Weve done a lot of reform over the past two years, that includes acquisition reform, a new military retirement system, major changes in military healthcare, com satisfactory reform, reright of the military code of justice, as well as significant organization zational reform. While a lot has been done, a lot more needs to be done. The world around us is simply moving too fast for us to sit still and assume that the organizations and processes of the past will suffice for today and especially for tomorrow. Yes, we all have an obligation to see that taxpayers dollars are spent effectively, especially in the first job of the federal government which to is to defend the country, but we all know from the news and Intelligence Briefings that we face a wide diverse array of threats, and those threats change day by day as adversaries develop systems designed to deny us any military advantage. We must be prepared for each of these threats. We also know that the pace of technolo technological and more and more is taking place in the private stektor all of these affect our processes. We will not be able to defend the country with Outdated Technology or sluggish bureau ros rockcracy. Much of it rests with us, with congress. We cannot do everything in a single bill or even in three years. But we must be willing to move aggressively to make the reforms needed in this volatile, dangerous world. There is are no individuals who can provide wiser, more considered guidance than the three witnesses we have today, each of whom has held high office in the department of defense, each of whom has testified many times before this committee, and each of whom have devoted their careers to helping provide for the National Security of the United States. I appreciate each of them being with us today. Before turning to those witnesses, let me yield to distinguished acting Ranking Member gentleman from rhode island, langston. Thank you mr. Chairman i want to welcome our witnesses here today and proud to be able to speak on behalf of Ranking Member smith this morning and ill be submitting his statement for the record after i read it. But thank you again to our witnesses. So thank you, mr. Chairman, for holding todays hearing on this topic of critical importance. And, again, i also want to say thank you for our witnesses for sharing their opinions on past and future defense reform opportunities. I know you have a wealth of knowledge and i appreciate you sharing this with the committee. I look forward to hearing the views on what the department of defense should or should not address in the future as it relates to Acquisition Policy and retorm efforts. The fq 16 and fq 17 acts included significant chapgs to the Acquisition Division of the office of the secretary of defense. First, Decisionmaking Authority for large acquisition programs move from the undersecretary defense for Acquisition Technology and logistics to the Service Secretaries and second that the same undersecretary position was split into two undersecretary position the shift has created an unknown dynamic for the department of defense and private people who provide services for dod. So here we are in 2017 working on next years ndaa and Key Acquisition positions are yet to be filled and its too early to tell if these reforms will prove to be successful. In my view, before we make additional acquisition reforms, we should see if last years changes are effective because, frankly, it seems as if current cha changes may be overwhelming the system. They can only take so much reform legislation. However, one area it doesnt need support is helping it to right size its infrastructure by offering a new round of base realignment and closure. Dod has been offering congress to authorize a new bracket each year and they estimate it can help save 2 billion a year at a time of constrained resources we cannot afford to waste 2 billion a year holding ton infrastructure that is in excess to the militarys requirement. While some may question the four structure levels or raise concerns with the 2005 round, i believe congress can and should work with dod to address these issues and authorize a new round of brack this year. Im also interested in where the department and the services will go with personnel reforms. The fy 16 ndaa reformed the military retirement system to provide 83 of the force of the force its strong portable Retirement Plan that can take with that they can take with them when they complete the service obligation, but do not reach a 20year retirement. Its time that the personnel system compliments the retirement system with more flexibility and ability to target certain skill sets when needed. The services weve been discussing for years in need for more flexible personnel system but have done little with the existing authorities they have to make any meaningful changes. People join the military and depart the military for a variety of reasons, and the system cannot be one size fits all. I understand due to the nature of the missions and organizations, there have there are requirements and standards that need to be maintained. Im interested in exploring concrete options that create flexibility to attract the qualified individuals it needs to fit the requirements and as those requirements change, retain the quality the military needs to maintain high standards. With that, i thank the Ranking Member for letting me read his statement on his behalf and i yield back to the chairman. I thank the gentleman. Let me, again, welcome each of our witness, dr. John hamre, chief executive officer and president for the center for strategic and international studies. Michele flournoy chief expect e executive officer and founder for a new American Security and dr. Dov zakheim Senior Adviser for the csis as i mentioned each of them have held high position in the department of defense and were grateful for you all being here. Without objection to, your full written statement will be made part of the record but at this point weeding pleased to hear any oral comments youd like to make. Dr. Hamre. Mr. Chairman, Ranking Member smith, its a real privilege to be invited back and i want to say thank you to you not just for inviting us but for this committee taking so seriously this important work of defense reorganization reform. You know, this is not the kind of thing that most committees are doing these days. Im so proud that you are and thank you for that. I was on the staff of the Senate Armed Services committee when excuse me, dr. Hamre, would you get that microphone right up to your mouth. Im sorry i apologize. I was on the staff of the senate armeder is vitss committee when we passed gold arm nickels and then the packard reforms. We worked on that very hard but we made some serious mistakes with the Packard Commission reform. And it was we didnt understand it at the time. But we when we took the chief of the chief of staff for the services out of the chain of command for acquisition, thats with a mistake. You fixed that two years ago and im very grateful for that. We made a mistake by decapitating the ecosystem in the department. When we created the undersecretary for acquisition, made. Thirdmost important position in the building and we diminished the role of the Defense Research and engineering. That was a mistake at the time. You fixed that last year. But and im i havent i know theyre working on legislation this year. I havent seen what youre proposing so im real what i really am here to talk about is what happened last year. You did the right thing by elevating the research and engineering function, but unfortunately in the conference i think you undermind ted the impact of this when you created the second undersecretary for acquisition. The purpose of your goal last year, and we had conversations with the committee, was to make the innovation secretary the thirdmost important position in the building, and that was the right thing to do. Did you that, but by introducing a second undersecretary who takes care of acquisition, thats where the money is. And i just i was the comptroller so i know what its like in the building. The guy that controls the moneys got more clout. So your desire to elevate in prominence the Innovation Ecosystem in the department so that we become more dynamic in addressing new technology and new threats was unfortunately undermined when you created this second undersecretary. And i would ask you to go back and take a look at that. You did the right thing by delaying implementation one year, so you have a chance to really get this right. We need to recruit the biggest person we possibly can to come into that job. We have to recruit a very prominent person. Theyre not going to come in if the job looks like its undermined by the structure of the rest of the senior leadership. I would plead with you to take another look at that and id be happy to come up and talk at any time. The other thing i would wish to talk to you about is you put in the authorization act last year you created the chief management officer. Its, as written now, it doesnt really do anything new. It carves out all the funks functions that are currently with the deputy secretary as the chief management officer into that new position as an undersecretary. I think theres a great promise in what youre looking at, but i think we need to make clear the way its written in last years bill, it is its a staff function. What i think we need in the department is a line manager over the defense agencies. We do not have a line manager over the defense agencies. We have line manager for the army, for the air force, for the navy and marine corps, we dont for the defense agencies. I would ask you to consider looking at making that chief management officer position which you created not a staff function but a line function. Give it responsibility to manage, oversee, hire, fire, promote, you know, to make capital investigate mep capital investments, et cetera, for this. There about 30 billion, theres a lot of work to done here but youre not going to get management out of of the job the way you wrote it last year. So apologize for being blunt but you absolutely are on the wright right track, i think some minor adjustments you will carry this across the line. And i will be very glad to work with you on anything this year. I havent seen your draft bill but i look forward to working with you and the committee. Thank you. Thank you were sir. Ms. Flournoy. Mr. Chairman, Ranking Member smith and distinguished members of the committee, truly an honor to be here to testify before you on such a critical topic as defense reform. Its hard to remember a time when the need for defense reform was more acute giving the incredible challenges that our military is likely to face in the future. We have a military thats more capable than ever before but its a military thats on an unsustainable cost curve. So fundamental reforms are needed to actually free up resources that can be reinvested in the Critical Concepts and capabilities and operations that will enable us to maintain our technological future. No now is the time to continue for robust reform that ensures that we get the most possible out of every taxpayer dollar invested. And i too want to applaud the work that this committee has done in leading the charge on defense reform particularly in the acquisition area. But what i wanted to do this morning is suggest four new areas that you may want to go deeper in this legislative cycle and in the future. The first is right sizing dod headquarters and in particular transforming the defense agencies. If you look at the at the office of the secretary of defense, the joint staff, the combatant command headquarters and the defense agencies they total about 240 four thour thousand people, thats about 20 of the Defense Budget. Substantial growth in dod headquarters is not one of inefficiency but also effectiveness. In the private sector bloated head quarter staff have been documented to slow Decision Making, push too many decisions too far up in the organization, incentivize risk versus behavior, undermine organizational performance and compromise agility, and i think the same can be true in government. Perhaps the greatest opportunity for potential savings lies with the largest defense agencies which account for about 134 billion of the dod budget. So highest priority, in my mind, should be given to those large agencies that operate most like civilian businesses, including doa rrk disa, the defense information systems, agency, dha rrk the Defense Health agency, and defas, is the finance and accounting service. And what i would encourage you to do is to, i the secretary of defense to undertake a comprehensive manage maent e mept assessment of these agencies looking at where best business practices, new technologies and automation might actually improve performance and reduce cost and create savings that could be reinvested in higher Priority Areas. Beyond this focus on defense agencies, i think it would also be a good thing for congress to provide the secretary with the flexibility and breathing room to assess to assess across the dod headquarters areas of potential overlap and look for tounts restructure, consolidate, reassign personnel, limb nate unnecessary offices and functions. And just hearing johns proposal for giving the cno line responsibility over the agencies i think thats very much worthy of consideration. Second key area id love for you to grapple with is brack. The department desperately needs a brack round, the estimate is at 22 of current infrastructure is access to military need. The chiefs have repeatedly testified that this infrastructure overhang is taking money away from readiness and from modernization and future criminal war fighting capabilities. Based on past experience the department is estimating that at least 2 billion a year could be saved and although concerns about potential job loss are understandable, there are also a number of studies of past close yours that concluded that most jobs are ultimately replaced and most effected communities actually do recover quite well. I think in the year where the congress is considering a major Infrastructure Investment bill, you could imagine directing some of that investment to affected communities and easing their transition and mitigating some of the job losses associated with brack. So bottom line receiver dollar we spend son unneeded infrastructure say dollar were not using to support the men and women who serve in harms way. So i would encourage you this year to act. The third area is reshaping and reinvigorating the civilian workforce. Today dod employs about 770,000 civilian employees plus a comparable number of civilian contractors. Multiple efforts have been made to streamline the system with mixed success. I think you have an opportunity this year to provide the secretary with a package of authorities to help reinvigorate the civilian workforce. I would encourage you, i list them in my testimony, ill just briefly touch on some of them here, but requiring the secretary to develop a comprehensive Human Capital strategy for how we recruit, develop, retain, and shape the civilian workforce. Include in that asession the optimal mix between military, civilian, and contractor workforces. Secondly, to set realistic personal Cost Reduction targets, to actually further modify the vee sip authority, to allow it to be targeted on specific employees that are judged appropriate to leave government service. To encourage the secretary to use the modified riff authority that you provided last year but hasnt been used by the department yet to give the secretary flexibility to reallocate and reassign personnel as he right sizes and reshapes the organization. And really to look at consolidating the personnel system. Currently there are 66 different personnel systems that are being used for the civilian workforce in the department of defense today, 66. Imagine trying to manage that. Can we look at a consolidated approach under title 10 that would really allow the secretary to tailor one system to higher manage, depp develop, compensate, deretain dod civilian workforce. And there are a number of ideas that i thrift as well. The fourth area semiproving are the quality of healthcare while reducing costs. Today the military Healthcare System costs have nearly doubled over the last decade with the cbo estimating an additional 40 billion by 2030. Whats even more important, in my mind, is that survey data suggests that the quality of care received by military personnel and their dependents remains uneven and Customer Satisfaction is below civilian bench marks in key areas. So i think this san area where dod and the congress have an opportunity to explore ways of both improving the quality of care while also leveraging approaches like values based healthcare to reduce costs. In my written testimony i actually draw from an excellent report that bob hail, the former dod comptroller did for cnas on reforming defense. In particularly he highlights five areas for healthcare reform that i think are worthy of looking at. War time readiness, valuebased reimbursement, productivity and veil ability of choice. Let me just conclude by saying that i really do think we have a tremendous opportunity with this secretary and this congress to move order forward on these iss. Now is the time to provide the secretary of defense with the authorities he needs to do this job. But that said, defense reform, as you all know, is not a panna sey its. Its my hope that this congress will also consider how to establish a more predictable and more robust levels of defense spending over the next five to ten years without gutting de ploem macy accounts that are critical to our National Security. I believe that reach a comprehensive budget deal that will has all the elements from tax reform, entitlement reform to smart drivers in our