WASHINGTON, D.C. (August 10, 2005) – Testifying before members of the Base Realignment and Closure Commission (BRAC) this morning were U.S. Senator Dick Lugar, Governor Mitch Daniels, U.S. Reps. Dan Burton and Julia Carson and Indianapolis Mayor Bart Peterson to discuss the Defense Finance and Accounting Center (DFAS) in Lawrence, Indiana.

The text of Governor Daniels’ testimony is below.

The testimony of the Indiana delegation will be replayed on C-SPAN2 at 7 p.m. CDT.

Statement of Indiana Governor Mitch Daniels

Base Closure and Realignment Committee Hearing

August 10, 2005

I would like to express my appreciation to Indiana’s senior Senator Richard Lugar for being here today. He has set an example to all of us by consistently placing the needs of America’s security – and the men and women who defend it – above any other consideration in evaluating the outcome of the decisions made through the BRAC process.

Let me next thank all of you for your willingness to undertake this most difficult of responsibilities. I have always been a supporter of the BRAC process, as has the state of Indiana. Even though we have taken some pretty significant hits in earlier rounds, we have not been part of efforts to delay or derail the current process.

As a practical matter, a BRAC round often affords the only opportunity to make badly needed changes to the DoD infrastructure. Senator Lugar has said our paramount goal must be to collect the most accurate and relevant information on which to base these key decisions…. and that has certainly been our approach during this BRAC round.

In all of our dealings with the Commission, we have been guided by this standard. In a matter unrelated to these proceedings today, we have had some useful and productive dialogue with commission staff regarding ways to maximize the benefits resulting from the adjustments being made at the Crane Surface Naval Warfare Center. While this has not been a high profile matter, I am pleased to report that these discussions are being conducted in a highly professional fashion by both sides and our suggestions appear to be receiving the most thoughtful consideration. We remain hopeful that this dialogue will lead to optimum results for the installation and the warfighters it serves so well.

Like any enterprise, the federal government should seek out opportunities for well-planned consolidation as a means to increase efficiencies and generate cost savings. And it is precisely such efficiencies and cost-savings that prompt DoD’s recommendation to consolidate DFAS activities to the three sites, including Indianapolis.

In Section 5 of its recommendations, DoD notes that “The consolidation of Civilian Personnel Offices within each Military Department and the transactional functions among the Defense Agencies reduces excess capacity, reduces the use of leased facilities, and achieves manpower savings through consolidation and elimination of duplicate functions. This recommendation supports the Administration’s urging of federal agencies to consolidate personnel services.” (Page 20)

I note that final sentence with some interest. As Director of the Office of Management and Budget in 2001, I directed agencies to pursue the consolidation of personnel services, including payroll and accounting.

To its credit, the Department of Defense took that direction seriously, and DFAS emerged as an early leader in the federal government. In August 2002, the Office of Personnel Management conducted an internal competition for consolidated payroll processing providers, and approved a partnership between DFAS and the General Services Administration to move forward.

As I wrote the Defense Department and other agencies in January 2003, this effort was designed to “enable agencies to operate more efficiently, thereby enabling the federal government to dedicate a greater share of its resources to the ultimate mission of serving the citizen.”

I view DOD’s recommendations for realignment of DFAS into the three locations as accomplishing exactly that end: applying resources to the ultimate mission of serving the citizen through a stronger national defense.

In an August 2, 2005 letter to Senator Lugar, DoD has confirmed that a three-site scenario for DFAS locations provides the optimal configuration for future DFAS operations.  To quote this letter directly, “changing or adding locations will reduce DFAS’s ability to effect necessary operational changes and will, in the long term, continue to burden DFAS with infrastructure not needed, which will divert scarce resources from the warfighter.”

The whole idea behind the proposed consolidation is to eliminate redundant operations at geographically diverse locations. It will allow DFAS to strengthen and standardize business processes, simplify training delivery and support, and improve oversight and control.

The monetary savings resulting from DOD’s DFAS consolidation recommendation are clear.  DFAS consolidation to the three sites will result in net savings of $158 million during the five-year implementation period, with annual savings of $120 million in following years.  As a result, the estimated net present value of the DFAS consolidation proposal over 20 years is $1.3 billion.  In fact, DoD believes the anticipated efficiencies resulting from this operational restructuring will yield cost savings even beyond this estimate.

Let me talk for a few moments about the criteria used to determine the optimal consolidation recommendation, and address a few of the reasons why Indianapolis clearly fits these criteria. 

The goal of the optimization proposal as stated by DoD was to ensure strong military value while reducing the number of DFAS Central and Field Operating Locations by merging and combining business line operations to the greatest extent possible.  The optimization model also sought to balance requirements for an environment that meets DoD antiterrorist and force protection standards, strategic business line redundancy, area workforce availability, an anchor entity for each business line to retain necessary organizational integrity to support DoD customer needs, and available facility space or buildable acres.

Our DFAS facility in Indianapolis certainly meets these goals.  As you all know, DFAS Indianapolis is the Pentagon’s largest DFAS facility, with over 2,500 permanent employees, as well as an additional 400 temporary contractors.  DFAS is located in the Major General Emmett J. Bean Federal Center, on the grounds of the former Fort Benjamin Harrison.  Although Fort Harrison was closed in a prior BRAC process, the Bean Federal Center’s obvious value led the Pentagon to maintain significant operations there, most importantly making the Bean Federal Center home to one of DFAS’ anchor locations. 

I know that Secretary Skinner and General Newton came out and toured the Bean Center last week, but we’d like to underscore some of the unique benefits offered by Indianapolis for those of you who did not see it in person.  Congressman Burton and Mayor Peterson will address many of these benefits in their testimony, and we are submitting a white paper which provides specific details about the Indianapolis facility.  But I’d like to take a few moments and mention just a few key points:

First, and perhaps most importantly, let me talk about capacity issues.  The Bean Federal Center is the second largest building in the Pentagon inventory, with over 1.6 million square feet of space.  Of this immense total, DFAS currently operates in 1.1 million square feet. Thus, there is still significant space for additional expansion of DFAS activities within the Bean Center. 

At last week’s site visit, DFAS stated that there are currently around 800 vacant workstations in its existing space that are available for immediate use.  In addition to this, DFAS says it can accommodate nearly 1,000 additional workers by both expanding  into currently unused space in the Bean Center, and by using space that will soon become available through other BRAC realignments.  Beyond this, we could also secure space for additional permanent employees by moving contractors off-site to nearby buildings that share DOD connectivity.

Thus, there is immediate space for at least 4,700 permanent employees at DFAS Indianapolis.  DoD’s formal BRAC recommendation proposed putting as many as 6,000 DFAS employees in Indianapolis, and should the experts decide that such a level is the right number for our facility, I am fully confident that we can accommodate it.

I also want to stress that both the State and our local governments are fully committed to ensuring the success of this consolidation effort, and we will provide the full cooperation of the State’s Department of Workforce Development, the Indiana Economic Development Corporation, or other agencies, to that end.

Another key advantage of Indianapolis is our low cost of operation.  Due to a number of factors, including the operating agreement we have with GSA and the low locality pay rate in our area, Indianapolis’ operating costs rank below all other major DFAS facilities – even those which are located on military bases and thus do not pay rent or security costs! 

I also want to touch on an issue that was raised by Secretary Skinner during the site visit last week. Indianapolis has a very short hiring time – one of the shortest in all of DFAS. Our local DFAS operation is able to fill job openings in an average of just 13 days, compared to the average time among all DFAS operations of nearly 30 days.The credit for this certainly goes to our strong local workforce and educational system, as Mayor Peterson will discuss.

In sum, it is simply good business and sound public policy to build upon the recent investment of almost $124 million in the Bean facility to continue the ongoing consolidation of DFAS. A decision to add facilities back diminishes the potential savings that this initiative offers to our warfighters, and may push the date for ultimate completion well back into the future.

Again, my deep gratitude to commissioners and staff for the task you have undertaken and the diligence and professionalism you bring to it. I commend to you the balance of our presentation and will be happy to respond to any questions you may have.

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