepared for the State Department that report which was filed
by the President in late December, and can speak to your
questions on that.
Last, with respect to meeting GPRA standards, we have filed
a 1999-2000 performance plan which amends the earlier 1999
plan. We have made major efforts to improving our GPRA
standards. We have the same issues that my colleagues spoke
about earlier, and that is identifying appropriate baselines
and benchmarks so we can link our expenditures to our
performance outcomes.
In summary, Mr. Chairman, the State Department faces
daunting challenges, both in foreign policy and in improving
our information technology and infrastructure. The GAO official
who prepared the January report, who you heard from last week,
acknowledged that State has been administering foreign affairs
for too many years on the cheap. Particularly in the area of
security, we must obtain the additional funding to have safe
facilities for our employees, employees of other agencies in
our embassies, and for visitors to our facilities. We need the
continued assistance of Congress to obtain these resources, and
I would be pleased to answer questions you and your colleagues
may have at this point.
[The prepared statement of Mr. Edwards follows:]
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Mr. Shays. Thank you very much for accommodating our needs.
All of your statements were very helpful. I realize that they
are general in nature and somewhat short. I don't want Defense
and VA and State to think that our common practice is going to
be to bring you up in a line and you have to listen to
everybody else's presentation. The purpose of today's hearing
is to help us focus; to help guide this committee in the next 2
to 4 years; where this committee is going to go in utilizing
our very small resources and what we are going to focus in on.
At this time I would ask Mr. Tierney if he has questions.
Mr. Tierney. Thank you.
Mr. Soloway, just a question generally. You talked about
competition to a large extent and what you thought the benefits
on that are. Perhaps it is my perspective on this thing, but it
seems to me that the only area that we think that less
competition is better for the consumer is in the military
industries, where we are encouraging consolidation and merger
so we have less people bidding on contracts. Has there been any
rethinking on this particular direction?
Mr. Soloway. I think if you look at the most recent history
in terms of the Department's position on those consolidations,
we have actually taken a stand on several, the most obvious
being the Lockheed case not too long ago. We are now in the
process of reviewing the most recent in the shipyard business
with the General Dynamics/Newport News proposal which has been
in the media over the last several weeks. So the Department is
taking a very serious look at making certain that we can
maintain competition, and to inject and intercede where we
believe that competition is being threatened.
And so from that perspective I think we are taking a very
serious look at it, but I think it goes beyond--my comments
about competition go beyond that. First of all, in the areas
beyond that major tier of contracting, the prime contractor
that we all talk about every day, the competition continues to
be fierce. For instance, more than half of our money goes to
buying services, much of it in the information technology
world, and that is a very robust marketplace where there is no
issue of a lack or limit on competition.
Second, the competition that I was referring to more
specifically in my testimony is our commitment to competing
those positions within the Department that we deem to be
commercial in nature, in other words, positions that may well
be able to be performed by commercial contractors versus having
it done by government employees. Those competitions almost
always are going to involve public-private competitions, where
we have a process through OMB Circular A-76 which provides a
methodology for those competitions.
The history of that has demonstrated to us that just the
injection of competition into that process achieves roughly a
20 percent savings at minimum, as high as in the 40 to 45
percent range, and that is a figure which has been pretty well
documented in most of the studies that I have seen inside the
government and outside. We have committed to competing upwards
of 200,000 positions over the next several years and expect
those positions to yield savings in excess of $11 billion,
money which we have already planned for in the out year
budgets.
So the competition comes in many different levels. But to
your specific question, I think the Department has made clear,
particularly with the recent history, that we take seriously
this question of competition and are reviewing it on a case-by-
case basis very seriously.
Mr. Tierney. Is that something that you think that this
committee ought to take a look at?
Mr. Soloway. You are asking an agency official to tell you
to look at something that we are doing.
I don't think that it is necessary at this point, because I
do think that the Department is taking a thoughtful and
aggressive approach to it. As you acknowledge, there has been a
tremendous degree of consolidation in our traditional supplier
base.
Mr. Tierney. Encouraged by the Department, I might say.
Mr. Soloway. The initial phases definitely were. As
indicated in the Lockheed case of this past year, it reached a
point in some areas where the vertical integration became a
matter of grave concern in the Department, and of course the
Department of Justice intervened and said that we couldn't
support those consolidations. So I think that our approach at
this point is a very thoughtful one, and I don't know that
there is any need to take it beyond that at this point.
Mr. Tierney. Mr. Powell, we talked during the hearings last
week about the prospect of taking some of your older buildings,
your older assets, and finding a use for them, but at the same
time moving a lot of the Veterans Administration service
delivery to outreach clinics or something closer to the
veterans. Does your Department have a particular plan in place,
or where might we go with that concept of what we do with the
older, more costly to maintain buildings and move to a more
service-oriented regional delivery?
Mr. Powell. To the best of my knowledge, this issue has not
come to my office. VHA may be working on those plans because
they are much closer to the issue. We are very concerned with
the enhanced use opportunities that would allow us to
effectively utilize our facilities. If we have underutilized
buildings we can lease or sell within our facilities we should
optimize their use. Obviously, we do have facilities which are
not currently engaged.
Mr. Tierney. Is it the plan looking forward, then, to
maintain all of those buildings and go out to the community-
based outreach clinic concept?
Mr. Powell. I don't mean to be evasive. We have not
discussed that particularly as a specific plan. I do know if it
is a priority for VHA, so I will get back to you on that.
Mr. Tierney. Mr. Edwards, there was talk also last week
about the identification of the number of personnel for which
we are responsible which are located overseas and the cost of
maintaining and providing security for them. Is there any plan
in the works of making some identification, some thought of
addressing whether or not there are too many people, too widely
scattered, or has that been addressed at all?
Mr. Edwards. As part of the security supplemental, we have
established an Overseas Presence Advisory Panel, and they will
be commencing their activities. March 9 is the initial meeting.
The purpose of this group of distinguished individuals, led by
an attorney from New York and some people from within State,
Admiral Crowe has agreed to join the panel, they will be
looking at how we should structure our posts overseas from the
standpoint of having larger embassies perhaps serving a group
of surrounding countries, and specifically the new facility in
Nairobi will be a test case of that. As you know, we are
rebuilding an entire new post.
So the overseas presence has been a matter of concern; and
of course our concern is that the growth of overseas people in
our posts are largely in agencies other than the State
Department, so we have the security of those people equally on
our mind because they are, in essence, guests in our
facilities. So we are taking a look at that. That panel has
agreed to complete its work in June of this year with a draft
report, so we are moving forward to examine that very issue.
Mr. Kennedy. This is something of particular interest
because only about one-third of all of the U.S. Government
civilian employees assigned in our embassies and consulates
abroad are actually from the State Department, the other two-
thirds are from other agencies. And so this is a crosscutting
look at the U.S. Government's presence overseas, not just State
Department.
Mr. Tierney. Is State picking up the cost of security and
maintenance for those individuals?
Mr. Kennedy. We pick up a significant portion, and that is
why we are interested in having the panel look at our presence
overseas and how additional cost-sharing methods might be
appropriate.
Mr. Tierney. Thank you. Mr. Soloway, in your written
testimony you had noted a number of acquisition programs in
which cost and turnover time had been reduced. Can you speak to
the cost of the F-22 program for me in that regard?
Mr. Soloway. I don't mean to be evasive, but if you have
specific questions about the program, I can take them for the
record and I would be happy to get back to you. I don't have
the details on the F-22 program with me.
Mr. Tierney. I would like for you to get back with the
amount of overrun and costs, and is it going beyond its
original projected return dates.
[The information referred to follows:]
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Mr. Shays. Let me just say as a policy that the staff will
make sure that the requests--you can give it to the committee
and you can CC the Member, but we want to make sure that
information does come in. And so if you make sure that the
committee gets it and we will make sure you get it, but we are
not going to ask frivolously for information and then forget to
see that we get it. We will followup.
Mr. Tierney. My last question, Mr. Soloway, is in regards
to your weapons acquisition process in general. There are
comments from the Inspector General that there were concerns
there that there were premature commitments made to a number of
technologies, moneys being applied before the technology was
really ready at that point.
Have you looked, has your Department looked at the national
missile defense proposals to determine that in fact the latest
request from the Department of Defense isn't doing just that
with respect to putting money where technology is prematurely
stated?
Mr. Soloway. Specifically with regard to NMD, I think the
Department is continually evaluating whether or not the money
is being well spent, whether or not the technology is capable
of achieving the performance requirement set forth, and that is
an ongoing process. It is a continual discussion within the
leadership of the Department, both military and civilian.
In the broader sense of the term, taking it out of the
missile defense area, the question of technology maturity and
when we make buy decisions or no-buy decisions is something
that we have looked at very extensively, because what we have
found historically is that we have sometimes set a technology
requirement way out here and then spent 40 or 50 percent of the
money trying to get the last 10 or 15 percent of the way,
rather than having a more flexible technology requirement,
accessing technologies that were more immediate and being able
to field systems more quickly and more quickly efficiently.
That is an ongoing process in terms of reducing cycle times and
focusing on the technology availability question. But with
regard to missile defense, that is something that is an ongoing
discussion in the Department and it is continually evaluated.
Mr. Tierney. Are you saying that the Inspector General's
concern is not well placed because the real problem is setting
the goals too far out?
Mr. Soloway. If we are not talking about the missile
defense question specifically, but more broadly about how we
make acquisition decisions, I think a criticism would be to say
that sometimes we have established requirements that are simply
unreachable in an appropriate or reasonable amount of time.
And what we have going now, for instance, we have a team
right now that is a rather unique relationship between the
Joint Staff and the acquisition side, the civilian and military
side, co-chaired by my boss, Dr. Gansler, who is the Under
Secretary for Acquisition and Technology, and General Ralston,
that is looking specifically at the impact of the requirements
process on acquisition and how we can have a more flexible,
iterative process, so we don't have this historic sort of over-
the-transom, this is what we need, and the acquisition
technology folks try to figure out how to go get it and it
takes 15-20 years.
We have been very open about the fact that it takes us 15-
18 years to field a system not only drives cost, but it means
that we often end up with systems that are not in fact
reflective of contemporary technology, that technology passes
us by because we have made those decisions way early. By making
the system more iterative, more reflective of what is really
out there in the technology world, we believe that we can
substantially reduce cycle time and reduce costs, also field
systems with better technologies quicker. I think that is a
fair criticism of our history.
Mr. Tierney. Thank you.
Mr. Shays. All of you I think can speak to information
systems and facilities, and I will be asking you questions
about both. And all of you in one way or the other have
acquisitions, but obviously DOD has more significant purchases.
The first question I want to ask relates to facilities--
500-plus bases, give or take, owned by the DOD. When we look at
base closure I want to go two stages, Mr. Soloway. What number
do we hope to get those bases down to?
Let me just tell you that I am going to be asking the other
Members on the same issue. I am interested to know about your
facilities, how many facilities you actually have, and then I
want to have you speak to whether you've done assessments as to
whether all of those facilities are needed or not. Mr. Soloway.
Mr. Soloway. The additional BRAC rounds that we are
requesting, we do not have a specific number of facilities
because that will be determined by the commission itself. I can
tell you what our projections are in terms of savings and what
we think that we will gain, if that is what you are looking
for, or I can give you some history.
Mr. Shays. Why don't you start that way. But that raises
another question. Let's start. I'm sorry.
Mr. Soloway. Well, the request for two additional rounds of
BRAC which would be a fiscal year 2001 and 2005 request, we
expect the savings to approach about $23 billion beginning
fiscal year 2008 through 2015.
Mr. Shays. Is that an annual expenditure savings?
Mr. Soloway. No, that would be a cumulative savings between
fiscal year 2008 and 2015 for approximately $23 billion, with a
steady state of savings of about $3.6 billion a year after
that.
Mr. Shays. That is your goal, and then you decide to see
how many bases you have to close to meet that goal?
Mr. Soloway. We don't decide how many bases to close. That
is a determination by the Base Realignment and Closure
Commission.
Mr. Shays. I understand that. I am not looking to strain at
gnats and swallow camels here, but it does beg the question. If
you know what you are going to save, how are you going to know
what you are going to save if you don't know what you are going
to close? Do you basically say this is your goal and then you
tell BRAC, and then they have to decide what they have to do to
reach that goal?
Mr. Soloway. The savings that we have identified are based
on two previous rounds. We are asking for two more rounds, so
it would be a similar scale.
Mr. Shays. How many bases did we close in the last two
rounds?
Mr. Soloway. We have closed, total, we have closed 97 major
bases and we have realigned 55, and we have had 235 smaller
bases either closed or realigned.
Mr. Shays. How many bases did we open up?
Mr. Soloway. I am not aware that we have opened up any, but
I can check on that. That is the cumulative total. What we have
looked at in establishing the savings estimate were the average
cost savings that were contained in the President's budget for
fiscal year 2000 based on the BRAC rounds in 1993 and 1995.
Mr. Shays. What I wrestle with is, the cold war is over but
the world is a more dangerous place in the sense that in the
past we were able to have a deterrent. So obviously we had a
nuclear threat that seemed more frightening on a scale, but now
we have the potential of a nuclear attack by a rogue nation or
individuals, and we have a tremendous number of hot spots
around the world. And so in some cases, a number of our
soldiers and sailors and Marines--the Marines always tell me I
cannot call them soldiers----
Mr. Soloway. You forgot the airmen.
Mr. Shays. And the airmen. Thank you. I have not met with
them yet for them to tell me that. So they are being spread out
to more hot spots and so on. But we are also manning a number
of bases, and I wonder if that is not to our detriment. So,
obviously, I am sympathetic to the need to begin to
consolidate. I know we have to weigh--not concentrate too much,
of our forces like we did in Pearl Harbor and then regret it
later on when it was such a tempting target.
But what I am hearing from you then, and then you can
qualify the response, I am hearing that you have a sense of
what you are going to save and yet we do not know the number of
facilities we would close.
Can I infer in this that there is not a document in DOD
where the generals and admirals and so on have gotten together
and said, Listen, in our world, if we did it without BRAC, this
is what we would do?
Mr. Soloway. I can't tell you for a fact. I don't have
operational responsibility for base closure. But what I would
be happy to do is take that for the record and find that out
for you.
Mr. Shays. I am not going to ask you to do that. We will
get that from other sources.
Mr. Soloway. Let me, if I could comment on your other
statement in terms of the threats we face. I think that if you
look at the strategic documents that have come out of the
Department, not just the Quadrennial Defense Review but the
Joint Vision 2010, which is the Joint Chiefs' of Staff view of
the future defense requirement and the threats we face, I think
we are very, very aware of the increasing nature of the threat
that we face, but it is a very different threat. And what we
are really trying to do and what Joint Vision 2010--which came
out of the Joint Chiefs--talks about and Secretary Cohen talks
about, the Revolution in Military Affairs, is really right-
size, and reorient ourselves so that we are optimally prepared
to deal with that new type and new form of threat.
It is not, for instance, a single, large conflict that we
look at it. Is multiple, concurrent conflicts. As you
mentioned, we are concerned about the threat posed by rogue
nations and terrorist groups and so forth. We are also
concerned about nuclear, chemical, and biological warfare. As I
mentioned in my testimony, the whole concept of homeland
security and how we protect the Nation from those kinds of
threats is something that we are very focused on.
So I don't believe that it would be appropriate to
characterize the BRAC process, and I am not suggesting you
have, but the interpretation could be that we are doing this
without regard to the changing threat but just as a money-
saving venture. This is actually partially about right-sizing
and identifying resources we can save, but it is also about
reorienting the Department to more efficiently meet the war-
fighting need or the more war-fighting mission that we have,
and that is something that we will be very focused on and very
concerned about.
Mr. Shays. I concur in that. And I would just say to you
that I was trying to acknowledge the fact that it may be
destructive for our military to have so many bases and spread
our manpower resources so thinly and our financial resources,
trying to keep all these bases open. But if you cannot give me
a sense of the number of bases, you have given me a number of
what you try to save. What would be the percent of the current
or projected operational maintenance money that you would save
through these two BRAC closings? You have given me the amount.
Is it going to be a 1 percent, 2 percent overall savings?
Mr. Soloway. I would have to go back and pull the budget
figures again. I haven't looked at it from that perspective,
sir, to be honest with you.
[The information referred to follows:]
Operations and Maintenance savings represent approximately
52% of the total savings generated in the previous two BRAC
rounds, based upon the FY 2000 budget data. One could make the
case that this is an indication of future BRAC results.
However, only a detailed BRAC analysis can determine this data.
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Mr. Shays. I would ask you to do that. In other words, our
committee has to decide whether we want to dip our toe in this
issue of base closures, because it is so controversial and
would require us to utilize some resources. One opportunity is
for our committee to begin to look at what the requirements are
and try to put a number on it. In an ideal world, what we
should be doing is closing to meet all the threats that we
face. I just do not know if we want to get into it.
Mr. Soloway. I would be happy to get that for you. But I
will reiterate again, I think the key point that there is
nothing we can do in terms of change and reform that will more
directly affect, both from a financial and an operational
standpoint, our ability to meet those threats than to pursue
additional rounds of base closure.
Mr. Shays. I know the Secretary is very determined that we
proceed. And I think Congress is a little reluctant, but I do
know that we need to proceed.
As it relates to the veterans' affairs, when you say 500
bases, is it 500 major bases? For instance, when we went out to
Seattle a few weeks ago, it is basically a weather station that
is under the command of the admiral in the Center, but do I
consider that one of your bases?
Mr. Soloway. We have closed 97 major bases.
Mr. Shays. In your statement you had 500.
Mr. Soloway. I don't believe so. Maybe Nelson did.
Mr. Toye. That's 500 installations. And an installation
could be a major installation, but not necessarily.
Mr. Shays. Thank you. That would not necessarily be, when
you go to Idaho for the pilots, that is not necessarily a base.
It is owned by the government, but would you consider that a
base, or an installation?
Mr. Toye. The 500 number includes DOD-owned and operated
installations. And some of those installations may have at one
point in time been a major installation and in the current
environment may no longer be a major installation.
Mr. Shays. Could it also be a bombing practice range?
Mr. Toye. It could be, yes.
Mr. Shays. Thank you very much.
How many facilities does the VA have?
Mr. Powell. We have 172 hospitals and approximately 400 of
the outpatient clinics, with 89 more opening this year. We
don't own those facilities, Mr. Congressman, we lease those.
Mr. Shays. You said 400 outpatient clinics?
Mr. Powell. Right. Those are leased, however.
Mr. Shays. I am delighted the VA has those outpatient
clinics. But Mr. Tierney has made reference to what we heard
from the Inspector Generals at the GAO last week, and one of
the points was that the 172 hospitals are really providing
service in a facility that is not designed for the needs of
today's health care. You had representatives here. I am sure
that is an issue you all discussed. What was your reaction to
that?
Mr. Powell. Actually, if I could revisit Congressman
Tierney's question just a bit, we are seeking new legislation
this year for the authority to dispose of excess property. Our
capital asset disposal plan as an agenda item will allow us to
retain most of the revenue from the disposition of these
properties, which we could then apply for other internal uses.
This allows us to manage these decisions much more effectively
at the local level where decisions regarding which properties
to use versus renovate, et cetera, is made at the local level
and comes up through the chain that way. We feel that is an
appropriate way to deal with that.
We continue to make significant improvements in our capital
investment process, which requires much better documentation
than we have ever had before, and allows for us to conduct a
much more critical assessment of any new proposal capital
investment. We have a much more formal process now of
identifying where we spend our capital dollars, particularly
with regards to facilities.
Mr. Shays. The legislation that you are bringing forward,
is it going to allow for the VA to use the sale of an asset for
operating expenditures or for another asset? I am happy to have
anyone answer the question.
Mr. Powell. It is generally for operating and nonrecurring
costs. And 10 percent of the proceeds, as I understand it,
would be set aside for homeless programs.
Mr. Shays. I just wonder, the wisdom of taking a capital
asset and then transferring it into an operating cost. Is that
what you are basically saying?
Mr. Powell. Yes, sir.
Mr. Shays. Again, the reason why we are asking this
question in a general way, we are not going to nail down all
the answers. It is just to begin to see if Mr. Tierney and I
and others want to get into this whole issue. And it is a big
issue because I know the service groups and veterans like their
facilities, and we like the veterans.
But the question is: Is there a better way to provide them
health care? And we need to be willing to ask that question.
And one of the questions we may ask ourselves to undertake is a
very thorough study of really how well does the VA--with the
infrastructure it has had for decades and decades and decades
and decades, does it meet the need of today's veterans?
Is there any study that the VA has undertaken, or has the
VA had any dialog that is trying to reappraise the facilities
that we have and to see if some of them should be sold and some
of them should be converted and so on? Is this anything that
the VA is beginning to undertake?
Mr. Powell. That issue has not come to the Secretarial
level yet. One consideration is to convert from our high-
maintenance fixed assets to leased facilities. This would
reduce ongoing operating costs, which is really the objective.
The combination of these locally-based decisions and the
allocation of resources through the VERA model, encourages
local officials to pay more attention to how their facilities
are utilized for and how to best serve their client's needs, in
this case the veteran.
Mr. Shays. Do we have any statistics to say how many
veterans are alive today from World War II versus, say, 10
years ago or 20 years ago?
Mr. Powell. I'm sure that we do, sir. I'll have to get that
specific number for you. I don't have it with me.
[Note.--The information requested was not provided at the
time of print.]
Mr. Shays. I am just curious to know what that peak period
was. I realize that we had a larger group, but they were
healthier. Now we may have a smaller group, but they are not as
well. So I realize these are all factors. But I would like to
see that. So that would be a request that I am making.
As it relates to the State Department, how many facilities?
Mr. Kennedy. Mr. Chairman, the State Department has about
265 embassies, consulates, and missions overseas, plus another
two dozen or so, consular agencies, which are small one-person
facilities staffed by a locally hired American, mainly in major
tourist centers, who are the first line of intervention if an
American is injured or in jail, such as in tourist resort areas
in Mexico for example.
We also have some 30 facilities throughout the United
States, including passport agencies in Connecticut and
Massachusetts, diplomatic security field offices and three
major regional centers: One in Fort Lauderdale, FL, which
provides support throughout Central Latin America and the
Caribbean; a major finance center and new passport production
facility in Charleston, SC; and a major passport and immigrant
visa processing facility in Portsmouth, NH.
Those latter two, if I might, are products actually to our
benefit of the Base Closing and Realignment Commission, because
as DOD closed the former Pease Air Force Base in New Hampshire
and the Charleston Naval Station, the State Department, looking
for ways to economize, streamline, and create efficiencies in
economies of scale, picked up, with Congress assistance,
facilities in those two locations.
Mr. Shays. Let me ask you this: The 265 of the embassies
primarily, are they also the residences of the Ambassadors?
Mr. Kennedy. No, sir. I said there are 265 cities in which
the United States has diplomatic and consular representations.
If you added in the other leased facilities, the number comes
up, Mr. Chairman, to 12,000. When you add in the embassies,
annexes, consular operations, warehouses, and the residences of
U.S. Government personnel overseas, it could come to as much as
12,000.
Mr. Shays. Are all the residences leased?
Mr. Kennedy. Some are owned, Mr. Chairman. Some are leased.
We own about 2,000 properties and lease another 10,000.
Mr. Shays. You cannot go to 10,000?
Mr. Kennedy. 2,000 owned, 10,000 leased, for a total of
12,000 properties.
Mr. Shays. I am making an assumption that is 12,000
separate locations. One of the things I was thinking of doing
is having my staff go and see all these facilities.
Mr. Kennedy. Mr. Chairman, seriously, we always welcome
congressional staff visits.
Mr. Shays. Seriously, you try to say that and try to feel
that way, but I do not know if you always welcome us. You would
be crazy if you did.
Mr. Edwards. Many of those 12,000, of course, would be
individ- ual apartments and homes in which State Department as
well as other U.S. Government employees at the embassies are
living. So it sounds like an enormous number but most of those
would be individual residents' units.
Mr. Shays. It is just so that technically we are
responsible for the safety of the people in those facilities.
When we went to Colombia--and this was after they lost the 700,
their DAS building was destroyed about 8 to 10 years ago. It
was their FBI building. They lost 700 people and 70 were
killed. And we went down there--a delegation from Congress, to
visit with some of the Colombians, who are truly fighting a
drug war. I mean, for them it is not theory. But when we saw,
for instance, the Ambassador's home--it was a lovely home and
it was kind of in a valley, there were probably 80 structures
above it so that any sniper could just knock off whomever they
wanted. So I could say, that is just one little home. I mean,
obviously it is a home, but it is a facility that many people
use. So that is why I was thinking of that.
Let me go back to Mr. Tierney, and then I am going to talk
about information systems when we get back.
Mr. Tierney. I only have one other question.
Mr. Powell, I do not mean to beat a dead horse and I hope I
am not on an area that you do not have any information on, but
I am sort of fascinated by the prospect of properties, VA
hospitals and the like, that if they are too expensive for us
to maintain or if they are not serving the purpose of providing
medical care in today's environment, has there been any process
or consideration to dealing with the surrounding communities
where they are located and some public-private partnership type
of thing of trying to create long-term care facilities or
assisted-living facilities, all of which there is a
considerable need for, that would help with the financial end
of things and serve our needs with another 1.3 million veterans
who are going to be over the age of 85 over the next 10 years,
and help the surrounding areas with their similar demographic
problems?
Mr. Powell. Yes, sir. We have a number of projects that we
are looking at under the category of ``enhanced use.'' We are
looking at partnerships with, for example, State veterans
organizations where we can allow facilities that we aren't
currently using to be converted for long-term care, or other
programs that may be run by the State veterans groups. We have
a number of those projects that are in the process of being
identified. Hopefully, they will be approved for that type of
conversion.
Mr. Tierney. And do you go beyond that, too, to look into
some private partnerships with people that might come in and
renovate an entire thing and then lease back at a favorable
rate for our veterans' use?
Mr. Powell. Yes, there are a number of those that we look
at from time to time. Again, most of that is driven from the
local level and it is something that we encourage.
Mr. Tierney. Thank you.
Is there anything that any one of you feels compelled that
you should share with us that we have not asked you?
Mr. Kennedy. Mr. Tierney, if I could add something on the
property issues. The State Department does have the authority
to sell its properties overseas and to retain the proceeds of
sale and to turn those proceeds toward new properties. And this
is a stewardship we take very, very seriously.
For example, last year we sold over $58 million worth of
property and purchased another $58 million worth of property.
We try to identify properties which are obsolete or not serving
their highest value and then take those assets and sell them,
avoiding several million dollars of lease cost every year. But
obviously those lease costs repeat and mount every year, so the
savings become significant.
Another example would be in Singapore several years ago, we
actually sold the United States Embassy, which is a very old,
small building, but on a very, very valuable downtown lot, and
took those proceeds and were able to build an entirely new
embassy, Ambassador's residence, Marine guard quarters, without
having to request a single dollar in appropriated funds,
because we were taking an asset and converting that asset to
its highest and best use. And this is something we do very,
very rigorously.
Our Office of Foreign Buildings examines properties
overseas. We even availed ourselves of what we call the Real
Estate Advisory Board to help with this process. And that
membership, to make sure we draw on real estate professionals
from the intelligence community, the General Services
Administration, and the U.S. Postal Service, so that we can
look at properties and decide the best way to convert a fixed
asset to its highest and best use so we do not have to come
back to the Congress for additional appropriations.
Mr. Tierney. That is interesting. I am glad you shared that
with us.
I assume there is not the same kind of authority with the
Veterans Administration. I assume that you do not have that
same authority to be able to sell and buy properties without
coming back to us for approval on that. But do you have
advisory groups that help you deal with your real estate
issues?
Mr. Powell. No, sir, we don't. That is one of the issues in
our enhanced use proposal we would like you to look at.
Mr. Tierney [presiding]. Let me ask you a question for the
absent Mr. Shays.
The GAO testimony last week indicated that the Results Act
Performance Goals and Measures should provide us and you with
clear indicators of progress and problems. The VA testimony
today indicates that the Department has made significant
progress in identifying performance targets and collecting
valid data to measure progress. VA has focused on a small
number of goals and performance measures VA leaders identified
as critical to the success of the Department.
Would each of you please identify the three performance
measures in your fiscal year 1999 plan that you see as critical
to your Department's success?
I will give you time to prepare if you want. But State is
ready to go?
Mr. Edwards. We have had some very interesting challenges
on GPRA, because in many cases our programs are designed to
have things not happen versus supposed to happen. But certainly
in our accountability report we have some very solid data on
issuance of passports, issuance of visas, which of course is a
service to Americans and to people who are coming here to visit
or to emigrate. So we have those data. And it is clear that
we're delivering an increasing number of passports and visas
with a decreasing number of personnel. And we are using some
very high technology to minimize fraud.
At our new plant, I guess not too far from your district,
Mr. Tierney, in Portsmith, NH, we have a new passport system
where your photograph is actually part of the printed material.
It is not an embedded photograph. And there are about four
different vendors involved in producing that passport. So the
chance of fraudulent passports, once we get that system in
throughout the Nation, is very, very much diminished. So we can
measure our effectiveness there.
We can measure land mine removal. But the problem is we
don't know how many land mines there are. There are still land
mines from World War I, believe it or not.
And we are faced in Central America with the Hurricane
Mitch aftermath of land mines floating down mud rivers, and
people putting their hands in the mud and the mine going off,
because these mines were in fields and roads which were
devastated. That hurricane, as you may recall, is probably the
most severe hurricane in the Western Hemisphere since Europeans
have been here.
So we have some very, very difficult tasks and we're
struggling to be able to measure each of our 16 objectives and
3 diplomatic readiness objectives, and we have a way to go. But
we are committed, as a service agency, to find a way to measure
that to show that there is payoff for the dollars that we're
spending.
Mr. Tierney. Thank you.
Mr. Soloway. Congressman, as I mentioned in my testimony,
we have two overall corporate goals, if you will. The first one
really focuses on force structure and strategic issues. The
second one is more directly related to what you are interested
in, which is the reengineering and performance management
within the Department.
Let me just mention a few of the performance measures that
we have established that we are tracking and that would
obviously be included in our GPRA reporting: Our annual
procurement spending, which is investment in new systems; the
percentage of the DOD budget that is spent on infrastructure,
which of course we are trying to reduce; public-private
competitions, which is that number of positions that we are
able to effectively compete and thereby achieve efficiencies
whether the work is done, one, by in-house government workers
or by contractor; and where we are going in terms of cost
growth and cycle times with our major defense acquisition
programs.
If there were some key ones, those would be the ones that I
think are really the highest on the list. As I mentioned, I
think there are about 41 that we've established.
Mr. Tierney. We will not ask you to go through all those,
but thank you.
Mr. Powell. The VA performance plan, that was submitted
with the budget on February 1st, lists slightly over 100
different outcomes that we are looking at, with 24 that the
Department considers as key.
I happen to be very interested in three that really measure
outcomes, and deal with the quality of what we deliver.
One is the accuracy of the processing of VBA claims. The
other two relate to health care, which are issues that are also
very important to Dr. Kizer. The first of these is the Chronic
Care Index, which really consists of 14 medical aspects and
gets to the issue of quality of patient care. The other issue
would be the Prevention Index, which consists of nine medical
interventions measuring how well the VA follows nationally
recognized primary prevention and early detection. Both of
those go to the essence of serving the needs of our community.
Mr. Tierney. What progress are you having on the claims
issue? I know that I can report, hopefully, that I am hearing
less in this last year than I heard several years ago on that.
What has the Department done to try to address the backlog in
the claims?
Mr. Powell. Again, this is a little out of my purview as
CFO. We do have the balanced score card that Under Secretary
Joe Thompson has been talking about, and there are now
published, on a web site, monthly updates on performance. I
know too that the Veterans Benefits Administration has a number
of initiatives underway to try to reduce the backlog but I'm
not familiar enough with those to give you an answer. I can get
that answer back to you.
Mr. Tierney. No. I can go to another source. Thank you.
Mr. Shays [presiding]. As it relates to information
systems, all three of you have your challenges, obviously, in
this area even if we did not have the Y2K problem. But let me
first ask as to it relates to the Y2K problem. I want you to
give me what would be the worst-case scenario from each of your
stand-points on what could happen if we did not address this
issue properly, and then I make assumptions that you try to
take the worst case first to deal with that.
But, for instance, let me just go backward and start in
reverse order and start with State. What could be the worst
inconvenience or the worst challenge that could happen if we
are not getting a handle on the Y2K problem for State?
Mr. Edwards. Well, there is no question, since we are a
very labor-intensive organization, the inability to pay our
people both domestically and to pay not only our people, but
Americans and SFNs overseas. So we've remediated all four, our
three overseas and our domestic payroll system, and we've also
remediated our retirement system.
As I indicated in my comments, we have 13,000 retirees that
we pay at State that aren't in an OPM-administered plan. Not
only would it be devastating to us but you'd hear about it
almost immediately if we failed to pay them.
Mr. Shays. One of the problems could be, they did not get
paid at all or they got paid an amount that was not
commensurate; they could have received a $10,000 check when
they deserved a $2,000 check, these kind of scenarios. They
might be disappointed if you solved the problem.
Mr. Edwards. Not getting any check at all, Mr. Chairman,
would probably be the problem of processing.
Mr. Shays. I am being serious here. Is the problem that
they would not get any check if you did not solve it, or they
might get an inaccurate amount?
Mr. Edwards. If the system crashed, you would not get the
output--which would be principally not checks but electronic
transfers into their bank accounts. We pay almost everybody,
even overseas, electronically.
Mr. Shays. I am going to ask others. But what I am trying
to understand is, do we even know? Is the issue that it would
be inaccurate, or it is just that they would get nothing, or
don't you know?
Mr. Edwards. Well, in the Y2K bugs that we had, it would be
very difficult right now to know, since we've remediated the
systems and they are essentially compliant, what would happen.
But normally when you have a meltdown of a system, the output
stops, so that means you wouldn't get the electronic transfers.
Mr. Kennedy. On the substantive side, Mr. Chairman, in
addition to our administrative process, the State Department
provides a number of services to the public such as passport
services, and visa services to foreigners, which is why we put
the remediation, the Y2K compliance issues of those systems, at
the head of our list, and why they have been remediated.
I'll give you one example. We maintain a data base of
criminals and terrorists who, when they apply for a visa at a
U.S. facility abroad, that visa is denied. But that is a large
data base that we work on jointly with the Immigration and
Naturalization Service and other law enforcement officials.
So we have taken great steps to make sure that when
somebody comes in, applies for a visa, and we run their name
against our name check system in a highly, as I said,
computerized and automated process, we want the right answer to
come up, either a record or clean.
So that is an example of something we take very seriously,
because we do not want to admit any criminal or terrorist
elements into the United States because our computer process
has somehow been flawed by the Y2K bug. And that system is
remediated, and we are in the process of installing the modern
hardware around the world. The only reason it is not fully
certified is not because the hardware and software hasn't been
approved, but it's just that we are in the process of literally
putting the new terminals at all of our 260 locations. This
will be complete by July of this year. But the system is tested
and in place at a number of posts.
Mr. Shays. Right.
You still have Wang word processors in some State
Department facilities?
Mr. Kennedy. That is a system that will be completely
phased out by July of this year.
Mr. Shays. One of the things that I have heard from people
who work in our embassies, from the Ambassadors on down, is
that we have not yet developed a system for them to communicate
through e-mail quickly from State to overseas; that they cannot
communicate quickly from one embassy to another.
Is there a plan in place to begin to totally--and would you
say is it just a plan or is it a possibility that it is done?
Mr. Kennedy. We have begun already implementing that. And
we will have one system in place that is commercially based,
robust, Y2K compliant, completely installed around the world by
July of this year.
Mr. Shays. That will allow an ambassador in France to talk
to the Ambassadors in England?
Mr. Kennedy. Yes, sir. But there is a complication there,
and that is a complication that most other agencies do not
have, and that is level of security required.
The State Department essentially maintains three separate
systems and that is because no one, including the National
Security Agency, has been able to certify a firewall that would
allow us to combine national security, classified information,
and what we call sensitive but unclassified information. An
example of that would be the anti-terrorism data base we
maintain, and then the internet. So we have deployed three
enclaves to deal with these problems. And our Chief Information
Officer and his colleagues are in constant communication with
DOD and the National Security Agency, looking for that magic
firewall that would allow us to merge all three systems
together, on one terminal, on the Ambassador's desk.
But, yes, if the Ambassador wishes an unclassified terminal
on his desk and wants to work in that world, we will have that
in July. The classified systems are taking a little bit longer
because of the complexity of ensuring that we never expose
national security information to those who should not be privy
to it.
Mr. Shays. Thank you.
Defense, it seems to me if we just talk about the computers
in the airplanes, the computers in the air traffic control,
there are a hundred different ways that you all must have to
focus your time and energy on. But in different areas, what
would be the worst-case scenario if we do not succeed? I
realize we are making progress.
Mr. Soloway. I think, Congressman, the question of progress
is key here, because certainly Defense is one of those agencies
that was viewed with great concern both by ourselves and by the
Congress and others looking at it as recently as this past
fall, where we had a number of mission-critical systems that
had not yet passed muster, and there was great concern as to
whether or not we were going to be able to overcome the
problem.
I think what is important to note is that now, today, about
83 percent of our systems have not only been fixed but tested.
We will be at 90 percent in the March-April timeframe and 100
percent by October. So we have made, I think, dramatic
progress.
In fact, Deputy Secretary Hamre, who is testifying right
downstairs this morning on Y2K, made the comment yesterday that
he himself, as I think he testified before Congress earlier
this year, had been deeply concerned about whether or not we
are going to be able to overcome the problems associated with
the Y2K bug, but now has tremendous optimism that we will be
able to get there.
Really where our focus is now, in addition to continuing
our attention to that last 17 percent, which is not
unimportant, but really a lot of our attention now is focused
on working with our NATO partners and also with Russia on the
early warning systems and so forth, because, as has been
reported in the media, there has not been perhaps as much
aggressive addressing of these issues overseas as here. And so
that is, in addition to our focus on our own problems, a much
increased level of activity, if you will, with regard to
overseas allies to ensure that we don't have any problems in
that regard.
I don't have, nor does Mr. Toye, operational responsibility
for information systems. That is under the purview of our CIO.
Dr. Hamre has personally directed the Y2K efforts in the
Department. So I can't give you specifics in terms of a worst-
case scenario. But I can tell you I think from a progress
standpoint, we are substantially ahead of not only where we
were, but where we thought we would even be by now, or well on
track, and much of our attention now has been focused overseas.
Mr. Shays. Some of the systems are basically run by DOD.
But a system, for instance, in a fighter jet would be the
manufacturer's challenge, not your challenge?
Mr. Soloway. It is a common challenge. It is a joint
challenge, sir.
Mr. Shays. I realize that. But let me just try to
understand who has that responsibility, rather than year 2000
no one having it. Is it the manufacturer's responsibility?
Mr. Soloway. That's a very good question. Specifically,
from a legal standpoint, I don't know the answer to that. I do
know that we have been working with our suppliers to ensure
that systems are updated and are capable of overcoming the Y2K
problem in those cases where they face it. And as we look at--
certainly with mission-critical systems, our guidance systems
and targeting systems and so forth clearly would fall into that
category.
I don't know from a legal standpoint who has those
responsibilities. I know that we are certainly requiring that
anything new that we purchase clearly would be compliant when
we purchase it. But in terms of actual legal responsibility for
legacy systems from a legal standpoint, I would have to
hesitate to answer and would probably take that for the record
and get back to you.
[Note.--The information requested was not provided at the
time of print.]
Mr. Shays. Mr. Horn, his subcommittee, is doing an
extraordinary job and, as you point out, have created each of
the departments and we have really deferred to them. The one
area where they have not gotten as much involved is areas where
there is--particularly with the intelligence community, because
of the nature of the information, but it impacts DOD. I know
they have been focusing on DOD--and I am happy that he has done
this and it is not on our shoulders. His Government Management,
Information, and Technology Subcommittee is focusing on that.
I just want to get a handle as to whether we are leaving
anything out as it relates to DOD. As I think of all the number
of areas that you have to focus in on, did you have a method in
which you went through each area to know if you were able to
comply or not? In other words, what is the structure in which
you begin to even know if you have a handle on this?
Mr. Soloway. The Deputy Secretary, Dr. Hamre, took personal
charge of this at the Secretary's request, and he conducts
monthly meetings of the Y2K Steering Committee that involves
the very senior leadership for covering the entire Defense
Community, going through from a community-by-community
perspective, if you will, the systems that they have in place,
the challenges that they face, the progress that they are
making, and so forth. So it has been managed at the very most
senior levels at the Department.
You are correct, of course, we have systems that cut across
many areas. We have 500 that support the intelligence
community. But internally it has been managed as a very senior
level effort to make certain that it is very clear in the field
that this is an absolute top priority and to make certain that
the leadership has its arms around the full scope of the
problem.
We have looked at our Defense Finance and Accounting
System, the intelligence, the readiness issues, and all of
those things as they relate to one another and each individual
system. It has been organized at the most senior levels of the
Department.
Of course, our money--our senior civilian official, and our
Chief Information Officer, Mark Langston, have had direct
responsibility. But it has been managed and overseen
personally, as I said, by Dr. Hamre, who is downstairs
testifying again on the topic.
Mr. Shays. Before I recognize Mr. Mica, let me just ask
each of you, what is the key information system challenge that
you have that is not related to Y2K? And Defense could probably
give me two. But put your heads together. What is the key
information challenge that you are faced with? Actually, let me
ask each of you. I think it would be easier that way. The two
key issues.
Mr. Kennedy. Mr. Chairman, I think that of the two major
challenges to the State Department, the first is obtaining
qualified information technology professionals in sufficient
numbers that can do both the domestic jobs and deploy to our
many overseas locations to provide the national security
services we provide.
I believe the second challenge that we have is to stitch
together both all our locations and all our systems across 24
time zones around the world, including operating in countries
that have the highest degree of information technology
capability, just as in the United States, down to the Third and
Fourth World, operating across all systems, across all levels
of technological competence overseas and around the globe,
which is our second major challenge.
Mr. Shays. It is very difficult for government, given the
pay level sometimes, to bring in the quality of competence that
we need. But even in industry in the area that I represent, we
have 1,900 information system type jobs available, unfilled,
because we do not have the people to fill them. And that is the
private sector competing with price. And you have limits that
way, correct?
Mr. Kennedy. We have limits. And we just had a big job fair
last weekend, and we did get a rather large and qualified
turnout because we were emphasizing the ability to serve and
work for the U.S. Government overseas. So the salary levels
worked against us, but we do have potential inducement of
talking about offering people an opportunity to serve their
country abroad.
Mr. Shays. And you also have the ability to hire some
people with high skills overseas, I would assume.
Mr. Kennedy. Yes.
Mr. Shays. But in this country, hiring Americans, from the
moment that person comes to that job fair--what is the earliest
that you could, even if you knew then that you wanted them?
Mr. Edwards. We made 50 offers Saturday, and we started the
background investigations yesterday.
Mr. Shays. So how long would it take you to get them?
Mr. Kennedy. We would say probably 90 days, sir, because of
the need to conduct the rigorous national security background
investigation pursuant to statute and Executive order.
Mr. Shays. It is interesting, because I was thinking 90
days from the government's standpoint was pretty good. So
congratulations. Larry Halloran, my counsel, was saying, ``my
God, 90 days is 3 months, and think of that person having to
wait and all the other people are going to be tempted to
apply!''
Mr. Kennedy. It is a real burden. But because of the
information that the State Department processes and handles,
especially everything that moves through the conduit of our
Information Technology System, we have to take those steps. It
is a challenge and a burden that we accept, and we try to
streamline as much as we can.
Mr. Shays. Your first answer on the people was not a
surprise I was not expecting. I was happy to ask the question.
Mr. Sullivan. I believe that our critical problem is
ensuring that all of our systems at VA are seamlessly
integrated. We have been struggling with this for a while. We
are coming close with the interfaces we developed. But that's
not the answer. We need to look at the newer technology and see
how we can better seamlessly integrate these systems.
Mr. Shays. And you are working with three time zones.
What is the second problem? Besides the integration, what
would be the second challenge to information systems?
Mr. Sullivan. I can speak from the finance side. I think
our other biggest challenge is to get data on a more timely
basis to our management decisionmakers out there. We haven't
been doing a very good job of that at all, and a lot of it is
because of our legacy system and some of it is because we need
to reengineer some of our processes up front.
Mr. Soloway. Congressman, I have two and then Mr. Toye has
two more. But being a reformer, I would like to break the rule
and add another to build on your comment.
First and foremost I think the biggest challenge we have is
cyber-security. As Dr. Hamre and I think others reiterated
several times, we are very concerned about the security of our
systems as we more and more use the internet and so forth and
our ability to maintain truly secure fire walls and so forth.
That has clearly got to be our No. 1 priority.
The second one, actually I want to build on your point
about people. Our ability to recruit and retain true technology
skills is a very serious challenge and one that concerns us
greatly. It is very difficult to compete with the commercial
world. We do not always have the opportunity to offer people
the opportunity to go and serve in embassies overseas or what
have you. And we certainly don't have internally the structure
to maintain that technological refreshment that is needed.
That's a major concern.
But it leads me to really the second big area, which is in
our business logistics information systems. Logistics is a huge
cost-eater in the Department of Defense and we are still living
with variable logistic systems. And if you analyze supply chain
management, if you look at velocity of systems and so forth, it
is really the information technology which is the first step,
the absolute key to improving efficiency, reducing cost,
getting materials and supplies to the field more quickly and so
forth.
So we face enormous challenges in modernizing our logistics
and information systems with truly contemporary technologies so
we can better serve the folks in the field.
Mr. Shays. Thank you. Mr. Toye.
Mr. Toye. Within DOD, financial systems, or the lack of
adequate systems, is indeed the biggest single impediment to
improving financial management. Our systems were not designed
to meet current standards. They were designed to track the
Department's execution of the budget as appropriated by the
Congress, and they do those things very well. And at one point
in time, that may have been good enough, but it certainly is
not good enough in today's environment.
So our first priority is to overhaul or replace our
financial systems. And we have a plan that we are executing, as
was mentioned earlier, that will not be completed until the
year 2003. But even upgrading our financial systems by itself
is simply not good enough. A substantial portion of the
information that ends up in our financial reports comes from
what we call feeder systems. These are systems in non-financial
areas that provide information to DOD.
We need to, and we are working with those other communities
in DOD, to get them to make the changes in their systems to
ensure that the information that they pass to the financial
systems also will meet today's current standards. That is a
long-term effort. It is a significant effort, but it is the
most effort and it needs to be accomplished to bring financial
management to the point where it should be.
Mr. Shays. Thank you very much.
Mr. Mica, it is great to have you here.
Mr. Mica. Thank you, Mr. Chairman, and thank you for the
opportunity to ask a few questions. I think my questions are
going to divert here to the Department of State. And I guess we
have got the Chief Financial Officer, Mr. Edwards, here to
answer.
Mr. Edwards, first I want to address the question of the
security of our diplomatic facilities and posts overseas. I
know Rear Admiral Crowe had recommended, I guess, some $14
billion be expended over 10 years for that purpose. It is my
understanding also that I think this year there has been a
recommendation of a lower amount; if we had to do that over 10
years, it would be about $1.4 billion or something like that.
What is the dollar amount you all are recommending?
Mr. Edwards. Well, as I indicated in my statement, the
President's budget recommends an advance appropriation of $3
billion for 2001 through 2005, and that is ramping up from $300
million in the first year to $900 million.
Mr. Mica. $3 billion for 2001?
Mr. Edwards. Through 2005. Fiscal year 1999, we got an
increase over our previous construction budget of $36 million,
and that is to do the advanced planning on the first, up to
eight embassies or other facilities for that advance
appropriation that would come in 2001.
Mr. Mica. How are you picking or prioritizing the
facilities for upgrades?
Mr. Edwards. Well, we had a very extensive examination
following the embassy bombings. Each of the Ambassadors
notified Washington of their immediate needs. We sent out teams
of diplomatic security and our building people, to a total of
36 posts which were clearly at the high end of risk.
So we have now come up with quite a number of posts for
each of those 5 years that we would either relocate, rebuild,
or otherwise reinforce weaknesses, so that in the event the
appropriation is approved we are ready to spend the money
appropriately.
Mr. Mica. Has the State Department issued any kind of
advisory as to small measures that can be taken to prevent
death or damage, to your knowledge?
Mr. Kennedy. Mr. Mica, my name is Pat Kennedy. I am the
Assistant Secretary for Administration, and I supervise our
Office of Foreign Buildings and also was the Acting Assistant
Secretary for Diplomatic Security for some period of time. And
the answer to your question is an emphatic ``yes.''
We have a series of standards in place. We have notified
our posts. We have made funds available to them for everything
from what is called ``shatter-resistant window film,'' which
the trade name usually used is Mylar, and telling them how to
do it and making the money available to them.
If I might give you one example that combines two things we
have done, both making that available and a rigorous training
program: There was a bomb blast about 2 weeks ago in the
capital city of the country in which there was a local problem,
not against the United States. There was a noise in the street.
Some of the local nationals working in the embassy started to
go to the windows to look out. The Americans who had been
through the training said, ``No. No. Get away. Move inside.''
When the bomb exploded moments later, all the windows were
blown out, but no one was hurt, for two reasons: One, the
Americans had pulled everyone toward the inner part of the
building and when the windows shattered the Mylar treatment
kept----
Mr. Mica. That is exactly what I am talking about, some
commonsense things.
This subcommittee in its previous life did quite a bit of
work on force protection, particularly after the Kobar Towers
incident, and we found some simple things. Of course, we spent
a third of a billion dollars on enhancing our force protection,
and we have been out looking at what was done.
It is interesting when you have a problem how you throw
money at it. We bought every kind of gadget in the world. I
remember going to Saudi Arabia with Mr. Hastert, who is now the
Speaker, and saw every kind of equipment you could possibly
imagine, most of it foreign produced, which is kind of
interesting to address the foreign protection problem; but some
simple measures that we were advised, like the Mylar on windows
and the other advisories that folks can do. Because I am not
going to criticize you for not spending a lot of money. I think
that sometimes the small amount can do a lot of good.
And we overreact on some of these, I think. I think even
Admiral Crowe is an overreaction. With $14 billion, I do not
know how many embassies we could harden. But that does not give
us any protection when we have American schools, we have
American facilities, we have American tourists, we have
American businesses all throughout the world.
I just got back from visiting South and Central America.
And when you take precautions in one area, they will come after
you in other areas, we have seen in Tanzania and Kenya. So just
some commonsense things and not spending the entire Treasury on
things that may look good and satisfies people's wish lists
would be desirable.
Mr. Chairman, if I may, I have some questions in a couple
of other areas.
As a financial officer, I have been involved in the
narcotics effort; and one of the reasons we are having such a
problem right now in the United States is the diversion of some
of the funds, particularly State Department funds, from the
Andean strategy. In particular, I was told about $40 million
was taken out of the Andean strategy and diverted at one point
several years ago to Haiti.
How does this happen? Who is making the decisions in
diverting some of these funds in that manner?
Mr. Edwards. Well, it can come about several ways. First of
all, if our base funding isn't sufficient to do everything we
want, we have to, for example, absorb salary increases and FICA
tax increases and so forth, we have to start reducing programs.
Mr. Mica. This is taking money out of a program
specifically appropriated by Congress and putting it into
another area.
Mr. Edwards. Well, if the Congress would appropriate it
directly for foreign assistance in a program as you have
described, that's where the money obviously would go.
Last year in the accountability report, we have a citation
of drug interdiction. We had a major year in fiscal year 1997
of inderdicting drugs coming into the country, and I think the
street value of those drugs was something in the billions of
dollars if you took the tons of drugs interdicted, and priced
it out at street values.
Mr. Mica. That does not address my question specifically.
And I will get my subcommittee staff to give your subcommittee
staff the specifics. But I want to know how that $40 million,
thereabouts, were diverted.
Mr. Shays. So let me just say that that would be a request
that we would have and we will followup on that.
Mr. Edwards. We can certainly respond to that question on
that specific issue, Mr. Chairman.
[The information referred to follows:]
Responsibility for Y2K system remediation depends on the
system status. Remediation of operational systems unique to the
Department are the responsibility of the owning Service or
Agency. They may use the developing contractor, other
commercial organization, or may rely on organic resources to
effect the required changes.
For commercial systems in use by the DoD, the owners must
rely on the commercial vendors to effect the change.
Mr. Mica. The Haiti money particularly bothers me, because
some of that money was spent for institution building as far as
their police and judicial system, and now we are told that
Haiti has become a center for drug trafficking. So you diverted
money out of an Andean strategy to stop drugs at their source,
and money was used in Haiti for institution building and they
were barely certified, I think with reservations, the other day
by the President, because the programs that we diverted money
for have basically failed.
I have the same problem with the money that we were trying
to get and resources to Colombia. Colombia has now turned into
the major producer of cocaine in the Western Hemisphere, and
this administration and the State Department have blocked
equipment, helicopters, material, resources, from going into
Colombia.
They had, I know, some disagreements on human rights and
our pattern of conduct of the past administration. But I am
wondering if you can give us an update--it does not have to be
now, but to the committee--on what you are doing now to see
that there is a new government in place, and hopefully a new
attitude by the administration to give resources to Colombia,
which is now the major producer of cocaine in the entire world.
The major. We have turned it into the major.
It is also the major producer of heroin in the entire
world. Since none of that equipment went down to eradicate the
crops, they have poppy fields growing from one end of Colombia
to the other and they are producing heroin in unbelievable
quantities of high purity.
So I am anxious, Mr. Chairman, and I would request the
subcommittee, and will submit a letter and request to see what
is being done to expedite the finances, resources.
Mr. Shays. Would the gentleman yield? This is a good
opportunity to acknowledge the fact that Mr. Mica's
subcommittee has jurisdiction over the whole drug effort in
this country, both domestically and overseas; and instead of
our saying, well, State and DOD report to this committee
solely, you report to us on every issue except the drug issue.
So what I am going to do is, even with the first question,
because I think it really is important to get right to the
committee of jurisdiction. Mr. Mica and I, by the way, serve on
each other's subcommittees as well, so I think this is a very
important question. It is good that he used this opportunity
now when you are before us. And we will send a memo to your
committee, in fact, just making sure. And we would like this
information sent to the committee.
The title of the committee now is what?
Mr. Mica. It is Criminal Justice, Drug Policy, and Human
Resources. Only a shadow of its mere former.
Mr. Shays. If you would send that information directly to
that committee. You do not need to send it here. I am not going
to ask you to do it twice.
Mr. Mica. And through the committee, Mr. Chairman, I will
redraft those questions very specifically and address them to
the agencies, with your permission.
Mr. Shays. Exactly. So you just have been given a public
notice.
Mr. Edwards. We will be happy to respond, both in writing
and also have our Assistant Secretary in that area meet with
your subcommittee.
Mr. Mica. I have two other questions in a couple of areas.
One, I was recently in discussions with a member of the
Ukraine Parliament who came to us with allegations that the
United States foreign assistance, foreign aid to Ukraine, is
being given and going into the pockets of basically thugs that
are in charge of the Ukraine activities.
Is there some kind of an enhanced oversight mechanism for
grants, assistance, aid projects in the emerging Eastern Bloc
nations?
I was appalled by what I heard. In fact he said that--he is
a member of parliament. He is also a banker, and he can
document this corruption with our money. He said it would be
better if we terminated all of the assistance for his country
because it is actually--it is hindering their development. Do
we have any kind of an enhanced check or oversight IG
inspection of these activities?
Mr. Kennedy. Mr. Mica, we deal with this on four levels.
There is an Agency for International Development [AID] mission
in the Ukraine that is on the ground and immediately
responsible for program development. It has Washington
oversight.
Mr. Mica. I was told that it is corrupt from bottom to top,
and all of our assistance programs there have been subverted.
Mr. Kennedy. Mr. Chairman, this is not specifically within
the State Department's jurisdiction because it is an Agency for
International Development program, but the State Department
does have a policy coordinator for assistance to the countries
of the former Soviet Union.
Mr. Mica. Can your IG go in, or does he not have that
authority?
Mr. Kennedy. The AID IG, sir, would be the relevant
authority.
Mr. Shays. I am sorry to interrupt. The AID will be under
State when, October?
Mr. Kennedy. The Administrator of AID, effective April 1,
will be under the foreign policy authority and direct control
of the Secretary of State, but pursuant to the legislation it
retains its status as an independent entity with its own IG.
Mr. Shays. So it is just for administrative purposes, but
the bottom line is that we oversee that subcommittee.
Mr. Mica. I would like to start with the Ukraine and maybe
we can work on. But I had an investigator from the
International Relations Committee and an investigator from my
subcommittee of the Government Reform Committee, listen to this
detail of corruption with our funds that was absolutely
appalling, and I think we have the responsibility to followup
in some fashion, whoever is in charge, whenever. And maybe we
can start right there, and we will be glad to give you
additional details after the hearing.
Mr. Kennedy. The Secretary is concerned about the best use
of all overseas funds, especially for sustainable development.
And I will take this up with the coordinator for the Newly
Independent States and pass this on, and your offer to share
this information to the AID people as well, sir.
Mr. Mica. Possibly in your jurisdiction or oversight, is it
true, and I don't know if this is accurate, did a Japanese firm
get the new passport contract to produce the passports?
Mr. Kennedy. An American firm won the contract. However,
this American firm does buy some of its materials from Japanese
sources. And that competition was an open competition and we
brought in evaluators, I believe it was from the National
Institute of Standards and Technology, to evaluate the process
we are using, which is a photo digitalization process to
literally spray the picture onto the passport book, to
eliminate the threat caused by criminal and other terrorists
who are trying to extract the picture from under the laminate.
So an American contract was awarded to----
Mr. Mica. You said some of the material?
Mr. Kennedy. I would have to get back to you.
Mr. Mica. I need to get back with Mr. Traficant. He has
some interest in this Buy American provision. It is interesting
that I was told that Americans will soon be walking around with
Japanese content passports.
Mr. Kennedy. The passport booklets, themselves, Mr. Mica,
are produced by the Government Printing Office.
Mr. Shays. May I ask the gentleman, my sense is that we
have reciprocal agreements with our allies, that they get to
bid on certain things that we do and we bid on certain things
that they do. In this case it could have been a foreign
corporation that could have won this bid or not, but didn't?
Mr. Kennedy. I am not a contracting specialist, but I
believe, sir, that you are correct.
Mr. Shays. I'm sorry?
Mr. Kennedy. General Agreements on Tariffs and Trade do
permit cross-bidding.
Mr. Shays. We have that same issue in Defense as well,
where we bid on things that are used by our allies.
Mr. Soloway. There is a globalization in industry in
general, and if we want to access the most contemporary
technology there is a need to access that full global
marketplace.
Mr. Shays. But Mr. Traficant is rightfully concerned that
we have as much U.S. participation as possible. Do you have
another question?
Mr. Mica. I do, but I think I have done enough damage.
Mr. Shays. You can go ahead.
Mr. Mica. Are you going to keep the record open?
Mr. Shays. Sure.
Mr. Mica. I would prefer to do that.
Mr. Shays. But as it relates to the drug issue, would you
report to Mr. Mica's committee. I also serve on that committee.
AID, we are going to be doing some looking at that; and Mr.
Mica can join, as he sits on this committee, to pursue that. I
am happy that he mentioned it, and we need to get a handle on
that.
I am going to conclude, but let me just say if there is
anything that any of you had wished--anything in particular
that you wished that we had asked, this would be your
opportunity to put it on the record.
I thank you. This was a general hearing in nature, but it
is helpful in helping us sort out where we go. I thank you very
much. This hearing is now closed.
[Whereupon, at 12:10 p.m., the subcommittee was adjourned.]
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