hand, and force structure, operational concepts, and procurement decisions on the other."

Do you believe that the force structure, operational concepts, and procurement decisions recommended by the QDR are sufficient to provide the capability to engage in overlapping Major Theater Wars today, and to prepare for the potential military threats of the future?

Answer. The U.S. defense strategy developed in the 1997 Quadrennial Defense Review places a wide range of requirements on our military forces. These requirements include shaping the international security environment in ways favorable to U.S. interests, responding to the full spectrum of crises, and preparing now for uncertain future security challenges. These three elements—shaping, responding, preparing-define the essence of U.S. defense strategy between now and 2015. The regional commanders and the military services work continuously to ensure the best mix of forces and capabilities to meet the demands of the strategy. Today's military force structure is capable of successfully executing this demanding defense strategy, to include its most stressing requirement to defeat large-scale, cross-border aggression, in two distant theaters in overlapping time frames, preferably in concert with allies and friends, but unilaterally if necessary. (This capability is outlined in detail in the Department's July 1999 classified Report to Congress, "An Assessment of U.S. Defense Strategy, Capabilities, and Force Structure.") The Secretary's deferral in December 1999 of the QDR's 25,000 personnel end strength cuts in the National Guard and Reserve component demonstrates that this is not an inflexible process. Rather, it is a process that takes into account the changing roles and missions of our forces and the importance of allowing innovation to continue in tandem with the QDR.

Our defense strategy has enabled us both to meet today's requirements and to invest in the transformation of the armed forces to meet future needs. This transformation of equipment, organization, and operational concepts is well underway. As Secretary Cohen noted in recent budget testimony, transformation is a long-term endeavor and the full fruits of these efforts will only be fully realized by successors to the current administration and the current Congress.

Question. What are the principal threats to U.S. vital national security interests that you believe the Department should examine both in the near and long term? Answer. In the near-term, the United States faces a dynamic and uncertain security environment. While we know that we will face significant challenges, precisely when and where they will arise is impossible to predict. We continue to face potential cross-border aggression and instability in regions critical to U.S. interests (for example, Southwest Asia and East Asia). Additionally, the development and proliferation of advanced and asymmetrical weapons and technologies with military or terrorist uses, including nuclear, biological, and chemical weapons, continue to be a threat despite the best efforts of the international community. The growing threat of a ballistic missile attack on the United States, once thought to be remote, is of particular concern. Finally, we must be vigilant against a range of transnational threats, including terrorist activities, the illegal drug trade, and activities aimed at denying U.S. access to vital energy supplies or key strategic resources. We must also be vigilant and prepared for attacks against critical infrastructure. Such attacks can be designed to damage or disrupt important elements of our society, such as transportation, banking, communications, health care systems, and an attack can come through conventional means as well as information operations directed against us. In the long-term, beyond 2015, the U.S. may face the possibility that a regional great power or global peer competitor could emerge. China and Russia appear to have the most potential in this regard, although their respective futures are quite uncertain. In addition to this potential challenge, the Department devotes attention to the possibility of unpredictable "wild card" scenarios that could seriously challenge our interests at home and abroad. Examples include the emergence of new technological threats, the loss of access to critical facilities and lines of communication in key regions, or the takeover of friendly governments by hostile parties. It is imperative that we maintain U.S. military capabilities with sufficient flexibility to deal with such unexpected events.

Question. Would you agree that the uncertainty that we face in the future requires us to maintain a military that is both strong and flexible?

Answer. Yes. As detailed above, the challenges of the current and projected security environment require that we maintain our superior and dynamic military capabilities.

READINESS AS A PRIORITY

Question. Over the past few years, both the administration and the Congress have emphasized maintaining near-term readiness as one of our highest priorities. However, the recent bipartisan budget agreement mandates a real reduction in defense spending in every fiscal year from 1998 through 2002.

Do you believe that the readiness requirements of the military services can be provided for under these constrained budget levels?

Answer. No. I believe the President's budget, with defense budget levels higher than could be achieved under that bipartisan agreement, is needed to fulfill the services' requirements.

READINESS INDICATORS

Question. Over the past several years, the Committee has observed discrepancies between the readiness reports we receive from the Pentagon and the information we receive from the operational forces. Many of these discrepancies are attributed to a readiness reporting system including the SORTS data which is designed to provide a snapshot of the current state of readiness rather than a projection of the future.

If confirmed as the Deputy Secretary of Defense, will you work with the Services to try to develop a better system of measuring and reporting readiness, including a way to predict future readiness, so that we have an adequate understanding of any readiness problems within the operational forces?

Answer. Yes. In fact, we are already well on the way to implementing an improved readiness reporting system as required by the Fiscal Year 1999 National Defense Authorization Act. In accordance with this congressional direction, we have begun building a readiness reporting system that will improve our ability to measure the capabilities of the armed forces in an objective, accurate, and timely manner. Further, the readiness reporting system is to be applied uniformly throughout the Department, and the information will be continually updated, including data concerning unit training readiness, equipment readiness, contingency operations readiness, key crew readiness, prepositioned equipment and sustainment stocks, unit trend analysis, training and installations.

PREPARING FOR UNCERTAIN FUTURE

Question. Unlike the period of the Cold War, the United States Armed Forces are facing the challenges of a world that is politically and economically unstable and unpredictable. In view of this uncertain future:

What will be the most significant challenges facing the U.S. Armed Forces in the next 10 years?

Answer. Our superior U.S. military force has many elements-highly trained people, superb leadership, and advanced equipment. All of these assets require sustained investment over a period of many years. Secretary Cohen's priorities have been to support the uniformed services and their families, to maintain high levels of readiness to ensure quick responses to crises, and to ensure future readiness through modernization and transformation of the force. This agenda will remain a compelling one; progress registered in each of these areas to date must be sustained by consistent attention.

Question. What changes would you advocate in force structure and in the modernization of our armed forces?

Answer. The Department's modernization and transformation strategy aims to ensure U.S. military preeminence well into the 21st Century with forces that are adapted to the changing strategic environment. The Revolution in Military Affairs makes the transformation of U.S. military forces possible. Technology is changing the civilian and military spheres alike. Exploited effectively, through innovative operational concepts and new organizational arrangements, new information systems and other technologies will allow U.S. forces to be faster, more agile, more precise, and better protected. We seek to transform to meet future challenges through Service initiatives that leverage technology to more effectively support the warfighter operationally and logistically in joint environments. We must also pursue science and technology efforts through close ties between technologists, innovators, and warfighters that will focus on areas critical to enhancing our military capabilities. We must encourage our international partners to transform in order to assure combined interoperability in command, control, and other capabilities critical for effective coalition operations.

Question. What role should our armed forces have in fighting international terrorism and narco trafficking?

Answer. International terrorism and the illegal drug trade represent two important transnational threats that can affect U.S. security and the broader international community.

Drug abuse is an undeniable threat to our national security that is measured by the annual loss of thousands of lives and billions of dollars. Reducing the supply of drugs on our streets is an integral component of our National Drug Control Strategy. The Defense Department plays a key supporting role in creating the opportunity for law enforcement agencies, both our own and those of foreign nations, to interdict the flow of drugs into our country. This supporting role, legislatively mandated by Congress, focuses primarily on the detection and monitoring of traffickers moving drugs from source regions to our borders. The Department remains committed to this counterdrug mission.

Increasingly capable and violent terrorists can directly threaten the lives of American citizens and institutions, and can seek to undermine U.S. policies and alliances. As outlined in relevant Presidential Decision Directives (PDDs 39 and 62), the Department has a significant supporting role in many counterterrorist activities. Under the oversight of the State Department, DOD, the FBI and the CIA perform important roles in military planning, law enforcement, and intelligence gathering, respectively. The Commander in Chief of Special Operations Command (SOCOM) has the lead for DOD's counterterrorism mission. Other DOD agencies involved in combating terrorism include the National Security Agency, the Defense Intelligence Agency, and the Joint Staff. Additionally, individual Service's anti-terrorist programs supplement our overall effort.

MAINTAINING OUR INFRASTRUCTURE

Question. The Department of Defense maintains the world's largest infrastructure, with a physical plant value exceeding $500 million. It is widely acknowledged that much of this infrastructure is in poor condition and therefore impacts quality of life and readiness.

What are the most critical infrastructure issues facing the Department of Defense?

Answer. In terms of the physical plant infrastructure, currently valued at approximately $600 billion, we need to locate, size, and configure installations and facilities to meet rapidly changing force structure requirements; acquire and maintain facilities to provide quality living and working environments; leverage available resources and improve the balance between requirements and funding; and improve facilities management by using modern asset management techniques.

Question. The services are dedicating between 1 and 2 percent of plant replacement value toward real property maintenance. In your judgement, is this funding level sufficient to maintain our facilities?

Answer. One or two percent of plant replacement value is sufficient to sustain some types of facilities. Other types of facilities require more. Since both replacement and maintenance costs vary tremendously by facility type, a simple metric like percent of plant replacement value is often misleading. However, at recent funding levels the Department has been unable to fully sustain all its facilities.

Question. How does this level of funding compare to the investment made by the private sector in real property maintenance?

Answer. Direct comparisons are difficult due to incompatible terminology and accounting practices, plus there are significant variations among private sector organizations. Based on private sector benchmarks by facility type, the Department's "real property maintenance" budget would be close to private sector levels if all the money could actually be spent on sustainment. However, since the Department's facilities recapitalization budget is also constrained, a significant portion of the funding is needed to restore or modernize failing facilities thereby reducing the availability of sustainment resources.

Question. What legislative or policy changes, if any, should be enacted to maximize the funding allocated to real property maintenance.

Answer. The Department is currently developing a Facilities Strategic Plan, which will enable us to better define the right quantity and quality of facilities needed at each location and the appropriate resources and information for maintaining our facilities on a consolidated, long-term planning basis. There are two promising new tools under this plan. The first is a facilities sustainment model to more accurately describe the activities and track the resources in this area. This effort is based on auditable, commercial benchmarks for facilities maintenance and repair costs. The second is our upcoming and first ever report to Congress on Installations Readiness. As these tools come on line, policy changes will follow. At this time I do not see any need for legislative changes.

Question. The Military Housing Privatization Initiative was enacted to provide a means for solving the military services' housing crisis.

Has the initiative lived up to its expectations? If not, what actions would you advocate to assure the success of the program?

Answer. The pace of the Department's housing privatization has been slower than we had hoped. We have four projects awarded under our 1996 authorities and three have servicemembers occupying them today. The Army awarded its first project, encompassing 2600 houses at Fort Carson, Colorado, last September and that project is currently under construction. We have twelve more projects in solicitation with prospective award dates later this year.

These first projects have verified our original expectations that privatization provides the ability to leverage private sector capital and will allow us to improve our substandard housing much faster than traditional military construction alone. We are seeking a 5-year extension to our original authorities to allow us to apply the lessons learned from this complex process.

Secretary Cohen recently announced a new housing initiative, which will increase housing allowances to eliminate out of pocket expenses for our servicemembers by 2005. This initiative will also enhance our housing privatization efforts by providing higher income streams to use in developing these projects. These efforts, combined with a steady military construction program, work together to fix our substandard housing by 2010. In order to more efficiently use our housing privatization authorities, the Department has initiated a plan, under the direction of the Deputy Under Secretary for Installations, to establish "Peer Review" and "Audit" mechanisms using private sector experts to evaluate privatization projects across the Services and capture the "Best Bets" or best business practices, as well as illustrate less successful strategies. The Department has employed these consultants since 1996 in the evaluation of the housing privatization program and they have produced a wealth of monitoring and project evaluation materials used in many of the initial projects. They have also participated in evaluation of specific financial proposals and produced white papers on the complexities incurred in monitoring loans and loan guarantees. The "Peer Review" process will now be used to develop a formal Evaluation Plan. This plan will be reviewed and approved by the Installations Policy Board, which includes the Service Deputy Assistant Secretaries responsible for housing privatization, senior Service Engineers, and senior Department financial management analysis representatives.

EXPORT CONTROLS-TO CONTROL OR DECONTROL IN LIGHT OF NATIONAL SECURITY RISKS

Question. Export controls for technologies have been significantly liberalized since the end of the Cold War and the demise of Coordinating Committee for Multilateral Export Controls in 1994.

Has the Department conducted risk assessments with regards to the impact of the liberalization of these technologies on U.S. national security?

Answer. In reviewing U.S. export controls, the Department possesses unique expertise and knowledge of the military applications of goods and technologies. Prior to any decision for liberalization of controls on technologies, we do a number of analyses based on information from a variety of sources.

Assessments of such technologies involve the Services, DOD labs, the Joint Staff, and operational components to determine the criticality of certain goods and technologies for the Department. We also take into account the extent of technology diffusion and availability throughout the world so that the controls we impose are effective.

Question. What impacts on our security must we consider as this reality continues?

Answer. The rapid diffusion of commercial technology requires taking the realities of the market place into account in determining what and how to control various technologies with military applications. Thus, we seek to set controls at levels that are critical militarily and controllable from a practical point of view. We are also emphasizing multilateral approaches to export controls. At the same time, we are bolstering our analytical and license review capabilities that will enable us to better protect our military technological advantages.

Question. What is the risk that, with a greater proliferation of commercial technology, our adversaries will be able to leapfrog the United States in some areas by better integrating and using commercial products?

Answer. The development and deployment of modern weapons systems are dependent on a host of factors, not just access to one commercial component. But, most importantly, DOD continues to be in the forefront of research and development and

a leader in integrating various commercial and military technologies. As our military strength becomes more dependent on technologies developed by and built for the commercial sector, we have we have a strong national security interest in ensuring that the United States retains its technological advantage over the entire spectrum of military critical technologies, including commercial dual-use technologies.

In this regard, we know that, as we strive to increase our security on such technologies, we also must keep in mind that our ability to maintain our leadership relies in large part on industry's ability to export. Increasingly, entire industry sectors are dependent on export revenues to continue the research and development that keeps them at the cutting edge of technology. If technology sharing becomes even more difficult, interoperability and other forms of collaboration with our allies required for coalition warfare are increasingly at risk.

We're dedicating more people to this mission, giving them better analytical tools to review and assess export license requests, and focusing more attention on the transfers we believe are potentially most dangerous. We also recognize that we can't solve this issue unilaterally. Accordingly, we continue to place a priority on multilateral efforts in an attempt to convince other suppliers to adopt similar policies and practices as our own.

PERSONNEL REDUCTIONS IN MANAGEMENT HEADQUARTERS AND HEADQUARTERS SUPPORT ACTIVITIES

Question. Section 921 of the National Defense Authorization Act for Fiscal Year 2000 mandated reductions in personnel assigned to management headquarters and headquarters support activities.

What is the current status of the personnel reductions mandated in Section 921? Answer. Section 921 directs a 15 percent reduction in personnel assigned to DOD major management headquarters activities during fiscal years 2000-2002 (5 percent per year) using actual personnel strengths as of October 1, 1999 as the baseline. Further, the act required that we use the revised definition for management headquarters in the May 13, 1999 DOD Directive to determine the baseline. We have implemented the new management headquarters definition throughout the Department. As a result, the baseline for the end of fiscal year 1999 is 63,000 personnel, an increase of 30 percent relative to the previous definition. We believe this new baseline accurately reflects the number of DOD management headquarters personnel. Relative to this new baseline, the Department's current plan projects further reductions of approximately 5 percent, to complete the efficiencies mandated by the Defense Reform Initiative (DRI). This is on top of the large reductions made in earlier years. Taken as a whole, the planned reductions, together with the reductions already made, will result in a headquarters establishment that is about 35 percent smaller than it was when the drawdown began 1989-roughly consistent with the force drawdown.

Question. What are the projected impacts of the reductions mandated by section 921?

Answer. The 15-percent reduction required by Section 921 would have a very damaging impact on the ability of the Department to meet the operational demands of the theater commanders in the field and the financial and program management stewardship responsibilities of the military departments. In particular, deeper cuts would jeopardize the ability of the combatant commanders to manage the demands associated with our global military presence and to respond to new threats, such as information attacks and incidents involving chemical, biological, or nuclear weapons. They would also threaten the ability of the military departments to meet their financial and program oversight stewardship responsibilities and, even more importantly, their ability to manage ongoing initiatives to improve the economy and efficiency of DOD's operations.

The 15-percent reduction to the 1999 baseline required by Section 921 does not credit the Department with the 27 percent reduction that occurred between fiscal year 1989 and fiscal year 1997. Compliance with the mandated reductions, on top of the prior and planned reductions made by the Department, would require reductions of more than 6,600 personnel beyond the budgeted reductions of 2,800. Such reductions would seriously disrupt the Department's operational and stewardship activities and could require reductions-in-force (RIFs). DOD is assessing the impact of the reductions required under Section 921 on DOD management headquarters activities and will report the impact of the reductions in the required report to Congress, which is due October 2000.

Question. Are any activities exempt from sharing in the reductions mandated by section 921?