2
The Pressure on Infrastructure and Capital Projects in the Federal Government

Dr. John B. Goodman

Deputy Under Secretary of Defense for

Industrial Affairs and Installations

Department of Defense

Managing infrastructure and capital improvements presents an ongoing challenge for the Department of Defense (DoD). There is a need to set the right course, and to do so requires that a series of constraints within which DoD operates be addressed.

It is important to view infrastructure issues in the context of the mission that the infrastructure and capital improvements are designed to serve. The key elements of that mission have been defined by two important documents that have been issued in the past year, the Quadrennial Defense Review and the Defense Reform Initiative.

The Quadrennial Defense Review identifies three key missions or strategies for DoD. First is the need to take a more active role in shaping the international environment, to try to build a better, more peaceful international climate. Second is the need to respond to the full spectrum of crises threatening U.S. interests. The ability to respond has two components: ensuring the readiness of military forces and increasing procurement of the weapons systems needed in the field and getting them out to the forces more quickly.

The third element of the Quadrennial Defense Review strategy is to prepare now for an uncertain future. Also outlined in the document, Joint Vision 2010, this element of the strategy calls for significant new investments in technologies that will insure focused logistics, battlefield dominance, and state-of-the-art communication systems. This not only requires a large financial investment, but calls for a new method of systems integration.

The DoD FY 1999 budget request reflects these priorities by sustaining the readiness of U.S. forces and increasing funding for modernization to speed the revolution in military affairs. The department has allocated an unprecedented amount of resources for modernization without increasing the total budget request.



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--> 2 The Pressure on Infrastructure and Capital Projects in the Federal Government Dr. John B. Goodman Deputy Under Secretary of Defense for Industrial Affairs and Installations Department of Defense Managing infrastructure and capital improvements presents an ongoing challenge for the Department of Defense (DoD). There is a need to set the right course, and to do so requires that a series of constraints within which DoD operates be addressed. It is important to view infrastructure issues in the context of the mission that the infrastructure and capital improvements are designed to serve. The key elements of that mission have been defined by two important documents that have been issued in the past year, the Quadrennial Defense Review and the Defense Reform Initiative. The Quadrennial Defense Review identifies three key missions or strategies for DoD. First is the need to take a more active role in shaping the international environment, to try to build a better, more peaceful international climate. Second is the need to respond to the full spectrum of crises threatening U.S. interests. The ability to respond has two components: ensuring the readiness of military forces and increasing procurement of the weapons systems needed in the field and getting them out to the forces more quickly. The third element of the Quadrennial Defense Review strategy is to prepare now for an uncertain future. Also outlined in the document, Joint Vision 2010, this element of the strategy calls for significant new investments in technologies that will insure focused logistics, battlefield dominance, and state-of-the-art communication systems. This not only requires a large financial investment, but calls for a new method of systems integration. The DoD FY 1999 budget request reflects these priorities by sustaining the readiness of U.S. forces and increasing funding for modernization to speed the revolution in military affairs. The department has allocated an unprecedented amount of resources for modernization without increasing the total budget request.

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--> This shift in funding priorities and the revolution in military affairs requires a similar revolution in the department's business affairs. The Defense Reform Initiative of November 1997 identified four key implementation strategies: (1) adopting best business practices, that is, moving to a paperless contracting environment; (2) reengineering organizations, in particular, by reducing the size of headquarters organizations; (3) streamlining, by competing DoD commercial activities; and (4), of greatest concern, eliminating unneeded infrastructure. These strategies have very significant implications for DoD's management of installations and facilities. The Defense Reform initiative also strongly endorses efforts to revitalize military housing through privatization, using private-sector capital. It also directs the privatization of utilities, and puts a greater focus on energy management. There is now a greater reliance on energy-savings performance contracts. The Navy and the Army Corps of Engineers have demonstrated how to implement the tenets of sustainable design, which involves the use of better designs and better materials to lower energy costs. It requires fundamental change in the philosophy of how DoD designs buildings. There is a commitment to making all new buildings designed after the year 2000 to be 30 to 50 percent more energy efficient compared with a 1996 baseline. The military services know how to do it and must be able to drive that change through their activities. The last element of the last component of the Defense Reform Initiative is a request that Congress approve two additional rounds of military base closures in 2001 and 2005. This request is critical to DoD's ability to manage its infrastructure. Base closure activities have direct implications not only for the department's infrastructure, which is important, but also for the national military strategy, which is paramount. The need for additional rounds of base closures is clear and compelling. First, the military still has more bases than needed to support military forces and future military strategy. This excess is enough to justify authorization of at least 2 additional rounds. The Quadrennial Defense Review, the Defense Reform Initiative, and the National Defense Panel created by Congress 1 year ago all concluded that the military base structure is larger than the force structure requires, even though over 100 major installations have already been closed. Second, base closures save money. By 2001, DoD will have saved over $13.5 billion, with steady-state annual savings thereafter of about $5.6 billion per year. If the two rounds of base closures in 2001 and 2005 are the size of the last two conducted, it would save about $3 billion per year. Third, the additional closures are needed now. Every year of delay in moving forward is a year when savings that are needed will not be realized. Three billion dollars in savings would come at a time when the next generation of major weapons systems will be going into production. Without the closures, there is the risk that the country's military strategy cannot be implemented. The

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--> United States might need to make one of three difficult choices: reduce the force structure below its current level or its level at the end of the Quadrennial Defense Review; slow the modernization of weapons systems; or cut the infrastructure budget overall and allow the condition of buildings and housing to deteriorate. This last choice is a very undesirable option. The bottom line for DoD is that it needs two more rounds of base closures. It is absolutely critical, though politically difficult. It is critical that continued communications emphasize why these base closures are so important to the department's work, to the national security strategy, and to the young men and women in uniform.