Hold two hearings that focus on the two major pillars of our agenda. Tomorrow well hear from the Service Chiefs on repairing and rebuilding our military. Today, however, well concentrate on the other pillar, which is defense reform. Weve done a lot of reform over the past two years. That includes acquisition reform, a new military retirement system, major changes in military health care, commissary reform, a rewrite of the uniform code of military justice as well as significant organizational reform. While a lot has been done, however, 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 taxpayer dollars are spent as efficiently and effectively as possible, especially in fulfilling the first job of the federal government which is to defend the country. But we all know from the news and from our 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 technological change is accelerating and that more and more innovation takes place in the private sector. All of these trends stress our existing organizations and processes. We will not be able to defend the country without Outdated Technology or sluggish bureaucracy. Much of the responsibility for making needed reforms rest 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 are no individuals who can provide wiser or more considered guidance than the three witnesses we have today each of whom held high office in the department of defense, each of whom testified many times before this committee and each of whom 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 gentleman from rhode island. Thank you, chairman. Proud to be speaking 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. Again, i also want to say thank you to our witnesses for sharing their opinions on past and future defense reform opportunities. I know you all 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, organizational structure and military personnel Reform Efforts. The fy 16, fy 17 Defense Authorization acts created significant change to the division of the office of secretary of defense. First, Decision Making authority for large acquisition programs move from the undersecretary of defense for Acquisition Technology and logistics to the Service Secretaries in second that the same undersecretary position was split into two undersecretary positions. The shift has created unknown dynamic for the department of defense and private Sector Companies who produce goods and provide services for d. O. D. 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 changes may be overwhelming the system. The department of defense can only absorb so much new acquisition reform legislation. However, one area where d. O. D. Does not need congressional support is in helping it to right size its infrastructure by authorizing new round of base realignment and closure. D. O. D. Has been asking congress to authorize new background each year for the past five years and estimate a new brak can help save 2 billion a year. At a time of constrained resources we cannot afford to waste 2 billion a year holding onto infrastructure that is in excess to the militarys requirement. While some may question the fore structure levels or raise concerns with the 2005 round, i believe congress can and should work with d. O. D. To address these issues and authorize a new round of brac this year. Im also interested in where the department and services will go with regard to personnel reforms. Ndaa reform the military retirement system to provide 83 of the force a strong portable Retirement Plan that can take that they can take with them when they complete their service obligation. But do not reach a 20year retirement. Its time that the personnel system complements the retirement system with more flexibility and ability to target certain skill sets when needed. The services have been discussing for years the need for more flexible personnel system but 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 are requirements and standards that need to be maintained. Im interested in exploring concrete options that create flexibility to attract the qualified individuals needs to fit the requirements and as those requirements change maintain 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 witnesses. Dr. John hamre, ceo and president of center for strategic and international studies, michelle, flournoy and dr. Dov zakheim. As i mentioned each have held high position in the department of defense and were grateful for yall being here. Without ob jux your full written statement will be made part of the record. But at this point wed be pleased to hear any oral comments youd like to make. I want so say thank you for your committee taking so seriously this work of Defense Organization reform. You know, this is not the kind of thing most committees are doing these days. Im so proud you are and thank you for that. Could you move your microphone up. We worked on that hard but we made some serious mistakes with the Packard Commission reform. We didnt understand it at the time. But when we took the chief of staff of the services out of the chain of command for acquisition, that was a mistake. You fixed that two years ago. And im very grateful for that. We dmingished the role of defense and engineering. That was a mistake at the time. You fixed that last year. And i havent i know theyre working unfortunately i think you undermine the impact of this when created the second undersecretary for that position. The purpose for your goal last year we had conversations with the committee was to make the innovation secretary the third most important position in the building. And that was the right thing to do. You did that. But by introducing a second undersecretary who takes care of acquisition, thats where the money is. 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 ecosystem within the department so we become more dynamic in addressing new technology and new threats was unfortunately undermined when you created the second undersecretary. And i would ask you to go back and take a look at that. You did the right thing by delaying implementation, 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. I would plead to you to take a look at that. You put in the authorization act last year, you created the chief management office, as written now it doesnt really do anything new. 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 that 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 investments, et cetera, for this very important function, to oversee the defense agencies. Its about 130 billion. Theres a lot of work to be done here. But youre not going to get management out of the job the way you wrote it last year. So i apologize for being blunt here, but you absolutely are on the right track. Flattered to work with you on anything this year. I have not seen your draft bill but i look forward to working with you in the committee, sir. Thank you. Thank you, sir, ms. Flournoy. Mr. Chairman, distinguished members of the committee. Truly an honor to be here to testify before you on such an such a critical topic as defense error form. Its hard to remember a time when the need for defense reform was more acute, given the incredible challenges that our military is likely to face in the future. We have a military that is more capable than ever before, but also its on a mission that is 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 really maintain our Tech Knowledge california edge in the future in a far more challenging security environment. So now is a time to continue with a plan for robust reform to make sure we get the most out of every taxable 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, in the future. The first is rightsizing do. O. Headquarters and in particular transforming defense agencies. If you look today at the office of the secretary of defense, the joint staff, the combat and command headquarters and defense agencies they total about 240,000 people, excluding contractors. That is about 20 of the Defense Budget. The substantial growth in dod headquarters is not just a matter of inefficiency but also one of ineffectiveness. In the private sector, bloated head quarter staffs have been documented to slow Decision Making, push too many decisions too far up in the organization, incentivize riskaverse behavior, undermine organizational performance, and compromise agility. I think the same can be true in government. The agencies account for about 134 billion of the dod budget. So the high priority, in my mind, should be given to the large agencies that operate most like civilian businesses, including dla, the defense logistics agency, dha, the Defense Health agency, and the finance and accounting service. And what i would encourage you to do is to require the secretary of defense to undertake a comprehensive management assessment of these agencies, looking at where best business practices, new Technologies 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 to have flexibility and breathing room, to assess across the dod headquarters, areas of potential overlap and look for opportunities to restructure, consolidate, reassign personnel, eliminate unnecessary offices and functions. And just hearing johns proposal for giving the cmo line responsibility over the agencies i think its very much worthy of consideration. Second key area i would love for you to grapple with is brac, the department desperately needs this background. The estimate is currently 22 of current infrastructure is excess to military need. The Service Chiefs have repeatedly testified that infrastructure overhang is taking money away from readiness and from modernization and critical future warfighting 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 closures that concluded that most jobs are ultimately replaced and most affected communities actually do recover quite well. I think in a year where congress is also considering a major Infrastructure Investment bill you could imagine directing some of that investment to affected communities and potentially easing their transition and mitigating some of the job losses associated with brac, so bottom line, every dollar we spend on unneeded infrastructure is a 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 Employee Work the civilian work force. Today, the dod maintains about 170,000 employees, you have an an multiple efforts 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 work force. I would encourage you i list them in my testimony. Ill just briefly touch on some of them here. But retiring the secretary to develop a comprehensive Human Capital strategy for how we recruit, develop, and maintain and shape the civilian work force, including in that, assessing the optimum mix between military civilian and contractor work forces. Secondly to set realistic personnel Cost Reduction target. So actually further modify the visp 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 authority that you provided last year but has not been used by the department yet. To give the secretary flexibility to reallocate and reassign personnel as he rightsizes and reshapes the organization. Really looking to consolidate the personnel system, currently there are 66 systems being used for the civilian work force 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 hire, manage, develop, compensate, retain dod civilian work force. And there are a number of other ideas that i list there as well. The fourth area is improving the quality of health care while reducing costs. Today, the military Health Care System costs have nearly doubled over the last decade. With the cbo estimating an additional 40 billion by 2013. 2030. What is even more important in my mind is that survey data suggests that the quality of care received by the military personnel and their dependents remains uneven, and below the civilian benchmarks in key areas. So i think this is an area where dod and the congress have an opportunity to explore ways of both improving the quality of care while also leveraging approaches like valuesbased health care to reduce costs. In my written testimony, i actually draw from an excellent report that bob hale, the former dod comptroller did for cnas, and highlights five areas of Health Care Reform that i think are worthy of looking at. Wartime readiness, valuebased reimbursement, utilizing services and availability of choice. Let me conclude by saying i really think we have a tremendous opportunity with this secretary and this congress to move forward on these issues. I think now is the time to provide the secretary of defense with the authority and flexibility he needs to actually get better at performance and free up resources for reinvestment and higher priority areas. But that said, defense reform as you all know is not a panacea. 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 vetting diplomacy and Development Accounts that are also critical to our security. I believe that reaching a comprehensive budget deal including all the elements from tax reform to entitlement reform to Smart Investments in the drivers of our economic portion and growth, its not only an economic imperative, its become a National Security imperative. Lastly, i hope the dialogue this committee is fostering, the congress and executive branch will be able to partner more closely together and make hard choices and undertake the reforms necessary to ensure that we truly keep faith with the men and women who serve in the best fighting force in the world. I think you would at agree they deserve nothing less. Thank you. Thank you. Dr. Zakheim . Thank you, mr. Chairman, Ranking Member smith, like my colleagues here ive been in front of this committee several times and its a real privilege to be here again and to testify yet again on defense reform. The last two years this committee the committee has literally led the charge on implementing, first legislating and then helping to in effect implement reforms that were souther sorely needed in the department. But as my colleagues pointed out and everybody here recognizes theres still a way to go. I want to focus on some of the topics that have already been mentioned. The list is very long. Let me begin fi