STATEMENT OF ADMINISTRATION POLICY - H.R. 1585 - National Defense

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STATEMENT OF ADMINISTRATION POLICY

H.R. 1585 - National Defense Authorization Act for Fiscal Year 2008

(Reps. Skelton (D) MO and Hunter (R) CA)

The Administration appreciates the House Armed Services Committee's
continued strong support of our national defense. However, the
Administration has a number of significant concerns with H.R. 1585, which
the Administration looks forward to addressing with Congress as the bill
moves through the legislative process.

Modifications to the National Security Personnel System: The Administration
strongly opposes section 1106, which would significantly change the National
Security Personnel System (NSPS).

These changes eviscerate our effort to make civilians equal partners in a
Department at war by removing most NSPS flexibilities and completely
revoking the adverse actions, appeals, and labor relations portions of NSPS.
They also back away from pay for performance. The Department of Defense's
(DoD) phased approach to implementation is designed to allow DoD to assess
and make periodic enhancements to ensure the system is achieving its goals.
DoD already has made some adjustments based on employee feedback.
Flexibility is needed given the Department's role in preparing for and
responding to ever-changing national security threats. By retaining the meet
and confer and continuing collaboration provisions, while also requiring
establishment of a limited pay for performance system under select chapter
47 procedures and imposing chapter 71 obligations on the Department, the
process becomes so administratively burdensome to design and operate that
the effect of the bill is in essence a total revocation of the flexibilities
Congress granted the Department. If the President is presented a bill that
includes such provisions, his senior advisors will recommend that he veto
the bill.

Buy American Provisions: The Administration strongly opposes legislative
provisions that would undermine the longstanding U.S. policy - repeatedly
affirmed by Congress - to open U.S. defense procurements to commercial
suppliers and to suppliers from allied and friendly countries that open
their defense procurements to U.S. suppliers. Sections 804, 809, 845, and
846 could jeopardize our military readiness when our objective should be to
enhance our ability to get the best capability for the warfighter at the
best value for the taxpayer. Such provisions would impose unrealistically
arduous requirements on commercial suppliers; decrease competition;
jeopardize U.S. suppliers' access to our civil-military procurements and to
foreign defense markets; increase costs for U.S. taxpayers; and
unnecessarily add red tape to the procurement process. If the President is
presented a bill that includes such provisions, his senior advisors will
recommend that he veto the bill.

Competitive Sourcing: The Administration strongly opposes language that
unnecessarily delays, complicates, and restricts use of public-private
competition in determining the most efficient performance of critical
functions of DoD. The Department has saved taxpayers over $5 billion

as a result of competitions completed between FY2001 - FY2006 and expects
these savings to grow to over $9 billion after the completion of all planned
competitions initiated in FY 2007. Particularly onerous are the restrictions
on the Secretary's ability to effectively balance the use of competition and
other management tools in the Military Departments, the creation of uneven
protests rights, intrusive data requirements concerning the provision of
retirement benefits, and limitations that would be applied across government
to marginalize the consideration of quality in determining the best source
for the taxpayer.

Building Global Partnerships Act: The Administration encourages the House to
adopt the requested Building Global Partnerships Act, recently transmitted
to provide critical authorities for Combatant Commanders to address security
priorities and support allies, coalition partners, and others in the War on
Terror. These proposals seek authorities to enhance partners' capacity for
effective operations and develop greater commonality by expanding
professional training and education for partner nations.

National Guard Empowerment Act: The Administration strongly opposes sections
1612, 1621, and 1624 and urges their exclusion. These provisions would
impinge on the authority of the Secretary of Defense and the Secretaries of
the Army and Air Force, and would fundamentally disrupt existing command
authority. Section 1612 would effectively specify in law that the National
Guard Bureau (NGB) now works for the Secretary of Defense, rather than the
Secretaries of the Army and the Air Force; further challenge the Secretaries
of the Army and Air Force in exercising their Title 10 responsibilities for
their forces; and effectively would place the NGB at a level above the
Military Departments. Section 1621 also would raise significant
constitutional issues by turning over command and control of Federal forces
to a state elected official.

Reserve Montgomery GI Bill Transfer: The Administration strongly opposes
section 525, which would move the Reserve Montgomery GI Bill and the Reserve
Educational Assistance Program under Title 38. This would remove critical
incentive programs for recruiting and retention from the control of the
Secretary of Defense and improperly place them with the Secretary of
Veterans Affairs. It would also violate the principle of budgeting for the
full cost of benefits when they are earned and result in significantly
higher costs to the government.

Special Survivor Indemnity Allowance: The Administration opposes section
644, which would pay a monthly special survivor indemnity allowance of $40
from the DoD Military Retirement Fund. The current benefit programs for
survivors, DoD's Survivor Benefit Plan (SBP) and Department of Veterans
Affairs' Dependency Indemnity Compensation (DIC), provide sufficient
benefits and avoid duplication of two complementary federal benefits
programs established for the same purpose -- providing a lifetime annuity
for the survivor of an active, retired or former servicemember. This offset
policy is consistent with private sector benefits. The provision is
estimated to cost $27 million in the first year and about $160 million
through FY 2013. It appears to be the first step toward eliminating the
offset between SBP and DIC; full elimination of this offset would cost the
Military Retirement Fund between $6 and $8 billion over 10 years.

Military Pay: The Administration strongly opposes sections 601 and 606. The
additional 0.5 percent increase above the President's proposed 3.0 percent
across-the-board pay increase is unnecessary. When combined with the overall
military benefit package, the President's proposal provides a good quality
of life for servicemembers and their families. While we agree military

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pay must be kept competitive, the three percent raise, equal to the increase
in the Employment Cost Index, will do that. The cost of increasing the FY
2008 military pay raise by an additional

0.5 percent is $265 million in FY 2008 and $7.3 billion from FY 2008 to FY
2013.

Defense Health Program (TRICARE): The Administration is disappointed that
the Committee language would not allow DoD to adjust TRICARE health fees and
payments for retired military beneficiaries under age 65 and would not allow
the implementation of any similar recommendations by the Task Force on the
Future of Military Health Care. The Administration' s suggested cost
adjustments would make high-quality military health care more sustainable in
the future by largely capturing the inflation increases that have occurred
since cost sharing was first established in 1996. Not allowing the DoD to
proceed with these changes will add over $1.86 billion in cost in FY 2008
and $19.28 billion in cost from FY 2008 to FY 2013.

The Administration strongly opposes section 703, which would impose price
controls on prescription drugs when they are dispensed to enrollees in
TRICARE through community pharmacies. The Administration believes market
competition is the most effective way to promote discounts in the community
setting. Government price-setting at community pharmacies will eliminate
retail competition; it could also have an adverse impact on other markets,
which could limit access to life-saving drugs, reduce convenience for
beneficiaries, and ultimately increase costs. Drugs dispensed directly by
DoD in its hospitals, clinics, and mail order facilities are already
purchased at government purchasing schedules and DOD is working to encourage
beneficiaries to take advantage of the lowest prescription drug prices
available whenever possible.

Conscience Protections for Medical Personnel: The Administration is
disappointed the Rules Committee did not accept an amendment for
consideration that would have provided appropriate conscience protections to
medical personnel affected by changes to the DoD formulary.

Military to Civilian Conversions: The Administration strongly opposes
section 704, which would prohibit military to civilian conversions in the
medical care system. This will eliminate the flexibility of the Secretary of
Defense to use civilian medical personnel for jobs away from the battlefield
and at the same time use the converted military billets to enhance the
strength of operating units. DoD needs to determine the right mix of its
total force to provide increased combat effectiveness critical to winning
the Global War on Terror.

Death Gratuity for Federal Civilian Employees: The Administration strongly
opposes section 1105, which would amend the Federal Employees' Compensation
Act (FECA) to provide an additional $100,000 death benefit for surviving
family members of civilian employees who died supporting U.S. forces in a
contingency operation. This provision would raise equity concerns by eroding
the uniformity of benefits provided by FECA.

Expansion of Combat Related Special Compensation Eligibility: The
Administration strongly opposes piecemeal changes to portions of disability
compensation contained in section 645. Several commissions and review groups
are reconsidering the country's responsibilities to those medically
separated prior to completing a full military career and the Administration
will consider comprehensive reform once these reviews are completed.

Acquisition Policy: While the Administration supports the underlying
interests of section 806,

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821, 822, 824, and 843, the Administration urges their deletion because each
of these provisions is either duplicative of recently-enacted laws and
implementing regulations or would be counterproductive and not of practical
help in strengthening the acquisition process. Section 824, in particular,
which imposes exhaustive reporting on contract deficiencies, will interfere
with agencies' ability to address and resolve contract performance problems
in a timely manner.

In addition, section 326(b) would impose on the Department's contractors
unmanageable and costly reporting requirements with questionable benefit.

Reductions and Requirements for Weapons Systems: A number of provisions
negatively impact weapons systems. Selected examples include:

Future Combat Systems (FCS): The Administration
strongly opposes the Committee's $867 million reduction to the FCS program,
which would severely impact or stop development of the Army's top, long-term
modernization program. It will force the Army to retain its Cold War
hardware (developed in the 1970s and fielded in the 1980s) well beyond 2040,
preventing our soldiers from fielding the best available equipment in the
future.

Space and Global Position System (GPS): The
Administration is concerned about a number of cuts to the position
navigation and timing (PNT) programs -- Air Force and Special Operations
Command funding for the Integrated Global Positioning System (GPS) test, and
the GPS III satellite program. These reductions will cause significant
delays in fielding critical new capabilities and force the continued use of
aging or obsolete equipment. Assured continuity of key space capabilities
for position, navigation, and timing is critically important to DoD and the
Nation's civilian economy.

B-52 Force Reduction: The Administration urges
repeal of section 131, which prohibits the reduction of the B-52H fleet to
56 aircraft -- a number sufficient to meet current and future warfighting
requirements. Reducing the size of the B-52 fleet will free up critical
resources to develop new systems.

Littoral Combat Ship (LCS): The Administration is
concerned about the Committee's $200 million reduction to the Navy's LCS
program. The cut will prevent the procurement of two ships in FY 2008 and
delay the fielding of this urgent warfighting capability.

Reliable Replacement Warhead: The Administration
urges full funding for the Reliable Replacement Warhead (RRW) Program. The
proposed reduction in funding is likely to delay this program, which is
designed to develop and deploy safer, more secure, and more reliable weapons
to replace aging Cold War-era weapons in the stockpile.

Missile Defense: The Administration strongly opposes the significant
reductions (totaling $764 million) for the Missile Defense Agency,
particularly the reductions of $160 million for construction of a third
European Missile Defense Site and $250 million for the Transformational
Airborne Laser Program.

Repeal of Modification to Insurrection Act: The Administration strongly
opposes section 1054,

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which could be perceived as significantly restricting a
congressionally- granted authority for the President to direct the Secretary
of Defense to preserve life and property and by limiting the President's
authority to call upon the Reserves. Such a result would be detrimental to
the President's ability to employ the Armed Forces effectively to respond to
the major public emergencies contemplated by the statute.

Unrequested Procurement Funding and Acquisition Restrictions: The
Administration opposes the addition of $2.4 billion for 10 additional C-17
aircraft, $1.7 billion for an additional LPD-17 amphibious ship, and $456
million for a T-AKE cargo ship. These and other similar unrequested
additions divert funds from higher priority acquisitions.

Military Medical Treatment Facilities: The Administration endorses the goals
of Title XIV of

H.R. 1585 but believes that this legislation is premature; the
Administration continues to oppose a broad one-year moratorium on the
initiation of new public-private competitions involving any function at any
military medical facility.

Leasing of Foreign-Built Vessels: The Administration opposes this provision,
which would limit DoD's ability to competitively lease needed vessels
regardless of where they were constructed. All vessels currently under
charter for more than six months are U.S.-flagged, U.S.-crewed, and
U.S.-owned or leased. Restricting the maximum lease period of foreign built
ships would not increase the number of U.S.-built, militarily useful ships.

Naval Base Guam Kilo Wharf Extension: The Administration opposes the House
provision to incrementally fund a military construction project in Guam
while permitting full funding on other equally costly construction projects.
The Administration position is that all military construction projects
should be fully funded except for compelling national security reasons.

Study on Global Climate Change: The Administration opposes section 951,
which would mandate the inclusion of a study on global climate change in the
next National Security Strategy, National Defense Strategy, and Quadrennial
Defense Review. This section sets a harmful precedent. The content of these
products should not be reflected in law, particularly in a manner that
impinges on the flexibility of national security professionals and policy
officials to determine the most appropriate subjects for these strategy
documents.

Potential Amendments:

Amendments on Iran: The Administration strongly opposes amendments to the
bill to restrict the ability of the United States to deal effectively with
the threats to regional security posed by the conduct of Iran, including
Iran's efforts to develop nuclear weapons. The Administration also notes
that provisions of law that purport to direct or prohibit international
negotiations, covert action, or use of the armed forces are inconsistent
with the Constitution' s commitment exclusively to the presidency of the
executive power, the function of Commander in Chief, and the authority to
conduct the Nation's foreign policy. If the bill were presented to the
President with provisions that would prevent the President from protecting
America and allied and cooperating nations from threats posed by Iran, the
President' senior advisers would recommend that he veto the bill.

Guantanamo-Related Amendments: The Administration opposes amendments that
would

micromanage the detention of enemy combatants by the United States in the
war on terror. Current laws and treaties already address the subject of
enemy combatants and preserve appropriate flexibility for the President as
Commander in Chief to conduct the war effectively within the law. If a bill
were presented to the President that prevented him from detaining enemy
combatants or collecting from them in accordance with current law
intelligence on past and future terrorist activities, the President's senior
advisers would recommend that he veto the bill.

Constitutional Concerns: H.R. 1585 raises a number of constitutional
concerns including ones regarding the President's authority as
Commander-in- Chief to supervise the Executive Branch, and to control the
disclosure and dissemination of classified information.

Other requested authorities not included in HR 1585:

Flexible Management of Deployments of Members: The Administration is
disappointed that the Committee did not include its proposals providing DoD
with more flexible tools to manage the deployment and compensation of
servicemembers. The proposed changes would allow DoD to balance operational
tempo and compensate servicemembers who deploy more frequently or for longer
periods than normal.

Aircraft Carriers: The Administration strongly urges Congress to authorize
Navy to maintain 10 operational carriers between the decommissioning of USS
ENTERPRISE (CVN 65) and the commissioning of USS GERALD R. FORD (CVN 78).
The Navy can meet Combatant Commander surge and presence requirements using
a 10-carrier fleet during this time with acceptable risk.

Strategic Airlift Capability Partnership in NATO: The Administration
strongly supports the initiative providing authority to participate in and
transfer C-17 Globemaster III aircraft to the Strategic Airlift Capability
Partnership in NATO. This initiative will allow the U.S. to retain use of
C-17 aircraft provided to NATO while gaining surge capacity with two
additional aircraft; will provide a critical Strategic Airlift Capability to
NATO; will promote interoperability; will strengthen our partnerships with
Allies; and will enhance C-17 global sustainment capability.

Foreign Currency Fluctuation Adjustments for Family Housing in Korea: The
Administration urges the inclusion of this requested authority to update
foreign currency fluctuation adjustments for certain housing leases in
Korea. The omission of this authority jeopardizes U.S. ability to
successfully execute the Yongsan Relocation Plan.

The Administration is ready to work with Congress on a national defense
authorization bill that would strengthen the Nation's Defense capabilities
and support priorities in the Global War on Terror, so that the President
can sign such a bill into law.