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September 24, 2001
(House Rules)


H.R. 2586 - National Defense Authorization Act for FY 2002
(Rep. Stump (R) AZ and Rep. Skelton (D) MO)

The Administration commends the House for its action in developing comprehensive and balanced national security legislation that is largely consistent with the Administration's national defense priorities. While the Administration supports the bill, there are several provisions, principally competitive sourcing and base closure and realignment, that the Administration hopes will be improved before the bill reaches the President's desk. The Administration looks forward to working with Congress to address these and other concerns.

H.R. 2586 supports the Administration's effort to address shortfalls in readiness, enhance the quality of life for our military troops and their families, and begin the transformation of the nation's defense capabilities to meet current threats. In particular, the Administration applauds the increase provided by H.R. 2586 for the quality of life of our members of the armed forces by providing a pay raise of at least 6% for enlisted members, at least 5% for officers, and up to 10% for members in certain pay grades. Moreover, it reduces service members' average out-of-pocket housing expenses from the current 15% to 11.3% in fiscal year 2002. The bill also funds most of the Administration's missile defense program. It is imperative that this level of funding not be reduced if the U.S. is to meet its objective of countering missile threats of all types. H.R. 2586 is consistent with the Administration's policy of making permanent the authorities in the Military Housing Privatization Initiative. The Administration appreciates the provision of the bill (section 342) that supports effective home-schooling for Department of Defense dependent children whose parents choose that educational option. In addition, the bill would help the Administration's efforts to identify and recover overpayments.

H.R. 2586, however, includes a number of provisions which are of great concern.

Competitive Sourcing

The Administration strongly opposes sections 331, 333 and 361-366. Sections 333 and 361-366 would severely limit the Department's ability to acquire services necessary to help the Department meet current threats. The Department of Defense must have the flexibility to choose the public or private source best able to meet the nation's pressing needs. The President wants Congress to send him a bill that he can sign quickly. Accordingly, his senior advisors recommend that the highly objectionable provisions be corrected so that this critical flexibility can be preserved.

Sections 361-366 would impose significant burdens and cost on the Department through the misdirected application of public-private competitions. The Administration strongly objects to the requirement to conduct public-private competitions for all new requirements and previously contracted work -- both subject to recurring private sector competition -- and for de minimis activities where direct conversions can yield significant savings. The Administration also strongly opposes creation of a new reporting system, as called for by sections 333 and 366, for tracking the direct and indirect manhours and proprietary cost information of its contractors and the unnecessary burden this will impose on businesses for information that offers little or no value in ensuring successful contract performance. Section 333 would inappropriately exempt reporting requirements imposed by the Army from public comment and review by the Office of Management and Budget under the Paperwork Reduction Act that would ensure the benefits of collection outweigh burden and cost. The Administration strongly urges deletion of these costly and burdensome provisions that could jeopardize the Department's ability to contract for services in a timely manner.

Section 331 would restrict the Department's ability to conduct reviews of in-house functions for first-time competition with the private sector. The Administration seeks to achieve savings (of anywhere from 20 to 50 percent) and improve delivery of service through competition. The Department estimates almost $12 billion in net savings from competitions between fiscal years 1997 and 2007. Restricting the number of functions eligible for competition in fiscal year 2002 to approximately 3,000 positions is substantially below planned levels for DoD competitions and would prevent the Department from fully realizing these savings.

These provisions are inconsistent with the goals of the President's Management Agenda, which was announced just last month. The Administration believes these provisions should be eliminated, or significantly revised, before the bill is presented to the President.

Base Closures

H.R. 2586 does not include language that authorizes the Administration's proposed "Efficient Facilities Initiative." This legislation would authorize a reduction in excess infrastructure through an additional round of base closure and realignment, allowing the Department to better meet operational readiness objectives and modernization requirements in support of our overall national security homeland defense and war fighting plan. The President wants Congress to send him a bill that he can sign quickly. Accordingly, his senior advisors recommend that these essential provisions be included and a bill passed as quickly as possible.

Defense Acquisition and Support Workforce Reductions

The Administration strongly opposes the mandated cut of 13,000 acquisition workforce personnel in section 901. This cut would severely damage the quality and cost management of weapon system programs aimed at ensuring the long-term superiority of America's armed forces. Between 1989 and 2000, DoD reduced its civilian acquisition workforce by over 51% -- leaving an older workforce with 50% eligible to retire by 2006. Strategic planning projections indicate that DoD will be unable to backfill expected attrition beginning as soon as FY 2004. Numerous DoD, GAO, and private studies identified this looming crisis and the increased risk to defense acquisition from added workforce reductions. The Department is approaching the challenge of reducing the workforce through human capital planning, and this arbitrary cut would undermine ongoing efforts that are critical to the transformation of the U.S. defense posture.

Vieques

While the Administration supports the Committee's cancellation of a currently scheduled November referendum over the future of the Vieques training range, the Administration is concerned that the bill's certification requirements are unnecessarily rigid. The Administration believes that the Navy's training needs may be met through a combination of geographic locations and alternative training methods as opposed to a single training site. In addition, the Administration objects to the provision that would require the Navy to retain administrative jurisdiction over the Eastern end of Vieques in the event that operations terminate. This requirement would drain scarce resources from the Department of the Navy that would otherwise be directed toward national defense.

Fort Irwin

The Administration opposes section 2906 concerning Environmental Compliance and Response Requirements in connection with the Fort Irwin Military Land Withdrawal Act of 2001. The Administration urges the House to adopt the language in section 2906 of the Administration-cleared proposal, which was agreed to by the Department of Interior and the Department of the Army.

Indemnification

The Administration opposes the broad indemnification language contained in section 2812, which would require the Secretary of Defense to indemnify persons or entities that own or control property that was previously part of the Brooks Air Force Base in Texas. The proposed section would imply that the current legal requirements are insufficient, and, therefore, may create significant legal problems for the Federal government, as well as the potential for large unfunded liabilities in the outyears. Depending on the clean-up issues attendant to the site, this section may create a situation in which United States is required to defend commercial or corporate entities against which it is bringing an action.

B-1 Bomber Retirement

H.R. 2586 would prohibit the retirement of any B1-B bombers until Congress receives various reports and studies from DoD. The Administration is concerned that this reporting requirement would unnecessarily delay the B-1 consolidation plan and inhibit the Secretary's ability to manage the Department's activities in an efficient manner. Delaying the consolidation means that more support funding would be required to maintain B-1s that are no longer required. In addition, these delays may slow the savings shift for critical upgrades to the remaining B-1 bomber fleet.

Defense-wide O&M

The Administration objects to the $330 million reduction to Operation and Maintenance, Defense-wide. This would disrupt many operations and supporting activities that are critical to the readiness and well-being of U.S. forces and military personnel.

Navy-Marine Corps Intranet

Language permanently excluding the Marine Corps from the Navy Marine Corps Intranet (NMCI) as well as other FY02 exclusions, and the $125M undistributed reduction to the Navy's NMCI O&M account threatens efforts to transform information technology in the Navy and Marine Corps. Further, the undistributed O&M reduction will adversely affect existing information technology support since the funds are the same as those intended for NMCI.

Presidio Trust

The Administration objects to section 2863, which would require the Presidio Trust to provide housing to Army employees at below-market rates. This would undermine the purpose of the Presidio Trust -- to manage this government property in a self-sufficient manner -- and encourage other groups to seek special benefits.

Medical Product Enhancement

The Administration is concerned with the provision allowing research to be conducted on human subjects without their informed consent in order to advance the development of a medical product necessary to the armed forces. While we recognize a legitimate need for the Defense Department to have equivalent waiver authority for emergency research as that specified in the Food and Drug Administration's regulations, the provision as drafted may jeopardize existing protections for human subjects in research, and must be significantly narrowed. We look forward to working with Congress to modify this provision.

CHOICE Initiative

The Administration appreciates the support for improved benefits and services to our Nation's military personnel. H.R. 2586, however, includes a provision that would prohibit the Secretary of Defense from annually ensuring that military retirees choose between DoD and VA for health care. This provision runs counter to the President's "CHOICE" initiative to better coordinate DoD and VA services. This "CHOICE" initiative would enhance continuity of care, while optimizing resources by preventing duplication of benefits.

VA Disability Compensation

H.R. 2586 would authorize military retirees to receive VA disability compensation without a reduction in retirement pay. While the provision would be contingent on passage of subsequent legislation, the Administration opposes the repeal of the current prohibition on the concurrent receipt of military retired pay and VA disability compensation. The Administration is committed to ensuring the health and security of all of our military retirees. To that end, the Administration is currently conducting a study of the issue of concurrent receipt of military retired pay and VA disability benefits as requested in section 314 of the budget resolution (H. Con. Res. 83). Section 314 states that the Secretary of Defense should submit the report not later than November 6, 2001, along with any legislation considered appropriate. We look forward to working with Congress to address this important issue.

Counterdrug Operations

The Administration is concerned with the limits imposed by sections 1022 and 1023, which will foreclose counterdrug operational decisions. The Administration is currently reviewing the Tracker Aircraft and the Tethered Aerostat Radar System programs. Thus, any action on these programs would be premature until the results of the review are complete. The Administration is also concerned with section 2408, which would undermine the Administration's ability to re-establish counterdrug operations support capability once resident in Panama.

Federalism

While section 2811 appropriately allows the Secretary of Defense to override State hunting, fishing, and trapping laws for military bases when necessary for public safety, the Secretary should not override such State laws merely for morale, welfare or recreation activities at the bases. Section 2811 should be amended accordingly.

Maritime Security Program Transfer to DoD

The Administration is concerned that H.R. 2586 does not support the President's proposal to transfer funding and management of the Maritime Security Program (MSP) to the Department of Defense. MSP supports U.S. national security, and the program would be more effectively managed through the Department of Defense. The Administration also notes that the Committee provided $100 million, $70 million above the level enacted in FY 2001, for the Maritime Administration's Title XI loan guarantee program. The Administration is attempting to reduce corporate subsidies and proposed zero funding for Title XI. The Administration is confident that corporations involved in shipbuilding can secure loans from private lenders without this subsidy.

Disposition of Surplus Defense Plutonium

Section 3134 places additional requirements on the Department of Energy's (DOE) plans to dispose of surplus plutonium. The Administration does not believe that the proposed provision is necessary or beneficial to the Department's efforts to effectively manage this material. The Administration has already indicated its commitment for the timely disposition of surplus plutonium, and is implementing a dual-track program to dispose of surplus fissile material located at cleanup and closure sites, including the Savannah River Site. The Administration notes that the cleanup of DOE's environmental liabilities depends on the integration of various facilities located throughout the country. Actions taken for the primary benefit of a single site will invariably constrain critical activities at other sites, and ultimately will have negative consequences for the taxpayers.

Department of Energy Transfers of Weapons Activities Funds

Section 3130 would authorize the head of each national security laboratory and nuclear weapons production facility to transfer up to $5 million or 110% of the authorized amount from one program to another within DOE's weapons activity account. These individuals are employees of contractors who manage and operate the facilities. They are not Federal officials. It would be most inappropriate to vest the authority to allocate Federal program funds to contractor employees, whose job is to carry out, rather than determine, Federal policy concerning the disposition of federal funds. The Administration recommends that the NNSA Administrator be given this authority.

Contract Authority for Multiple Year Lease of Prepositioned Ships

H.R. 2586 does not include the Administration's request for contract authority to allow the Working Capital Funds (Military Sealift Command (MSC)) to enter into multiple year leases for prepositioned ships. Without contract authority, DoD will be required to negotiate the contracts on an annual basis, which would require prepositioned ships to return each year to the United States for cargo off load, reducing readiness and increasing costs.

Accrual Funding for Military Retiree Health Benefits

The Administration is pleased with the Committee's decision to include technical corrections to the accrual funding mechanism for health benefits to military retirees over age-65. However, the Administration is concerned that the language prevents payments from the fund to military health facilities, and makes the participation of other Uniformed Services voluntary instead of mandatory.

Civilian Pay Policy

Section 1107 would eliminate the bi-weekly cap on premium pay under 5 U.S.C. 5547 for all federal civilian employees and replace it with an annual cap. The language contains technical errors and could result in significant agency costs and serious staffing problems. The Administration intends to address pay reform comprehensively and opposes the changes in premium pay included in Section 1107.

Monroney Amendment

The Administration opposes restoration of the Monroney provision, section 1110. Artificial increases in Federal wages, which would occur under this provision, could make affected jobs less competitive with the private sector, increasing the probability that the work will be contracted out. If there are local pay anomalies causing recruitment or retention problems at installations, there are administrative authorities available to provide relief and thus legislative action is unnecessary.

Constitutional Concerns

Provisions that purport to require or authorize subordinate executive branch officials to submit draft legislation to Congress (for example, sections 903 and 2911) must be construed consistently with the constitutional grant of the executive power to the President and the President's sole power under the constitution to recommend to Congress such measures as he shall judge necessary and expedient.

Section 1208 purports to limit the authority of the President as Commander in Chief to deploy the armed forces to a foreign country. The provision unwisely limits the ability of the President to take action in an unforseen emergency and should be stricken. The provision would be construed in a manner consistent with the President's constitutional authority.

The Administration discourages the continuing Congressional practice of enacting secret law. Therefore, the Administration discourages the use of the statutory classified annex in section 1002 and instead encourages use of classified annexes to the joint statement of conference managers and committee reports.

The Administration strongly supports establishing a consistent policy for all federal employees with regard to differential payments for asbestos exposure, and we have already provided enabling language to Congress. However, the language included in Section 1108 would, on a retroactive basis, make some federal employees ineligible for payments with respect to work they have already performed for which a standard of exposure exists, whereas those employees may be currently entitled to receive payments for that work. We urge the Congress to substitute the language included in the Administration's proposal, which provides for the payment changes to be made on a prospective basis.

Pay-As-You-Go (PAYGO) Scoring

Any law that would effect direct spending is subject to the pay-as-you-go requirements of the Balanced Budget and Emergency Deficit Control Act. Accordingly, H.R. 2586 or any substitute amendment in lieu thereof, that would also effect direct spending, will be subject to the pay-as-you-go requirement. OMB's PAYGO scoring of H.R. 2586 is still under development. The Administration will work with Congress to ensure that any unintended sequester of spending does not occur under current law or the enactment of any other proposals that meet the President's objectives to reduce the debt, fund priority initiatives, and grant tax relief to all income tax paying Americans.


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