Federal News Service - Transcript

Federal News Service
HEADLINE: PANEL ONE OF A HEARING OF THE SENATE GOVERNMENTAL AFFAIRS COMMITTEE
 
SUBJECT: TRANSFORMING THE DEPARTMENT OF DEFENSE PERSONNEL SYSTEM: FINDING THE RIGHT APPROACH
 
CHAIRED BY: SENATOR SUSAN COLLINS (R-ME)
 
LOCATION: 342 DIRKSEN SENATE OFFICE BUILDING, WASHINGTON, D.C.

WITNESSES: SECRETARY OF DEFENSE DONALD RUMSFELD; GENERAL RICHARD MYERS, CHAIR, JOINT CHIEFS OF STAFF; DAVID CHU, UNDERSECRETARY OF DEFENSE FOR PERSONNEL AND READINESS; AND ADMIRAL VERN CLARK, CHIEF OF NAVAL OPERATIONS, U.S. NAVY
 
BODY:
SEN. COLLINS: The committee will come to order. Good morning.

The primary goal of the federal personnel system should be the recruitment and retention of the highest quality workforce to serve the people of the United States. Unfortunately, the antiquated system now in place does not always achieve that goal. Although there are many, many superb federal employees, bureaucratic barriers make it hard to reward their efforts, and it has become increasingly difficult for agencies to attract and retain employees with technical expertise or special skills.

The Department of Defense has delivered to Congress a far- reaching proposal to grant the secretary of Defense broad new authority to dramatically restructure the department's civilian personnel system, a system that covers some 730,000 federal workers. The department contends its proposal will provide the flexibility and agility needed to respond effectively to changes in our national security environment. To accomplish this objective, the administration proposes giving the secretary of Defense not only the significant personnel flexibilities that Congress granted to the secretary of Homeland Security, but also additional authority to unilaterally waive several other personnel laws.

Although the administration has submitted a bill that affects virtually every significant aspect of the personnel system, three personnel flexibilities are of particular importance to the department. First, the department seeks authority to replace the current general schedule 12-grade pay system with a performance-based system through which workers would be compensated according to merit, not longevity. Second, the department wants the authority to conduct on-the-spot hiring for hard-to-fill positions. And third, the department seeks the authority to raise collective bargaining to the national level rather than negotiating with approximately 1,300 local bargaining units.

Over the past four weeks, Senator Voinovich, who has been a leader on human capital issues, and I have reached out to a wide variety of interested parties in an attempt to put together a proposal that would be both fair and effective. We have been joined in our efforts by Senator Sununu, who has long had an interest in our federal workforce, and by Senator Levin who, as the ranking member of the Senate Armed Services Committee, and as a senior member of this committee, brings a wealth of knowledge and insight to this process. Their assistance and support have been invaluable, and I want to thank them for their efforts.

I had intended to offer our consensus proposal as an amendment to the Senate Defense authorization bill.

I was dismayed to learn, however, that our amendment was not deemed relevant by the parliamentarian and therefore would be ruled out of order. The House, however, has included legislation similar to DOD's plan as part of its version of the Defense authorization bill.

Quite simply, I believe that civil service reform of this magnitude is far too important an issue for the Senate to remain silent. As the conference on the Defense authorization begins, I hope that our efforts in this committee—which, after all, has jurisdiction over the civil service laws—will help shape the outcome of the personnel provisions in the Department of Defense bill.

Our legislation would, among other things, provide the secretary of Defense with the three pillars of his personnel proposal and thus would allow for a much-needed overhaul of a cumbersome, unresponsive system. Our bill would grant the administration's request for a new pay system, on-the-spot hiring authority, and collective bargaining at the national level. In addition, our legislation would enable the secretary to offer separation pay incentives for employees nearing retirement, as well as to offer special pay rates for highly qualified experts, such as scientists, engineers and medical personnel. It would also help mobilize federal civilian employees, whose military pay is less than their federal civilian salaries.

But we would not propose to give the secretary all that he asks for. Instead, we have attempted to strike the right balance between promoting a flexible system and protecting employee rights.

For example, our bill takes a different approach to the issue of employee appeals. In contrast to the DOD proposal, our legislation does not grant the secretary the authority to omit the Merit Systems Protection Board altogether from the appeals process. Instead, our legislation calls for a gradual transition from the MSPB to a new internal appeals process and requires the Department of Defense to consult with the MSPB before issuing the regulations creating the new process.

In addition, our legislation retains the MSPB as an appellate body and gives the employee the option of judicial review if that employee is adversely affected by the final decision. Our purpose is to ensure that the civilian employees at the Department of Defense are entitled to safeguards similar to those afforded other employees in the federal workforce.

Another important difference is that our bill does not grant the authority to the secretary to waive the collective bargaining rights of employees. The department has repeatedly stated that it has no desire to do this. We take the department at its word, and therefore, do not grant the broad authority it does not intend to use. Instead, our legislation places statutory deadlines of 180 days on the amount of time any one issue can be under consideration by one of the three components of the Federal Labor Relations Authority. This alone should improve the timeliness of the bargaining process and prevent the occasional case from dragging on for years.

The bottom line is, I believe, that our proposed legislation would give the authority to the secretary that he needs to manage and sustain a vibrant civilian workforce of some 700,000 strong. We are working hard to build a consensus on this legislation and to resolve these complicated issues in a fair and equitable manner. After all, the changes that we make in the department's personnel system will affect more than one-quarter of the total federal civilian workforce. We need to get this right.

I welcome our witnesses today. I look forward to hearing their views and insights on this important issue. As our committee members can see, we have an extremely distinguished panel before us. Before I do turn to our first panel of witnesses, I would like to call on my colleagues for opening statements.

I'd like to begin with Senator Levin, whose help has been invaluable in drafting the consensus legislation that we have introduced. He has a great deal of experience in Department of Defense issues as a result of his ranking member status on the Armed Services Committee, and has—is actually the senior member on this committee, as well. So, I'm very appreciative of his efforts. And I'd like to call on him now for any opening remarks.

SEN. CARL LEVIN (D-MI): Thank you, Madame Chairman. Thank you for calling today's hearing. With this committee's jurisdiction over the federal civil service system comes a responsibility for reviewing and considering proposed changes to the system. And I particularly appreciate our chairman's determination to address this issue completely and fairly. This is the way she approaches all issues. She has used this approach, as expected, with this issue, as well; an extremely complicated issue with a long history, but I commend her for her determination to look at this objectively, and fairly and comprehensively.

I also join her in welcoming this very distinguished panel. The importance of the issue before us is demonstrated by the fact that they're here today. In the midst of all of their other extremely significant responsibilities, they are here today to talk about an issue which, obviously, just by their presence illustrates its significance.

On April 11th this year, the administration submitted a legislative proposal that would fundamentally alter the federal civil service system by authorizing the secretary of Defense to waive provisions of law governing employee performance, pay and allowances, labor relations, hiring and firing, training, pay administration, oversight and appeals. The administration proposal did not include any specific legislated procedures or processes, however, for the new civilian personnel system, other than the requirement that the new system be, quote, "flexible and contemporary."

The federal civil service system was established more than a century ago to replace a patronage system that was characterized by favoritism and abuse. As we contemplate the possible reform of that system, we must take care that we do not allow those abuses to resurface. The Defense Department proposal would give the secretary of Defense extraordinarily broad license to hire and fire employees and to set employee compensation virtually without legislated restrictions or constraints. This would not only be the greatest shift of power to the executive branch in memory, it would also put us at risk of a return to some of the abuses of the past. While it is true that this proposal would preserve the merit system's principles, it is not just the principles which are important, but also the processes and procedures by which these principles are implemented and enforced. If these processes and procedures are toothless, the merit system's principles could become empty letters.

In short, I believe that we need to build some protections into any new system to avoid a return to the patronage, political favoritism and abuse that characterized federal employment before the advent of the civil service system. It is our responsibility to counterbalance the natural temptation for future Department of Defense officials to reward loyalty over quality of performance and provide pay and promotions to those who tell senior officials what they want to hear.

I join in Chairman Collins' proposal because I believe that it would go a long way towards building these critical protections into any new system.

Department of Defense officials have stated that they need this new authority so that they can establish an expedited hiring process and institute a pay-for-performance system based on pay banding approach used under several Department of Defense pilot programs. However, the administration's proposal does not even mention the words "expedited hiring, "pay for performance" or "pay banding," let one give any indication of how the new system would work.

The current civil service system, as our chairman has mentioned, is not perfect, and I agree with her and join with her in stating that it can be improved. Indeed, every serious review of the current system, including both the Clinton administration's National Performance Review and the recent report of the Volcker commission, has concluded that improvement is needed.

For this reason, I supported a series of so-called demonstration programs, including the Defense acquisition workforce pilot program and the Defense laboratory pilot programs, under which Congress has authorized the use of pay banding, rapid hire procedures and other personnel flexibilities by the Department of Defense. Those demonstration projects are widely viewed as having been successful and have contributed to the department's ability to attract and reward qualified personnel. On the basis of that experience, it is reasonable to consider extending similar authority to other areas of the Department of Defense's civilian workforce.

If we're going to do so, however, we have a responsibility to go beyond slogans and to authorize specific changes to address specific problems. If we throw out the old system without saying what will replace it, we will find ourselves revisiting this issue again and again, year after year, as we try to patch together answers to questions that we should have answered in the first place.

And that is, again, why I so appreciate the constructive approach that the chairman has taken to this issue and have cosponsored the legislation which she has introduced. It does offer specific solutions to specific problems. Our bill would give the Department of Defense the flexibility that it seeks to establish pay banding, rapid hire authority, a streamlined appeal process and national-level bargaining, but it would do so without giving up the employee protections that are needed to prevent abuse and are needed to make the civil system—civil service system work. That is real reform. It is workable reform.

And again I want to thank our chairman for her extraordinarily constructive and detailed and involved effort here. And I again welcome our witnesses.

SEN. COLLINS: Thank you very much, Senator Levin.

I'd now like to call on Senator Voinovich, who is the subcommittee chairman with jurisdiction over the civil service laws, and has been the committee's leader on human capital issues. He has worked very hard on this issue, as I mentioned in my opening statement, and I'm delighted to call on him for his opening remarks.

SEN. GEORGE VOINOVICH (R-OH): Thank you, Madam Chairman. I thank you for holding this hearing on the proposed National Security Personnel System for the Department of Defense. I welcome all of our witnesses, and I'm especially grateful that Secretary Rumsfeld and General Myers are able to join us today, and Admiral Clark and Assistant Secretary Chu.

Mr. Secretary and General Myers, I commend you for the outstanding leadership during Operation Iraq Freedom. Our world is a safer place because of the coalition you led to liberate the Iraq people and prevent a tyrant from using weapons of mass destruction.

During Desert Storm, I was governor of Ohio and commander in chief of the Ohio National Guard, and because of that, paid particular attention to the way that that war was waged. Unfortunately, we lost 19 Ohioans in that war. The advances in military capabilities over the last 12 years that you have made are incredible. And when I recently visited Wright-Patterson Air Force Base in Dayton, I was impressed at how proud General Lyles and his staff were for the technology that was used in Operation Iraq Freedom, such as the Global Hawk and the Predator drone.

My discussions with General Lyles took place at a field hearing my subcommittee conducted to examine the status of the civilian staff of the Department of Defense. It's hard to believe that there are 740,000 civilian workers at DOD. That's about 40 percent of our entire federal workforce. And as I noted that day, we must ensure that DOD civilians have the tools and resources they need to perform their critical mission. I was pleased that Undersecretary Chu testified, along with Comptroller David Walker, and I'm glad that they're with us again today.

Madam Chairman, as you know, I've devoted a significant amount of my time to improving the culture of the federal workforce. Over the last four years, my subcommittee has held 13 hearings on the federal government's human capital challenges. I have worked with some of the nation's top experts on management, public management, to determine what new flexibilities are necessary to create a world-class 21st century workforce. Some of these include the Brookings Institute, the National Academy of Public Administration, the Volcker Commission, Harvard's Kennedy School of Government, various federal employee groups and members of this administration.

Four years ago, I was the primary sponsor of an amendment to the Fiscal Year 2000 Defense Authorization Bill that authorized 9,000 voluntary early retirement and voluntary separation incentive payments through this fiscal year. Of those 9,000 slots, 365 have been used at Wright-Patterson Air Force Base in Ohio to start to reshape their workforce. Even for such a modest reform proposal, I must tell you it was like going through the Maginot Line to achieve this important authority for the Department of Defense. I'll never forget the grief I went through just to get that little bit of litty-bitty change.

SEN./MR. : (Laughs.)

SEN. VOINOVICH: Okay.

I'm gratified as to how far we've come since 1999, and I'm pleased that workforce reshaping reforms have helped make a difference for the department. However, I am concerned, and I share the concern of the chairman and Senator Levin, that some of the provisions of the current proposal go too far. For example, the proposed removal of oversight authority and jurisdiction of the Office of Personnel Management and the Merit Systems Protection Board. I'm also concerned, as Mr. Walker has observed at previous hearings, that DOD does not yet have the appraisal mechanisms in place to allow for a successful pay-for-performance system. Finally, as Dr. Chu knows, I am concerned about DOD's announced staffing reductions. These reductions are already impacting the department's ability to reshape the civilian workforce, as was testified to by General Lyles at Wright-Patterson Air Force Base.

Madame Chairman, on many occasions in Governmental Affairs Committee hearings, I have referred to the observations of former Defense secretary Jim Schlesinger, a member of the U.S. Commission on National Security in the 21st Century, concerning the importance of federal employees in national security agencies. Secretary Schlesinger noted that, quote, "fixing the personnel problem is a precondition for fixing everything else that needs repair in the institutional edifice of the United States national security policy," end of quote.

Mr. Secretary, I recognize we have different opinions on some of the key issues in your proposal, but I commend you for your zeal and your commitment. I know that because of your dedication to solving this problem, we will finally make some real progress in this area. As I say, while I have some reservations about the breadth and depth of the proposal and the House bill, I'm delighted you're here and that we are finally tackling the human capital challenges at the Department of Defense. It's long, long overdue. Your presence here and your efforts in the House indicate that the light bulb has gone on and substantial progress will be made as a result of your efforts.

And in that regard, Senator Collins, Levin, and Sununu and I have introduced Senate 1166, the National Security Personnel System Act. We believe that our bipartisan legislation helps your efforts, although taking a different tact than your proposed national security personnel system.

With the new threats of post-9/11, it's appropriate the Department of Defense is transforming its capabilities in force. And to achieve that goal, it's imperative the department have the ability to reshape its workforce.

As a former mayor and governor, I know effective human capital management requires communication, collaborations, patience and time. I believe managers should work with employees to establish policies that can help an agency accomplish its mission. I'm pleased that the Department of Homeland Security is working with its employees to establish its personnel system. And I'm pleased that some of the provisions for mandatory interaction between management and labor are contained in your proposed personnel system. It's extremely important that the employees be involved in shaping the new system.

Madame Chairman, I'm sure that we are going to have a lively and engaging discussion with our distinguished witnesses today. Thank you for being here.

SEN. COLLINS: Thank you, Senator Voinovich. I'm now pleased to call on the ranking member of the subcommittee, another long-time leader on civil service issues, Senator Akaka.

SEN. DANIEL AKAKA (D-HI): Thank you very much, Madame Chairman. I want to thank you for your personal attention to this issue and for the work you've done in forging a bipartisan bill.

I also want to thank Senator Levin and Senator Voinovich for your hard work and your efforts on this issue. The manner in which you have addressed the DOD personnel proposal is testament to the respect and commitment this committee has for our nation's federal workforce.

I also wish to join my colleagues in extending a welcome and appreciation to our very, very distinguished witnesses.

About the same time that the department unveiled its personnel proposals, the GAO reported that DOD's human capital strategic plans lacked key elements. Most of the department and its components' human capital goals, objectives and initiatives were not aligned with the overarching missions of the organization. In addition, the plans lacked information on skills and competencies needed to carry out the department's missions. GAO found that the department's civilian workforce shrank 38 percent from 1989 to 2002, and positions were eliminated without regard to the skills and competencies needed to carry out agency mission. The lesson learned was that there must be strategic planning before taking major personnel actions.

I just don't see how providing the department the wide-ranging, broad authority it seeks without appropriate safeguards in place will appropriately address the shortcomings noted by GAO. I fear that approving DOD's proposal or the House provisions would give the Department of Defense the license to conduct surgical strikes on the civilian workforce.

For example, DOD seeks to waive Chapters 75 and 77 of Title V, dealing with adverse actions and employee appeals. This would allow the department to waive key employee rights, namely, the right to a hearing, on the record, before an independent third party; current discovery rights; and the right to counsel.

It is unclear why the department needs the authority to waive such important employee protections. Congress guaranteed these safeguards to ensure that the federal workforce is treated fairly, in an open and transparent manner, and free from political pressures. It is appropriate to request such authority without specific guidelines, credible—it is inappropriate to request such authority without specific guidelines, credible management plans, accountability to Congress and transparency of decisions.

As the ranking member of the Armed Services Readiness Subcommittee and co-chairman of the Senate Army Caucus, I am committed to a strong and viable military. And as the ranking member of the Governmental Affairs subcommittee responsible for the federal appeals process, I am equally committed to protecting the rights of federal employees.

Madame Chairman, I appreciate you holding today's hearing, and I look forward to the testimony and discussions that will follow. Thank you.

SEN. COLLINS: Thank you, Senator.

I'm now pleased to call on Senator Coleman, who has a great deal of experience with public employees as a result of serving as mayor. Senator Coleman.

SEN. NORM COLEMAN (R-MN): Thank you, Madame Chairman. And Madame Chairman, I want to join in thanking you for your leadership and your willingness to take on this tough issue. This is a tough issue.

When I got elected mayor in 1993, I was told that the toughest—biggest problems I was going to have were going to be in the personnel side and the human rights resources side.

And folks were right. And so I applaud you for your willingness.

The reality is that we shouldn't be accepting a lesser standard of performance in government. It was very hard for me as a mayor to fire employees who weren't performing. And somehow this sense that we have a lesser standard, that we will tolerate more insufficiency of performance on the public side shouldn't be.

And so the challenge, then, is how do we do that? How do we maximize the human capital? How do we provide, as Senator Voinovich talked about, a world class 21st century work force, at the same time provide the kind of balance that we need?

I want to applaud the secretary for taking this on. People talk about making change in government like being—it's not like a race car around the track, it's just like getting an ocean liner just kind of pointing in the right direction, and hopefully it gets there. We got to be able to move faster than that. We've got to be more efficient than that, we've got to be more capable than that. The American public deserves that. It deserves that.

So I want to applaud the secretary. We certainly need to retain safeguards against arbitrary management actions. I don't think there's any question about that. We need to increase hiring flexibility and allow managers to reward the best employees. The American economy runs on paying for performance, on rewarding quality. And we should expect no less from government.

So I look forward to hearing the testimony, I look forward to working with the chair in a bipartisan way, the other members of the committee under the proposal the chair has set forth. I think we can find that balance, we can find that equilibrium. But we need to make change. The current system is not one that Americans should accept. So again, I want to applaud the secretary for bringing forth this proposal.

SEN. COLLINS: Thank you, Senator Coleman.

I'm now delighted to call on the senator from Illinois, Senator Fitzgerald.

SEN. PETER FITZGERALD (R-IL): Thank you, Madame Chairman.

Mr. Secretary, thank you very much. General Myers, Admiral Clark, Dr. Chu, I want to thank you for appearing here today and also congratulate you on the success in Iraq. It's an outstanding job and an important win in the—an important battle win in the longer war on terrorism.

The subject of today's hearing is transforming the Department of Defense's personnel system for the 21st century. This is a vital issue affecting our national security. And I want to thank Chairman Collins for holding this timely and important hearing today.

Mr. Secretary, you are to be commended for undertaking a monumental challenge at a challenging time in our nation's history. That challenge is transforming our defense structure and bringing sound 21st century management principles to a monolith of the Cold War. Our nation is deeply engaged in a global war on terrorism. To fight and win this war, the Department of Defense needs sufficient flexibility in its civilian personnel system to expedite hiring, reward, performance and assign employees as necessary. The terrorists who operate from the caves and threaten our country are not mired in bureaucracy. We cannot allow our red tape to become an ally of the al Qaeda. Therefore more needs to be done to make the Department of Defense as agile as possible to confront these emerging threats, and reforming the department's personnel process is an important step in that direction.

It's important for the Senate to have a healthy debate over the precise dimensions of the proposed national security personnel system. However, it is also important to recognize the main objectives the proposed system is designed to accomplish.

First, the national security personnel system would provide the Department of Defense with flexibility to manage its employees. This will help the military to meet the rapidly changing security threats of the nation by allowing managers to utilize employee skills and services more effectively.

Second, it would strengthen the department's performance and improve its financial management by rooting out fraud and abuse. When former Secretary of Defense James Schlessinger and Admiral Henry Train (sp) testified last year before Congress, they stated that fixing personnel problems would pave the way for needed reforms in U.S. national security policy.

Third, it would provide for a swift and efficient defense support structure. The current Civil Service system uses a one-size-fits-all approach that does not suit the daily demands on the military for agility in today's security environment. Presently, it can take up to three months or longer for the department to hire a civilian employee. The long hiring and promotion process discourages highly qualified candidates, while at the same time impedes the mission of the department.

I look forward to working with this committee on legislation that would provide much-needed flexibility to the Department of Defense to organize its more than 700,000 civilian employees. I thank you for being here today, Mr. Secretary, and I look forward to your testimony.

Thank you, Madame Chairman.

SEN. COLLINS: Thank you, Senator.

Senator Lautenberg.

SEN. FRANK LAUTENBERG (D-NJ): Thank you very much, Madame Chairman. And I don't have a formal statement. I'll just very quickly say that before we get into the hard part of this exercise that I want to commend Secretary Rumsfeld, General Myers and all of those who served to accomplish the military objective that we had. Hats off to you. Very well done. We are proud of those who did it. That doesn't mean I don't question what some of the outcomes have been, but I do salute all of you, to use the expression. And—but I do want to discuss in some detail the suggestion that we transfer this huge group of employees—over 750,000, I believe, is the number—to a different kind of a system, because the one that is in place doesn't work perfectly.

But, Mr. Secretary, I think you know I had long experience in the corporate world before I got here. And the company I helped start many years ago today employs over 40,000 people, and it's one—it's a nice American success story, three poor boys who started a company that succeeded. And I found one thing: that the people who work for me in government—now we're trying this the second time. The first 18 years I didn't fully learn my lesson, so I came back to learn more. But one of the things that I found is that the dedication, the commitment of those who work under the federal system is unmatched. And again, I take it from my corporate experience as one of America's immodestly most successful companies. And I've seen the kind of output, throughput, commitment that is hard to find, and especially since a relatively modest wage scale is the reward for that.

The things that do supply some satisfaction, both psychic and real, are the benefits, so-called, and one of those benefits is the permanency of the employment; the ability to know that you have a job until retirement comes along.

And so, thank you, Madam Chairman, for the opportunity to express that. And I look forward to hearing from our witnesses.

SEN. COLLINS: Thank you.

Senator Stevens.

SEN. TED STEVENS (R-AK): Thank you, Madam Chairman.

And I welcome all of you after a job well done. And I consider you to be personal friends. I don't think there's a stronger supporter of the defense establishment in the Congress than I am. I have served in the executive branch, both in civil service and as presidential appointees twice. And I've been here through the periods of time of crises in the past, from Vietnam, in particular during the Nixon fiasco.

I believe that you're on the right track to modernize the concepts of dealing with personnel, civilian personnel, for the Department of Defense. But I've got to ask you, what's the rush? This bill came to us right after a success in the field. To some people, it implies that somehow or other civilian employees were responsible for some of the things that might have gone wrong in that period. I don't believe that's the case, but that's the comments I got from home.

Beyond that, I am part of a group that was the author of "Creating a New Executive Civil Service." The executive civil service concepts were to give us people trained and committed to public service who agreed, upon request, to transfer to any agency, including the Department of Defense. And I believe there have been those people in senior service transferred to and from the Department of Defense. I find nothing in this bill that authorizes that.

There are some walls in this bill that I don't understand. I do believe that management should have greater ability to hire, particularly in times of stress such as wars and emergencies. But I do believe there's an absolute necessity for a committed group of people who have decided to make civil service in the Department of Defense their careers; who can be protected against political change and personnel change above them, and can know that we value them as civil servants. Had we not had such a group during the period after the Nixon resignation and the changes that took place then, I don't think we would have had a stable government. They were the backbone of our society.

And I don't—I think in this bill there is a hint of discouragement to someone who is just out of college to think that he or she can set a goal to be a career civil servant in the Department of Defense. Instead, the emphasis seems to be that right now we should hire the best and the brightest to do whatever job there is, without looking inward to see who's in the department that ought to be qualified for that job first.

Now, I want to work with you, Madam Chairman, as a former chairman of this committee, and I want to work with the department for the change that's been recommended to the Appropriations Committee on how to handle money for all personnel, both civilian and military. These are sweeping changes, and I don't think there's any rush.

I remember so well when I came here, when someone told me, Mr. Secretary, that the Senate is sort of like the saucer in a cup of coffee. You pour a little bit what comes over from the House in that saucer and see how it tastes after it's cooled a little bit.

So I don't—I hope you'll understand, as far as I'm concerned, you've got a lot of great work in this bill that you suggested, but it's going to take some time to adjust and it's going to take some time to hear those people who are going to be affected most. And they're the people who are in mid-career right now who I hope will—some of them, at least, will make a decision to become career civil servants.

And I congratulate you for what you've done. And I particularly congratulate the command of the uniform services. Mr. Chairman, you and your people have just done such an admirable job. I told someone the other night that my generation was called "the greatest generation." This generation is all volunteers. Most of us were draftees. Every single one of the people you commanded was there because he or she chose to be there.

That's what I'd like to see for the whole department; a department of people who choose to be there and know that we'll protect them once they make their decision.

I've got to go to another hearing. I thank you very much.

SEN. COLLINS: Thank you very much, Senator Stevens. I would ask my remaining colleagues if they could give very brief statements, since the secretary's schedule is tight.

And I would call now on Senator Carper.

SEN. THOMAS CARPER (D-DE): Why did you say that just before I spoke?

SEN. COLLINS: (Laughing.) I apologize, Senator. (Laughter.)

SEN. CARPER: My reputation proceeds me. (Laughter.)

Mr. Secretary, great to see you. Admiral Clark, welcome. Nice to see you. Always nice to have a Navy man in the room. General Myers, we've seen a lot of you; we welcome you. And Dr. Chu, thank you for coming.

Mr. Secretary, your back is being covered by former Congressman Pete Geren, and is an old colleague. And we're delighted to see him. I'm going to be watching carefully to see if his lips move when you speak, so we'll -- (laughter) -- see how that goes.

I have a prepared statement I'd like to offer for the record, if I could, Madame Chairman.

SEN. COLLINS: Without objection.

SEN. CARPER: I'm delighted that you and, I think, Senator Levin and others on both sides of the aisle have offered legislation that deals with some of the issues that are going to be spoken to at today's hearing. And I think this is especially timely, coming at the heels—the end of a war in Iraq and not long after military action in Afghanistan, where we can actually look at how the current rules of engagement with respect to personnel, civil personnel, have impeded or helped or hindered our ability to extend our military might around the world, protect our security and to make sure that our interests around the world are addressed. So, this is very timely, and we look forward to hearing what you have to say.

I also want to look at it in context of the authorization we provided for the new Department of Homeland Security; whether what they have is working well, and if so, how that might be extended to the Department of Defense.

Again, Madame Chair, most timely. And I think I did that in a minute.

SEN. COLLINS: You did. Thank you so much.

Senator Sununu is a cosponsor of the legislation. I appreciate his support, and I would call upon him now.

SEN. JOHN SUNUNU (R-NH): Thank you.

Welcome, Mr. Secretary. No one will ever say of Secretary of Defense Donald Rumsfeld: He feared change. (Laughter.) But I think it's appropriate and important that that's the case, because we have a whole new set of national security challenges, and that has already required and will continue to require new organizational structures, new priorities and new sets of initiatives to protect our country. I think—I believe most of the committee members recognize that, and I hope they embrace that need for change, as well. And I think that's what we're here to talk about today.

I'm pleased to have supported the chair in working to craft legislation that does accomplish the goals of change and modernization within DOD civil service. As you well know, the proposal that she has crafted is not 100 percent of what Defense was looking for, and we're going to talk about that today. But I don't for a minute believe that that's because the motives of Defense in putting forward this proposal were bad or were weak in the least. This isn't about surgical strikes on any employees; it's not about retribution; it's not about blame. It's about creating a Defense system that does transform and modernize the Pentagon and that ensures that we can face these new national security challenges.

The proposal that's been crafted protects the rights of collective bargaining and mediation and so forth, but at the same time, it does accomplish what I hope, I believe, some of the principal goals of your proposal has been, and that is to establish pay for performance, to establish much greater flexibility in hiring, which I don't think is a bad thing, and I think it will only strengthen the opportunity that the Pentagon creates for new entrants, and of course, move toward national-level bargaining, which only makes common sense.

I'm excited that these changes are occurring. I think there's going to be a lot of work to be done and, I'm sure, a lot of give-and- take, in making this proposal—legislation as strong as it can be. I look forward to working with you and with Madame Chair.

And I would finally just ask unanimous consent that I might be able to submit some testimony from the Federation of Professional and Technical Engineers. Being a former engineer and maybe being an engineer again someday, I have appreciated working with the IFPTE and would ask unanimous consent to submit their testimony for the record.

SEN. COLLINS: Without objection.

SEN. SUNUNU: Thank you very much.

SEN. COLLINS: Thank you, Senator.

Senator Durbin.

SEN. RICHARD DURBIN (D-IL): Thank you, Madame Chair, for this hearing. And I thank the secretary and those who have gathered with him.

And Mr. Secretary, I don't know if you're aware that General Myers, I think, recently visited Chicago, if I'm not mistaken, was at the Memorial Day parade there. I'm sorry I couldn't join you, but I'm happy to have had you there.

GEN. MYERS: It was a great day. Thank you.

SEN. DURBIN: And for all who have gathered here today, I'm going to submit my statement for the record, in interest of giving you a chance to make your statement. But I do believe that what is at issue here at this hearing is fairly fundamental. We have to answer the following questions:

Is collective bargaining inconsistent with quality performance?

Is membership in a union inconsistent with pursuing the goals of national security?

Is our existing federal workforce incapable of meeting the challenges of the 21st century?

I think those are all fundamental questions. We debated some of them in the course of creating the Department of Homeland Security. We'll debate them again today. And I think those who view collective bargaining in a negative context see it as part of bureaucracy, featherbedding, a contentious work atmosphere.

But there are positive sides to this, which I think we must not overlook. It really does, in a way, give us a chance to create professional employees who are rewarded without fear of political retribution and unfair treatment by their superiors. It also dignifies work. It says to people, "You will have a voice in your destiny. You are not just a pawn to be moved on a board, taken off when necessary, put back on when necessary. You have a place. You have a voice." And I think that's what's at the heart of this debate.

I want to salute the chairman and Senator Levin and Senator Voinovich in particular, because he has, I guess, devoted more of his time as United States senator to professionalize the federal workforce than any one of us. I've been to many of those hearings. And George, you've led the way on this, and I'm glad that you're part of this conversation today.

Thank you for being here, Mr. Secretary.

SEN. COLLINS: Thank you.

Senator Pryor.

SEN. MARK PRYOR (D-AR): Thank you, Madame Chair. I wasn't going to say anything, other than thank you for having this hearing today. It's very important, and it's very important for our long-term security. And it's also just very important for the Senate to hear these matters and, you know, try to have our oversight responsibility fulfilled. So thank you for doing this.

SEN. COLLINS: Thank you.

Well, at long last we now will move to our first panel of witnesses. I want to thank you for your patience. As you can see, this issue is of great importance to many members, who were eager to express their views on it.

I want to welcome our secretary of Defense, Donald Rumsfeld. I want to join my colleagues in commending you for your outstanding leadership of the war against terrorism. We've very pleased to have you take the time today to be with us to present the department's views.

Accompanying the secretary are General Richard B. Myers, the chairman of the Joint Chiefs of Staff; Admiral Vern Clark, the chief of Naval Operations; and Dr. David Chu, the undersecretary of Defense for Personnel and Readiness. Welcome.

Secretary Rumsfeld, you may proceed.

SEC. RUMSFELD: Thank you very much. Is that working? Good.

Madame Chairman, members of the committee, I thank you for those statements and comments and interest, and also for the opportunity for us to discuss this proposal by the president for the national security personnel system. As was mentioned, it is extremely important to the Department of Defense. That is clear by the presence of the chairman of the Joint Chiefs of Staff, by the chief of Naval Operations, by Undersecretary Chu, who has spent much of his life and leads the Pentagon effort with respect to these matters.

Try it again. Okay. How's that?

SEN. COLLINS: Thank you. That is better.

SEC. RUMSFELD: All right.

The—as the members know well, we are in a new security environment, an unprecedented global war on terror. And we need to be able to deal with the emerging new threats with the Department of Defense that is fashioned for the information age and the 21st century. The threats we're facing are notably different, as each of the senators here know well. And to deal with the new threats, we believe we not only need new military capabilities that are flexible and light and agile so we can respond quickly and deal with surprise, but we also do need a department that operates in a way that enables it to demonstrate flexibility as well so that it can respond skillfully.

Today we just simply don't have that kind of agility. In an age when terrorists move information at the speed of an email and money at the speed of a wire transfer and fly around in commercial jetliners, we still do have bureaucratic processes of the Industrial Age as opposed to the Information Age. Consider a few examples.

Today we have, I am told by Dr. Chu, some 300,000 to 320,000 uniformed personnel, men and women in uniform, who volunteered to serve in a military capacity, performing non-military jobs. Now, there's something wrong with that picture. I suspect we also have some very large number of contractors performing tasks that ought to be performed by career Civil Service personnel.

Three hundred and twenty thousand military people performing civilian functions is more than two and a half times the number of troops that were on the ground in Iraq when Baghdad fell. And why is that? Well, it's because managers are rational. They have a task. They're going to be held accountable for that task. And they're asked to do it. So they go out, and they reach for somebody that can help them do that. And they reach for military people because they know they can bring them in, they can calibrate them, they can move them, transfer them someplace else when the time comes, and they give them the flexibility to do the job that they're being held accountable to perform. Or they reach for civilian contractors, because they know they can do the same thing: they can bring them in, ask them to do a job, stop them from doing the job, move them where the job needs to be done. And they avoid reaching for the career Civil Service. That's why we have 320,000 military people doing civilian jobs: because managers are rational. They can do those things in the contracting world and in the military world without a lot of delays or bureaucratic obstacles. But they can't do that with the Civil Service, unfortunately.

The unwillingness to put civilians into hundreds of thousands of jobs that do not need to be performed by the uniform or by contractors really puts a strain on our system.

It's not right, especially at a time when we're calling up the Guard and Reserves and asking them to serve. It's not right to have that many military personnel doing civilian functions at a time when we have stop-loss imposed and we're not letting people out who have completed their tours and are asking to be released from the military and we're preventing that because we need them on active duty.

It has to be also demoralizing for the civilian personnel themselves. These are patriotic, terrific people and we all know that; you've mentioned that. And they come into government because they want to make a contribution. And when a challenge arises, or a crisis, and their skills and talents are needed, they want the phone to ring. But if the phone doesn't ring, the phone rings for the military or the phone rings for contractors but not for the civilian personnel, it has to be demoralizing.

Consider this: In Operation Iraqi Freedom, 83 percent of the civilians that were deployed into the theater of Central Command were contractors. Only 17 percent were civilian federal workers. Why? Why would that be the case? Well, it's because in most cases the complex web of rules and regulation prevents the department managers from moving DOD civilians to new tasks quickly. As a natural result, the managers turn to the military or the private contractors. Because of these rules, we have to cope with—that we are losing talented young people to private-sector competitors.

When the DOD recruiters go to a job fair at a college and they walk in, and the person sitting next to them is from a corporation, and the corporation can offer that young person looking for a job a job, they can say, "Here's what your salary will be. Here's what the bonus will be. Here's where you'll work. And say yes, no or maybe." What does the government person from DOD do? They walk into the job fair and all they can do, sitting right next to a corporation, all they can do is hand them a ream of paper to fill out, and tell them, "Sorry, we can't offer you a job. Fill all this out. It will take months before we'll know."

And I guess it should come as no surprise that many talented young people are working somewhere other than the department. This is a problem that will grow more acute every year as the baby-boomer generation employees start to retire. As members of this committee, you've been told, as I have, that it's estimated that up to 50 percent of the federal employees will be eligible to retire over the next five-plus years. According to one institute, a recent survey of college students found that most would not consider a career in government because, among other things, the hiring process was Byzantine.

I met with—I served on the first Volcker Commission on Public Service. And I was over with Paul Volcker yesterday and he was discussing this problem as a very serious one, and some studies they've done of young people's attitude about government service. The future of our national security depends on our ability to make it less Byzantine and less burdensome on the employees.

In addition, the current system prevents us from dealing effectively with fraud. I'm told that the recent scandals you've read about regarding the abuse of government purchasing cards, that with respect to military—they were being used to buy cameras and various things that they shouldn't have been used to by for. With DOD personnel, uniform personnel, if an abuse like that occurs, we have the ability to garnish their wages and make them—recover—we can recover the stolen funds. But not so with civilian personnel. In fact, Dr. Chu tells me that DOD has been negotiating now for more than two years with more than 1,300 union locals for the right to garnish wages, in the event that there's fraud in the use of purchasing cards. And we still have 30 more unions to go.

Now, I think it's unacceptable that it takes us years to try to deal responsibly with employees that are stealing the taxpayers money. And if a private company ran its affairs that way, it would go broke, and it ought to go broke. There are other such examples that the chief of Naval Operations, Vern Clark, and others can mention.

I'd like to interrupt my comments for a moment and let Admiral Clark, who's invested an enormous amount of time on this subject. And I know Dick Myers has a statement after Vern Clark and I complete my remarks.

But I think, Vern, you might want to comment on some of the things you're wrestling with.

ADM. CLARK: I thank you, Mr. Secretary.

And Madame Chairman, it's great to be with you this morning.

And let me just cut right to the chase. It's really—I'm encouraged by the support of all the members of this committee and the recognition that we need to reform the system. I have a responsibility given to me by law, Title 10, that lays out what Vern Clark is responsible for. And it's straightforward. The law says: Organize, train and equip the force. And then, I turn it over to guys like Tommy Franks, who go and command, and lead and fight the nation's wars.

The fact of the matter is—and I wrote down some of the things that were said here—we do have to recruit and retain the right people to have the kind of fighting force that will win tomorrow's wars. I couldn't agree more with, Madame Chairman, your comment that the system today is not responsive, and that's the problem. I also couldn't agree more, Senator Voinovich, your comment that James Schlesinger said: to—you've got to fix the personnel system before you can—before any of the other pieces are really going to be whole.

And I'd like to testify—and many of you have heard me testify in other committees; this is the first time I've been to this committee—but in the military committees, that on the military side, I believe that in the Navy, we have proven that. For three years, we have had as our number one priority the battle for people. And what happened in Operation Iraqi Freedom and Enduring Freedom happened because our personnel readiness is better than it's ever been before.

But my whole personnel system is not just the uniformed piece. And the secretary talked about 300,000 uniformed members and so forth. It is—and what—this is the thing that I have learned since I've been in this position—that it is the combination of the military structure; it is my Reserve structure; it is the 200,000 civilians that I have, and my—Secretary England gave me the number when we were researching this that I have, fundamentally, 234,000 contractors in the system, and they're in the system because of the principles and the faults with the civilian personnel system that the secretary is outlining. And I could give you case after case where the lack of responsiveness that we have in the civilian—in our civilian personnel system is preventing us from having the right kind of system to make our Navy and the rest of our military what it needs to be.

If the rest of the chiefs were sitting here—and fundamentally, I'm here as one of them; they all have the same kinds of problems—they would tell you that we—and my belief is that no navy is going to go toe to toe with me in the future—and with our Navy. They're not going to do that. Our Navy is too strong. What they're going to do is that they're going to come at us with asymmetric methods. Our asymmetric advantage is our people. Our advantage is the ability to bring the genius of the American citizen, sons and daughters of America, to the task.

And I will—I have case after case that shows that this—the system that I have today is preventing me from—and—executing my Title X responsibility to provide—organize, train and equip in the most efficient manner and to produce the fighting capability that I'm being called upon to deliver for this nation.

So, Madame Chairman, that's why I have spoken everywhere I get a chance to speak to the requirement for us to transform this system.

And I appreciate, Mr. Secretary, you giving me the chance to come and speak here today. Thank you.