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                                                       Calendar No. 433
104th Congress                                                   Report
                                 SENATE

 2d Session                                                     104-278
_______________________________________________________________________


 
AUTHORIZING APPROPRIATIONS FOR FISCAL YEAR 1997 FOR MILITARY ACTIVITIES 
   OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND FOR 
DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE PERSONNEL 
  STRENGTHS FOR SUCH FISCAL YEAR FOR THE ARMED FORCES, AND FOR OTHER 
                                PURPOSES

                                _______


                 June 11, 1996.--Ordered to be printed

_______________________________________________________________________


 Mr. Specter, from the Select Committee on Intelligence, submitted the 
                               following

                              R E P O R T

                         [To accompany S. 1745]

    The Select Committee on Intelligence, to which was referred 
the bill (S. 1745), having considered the same, favorably 
reports the bill with amendments.

                          purpose of the bill

    S. 1745 would authorize appropriations for fiscal year 1997 
for military activities of the Department of Defense, for 
military construction, and for defense activities of the 
Department of Energy, to prescribe personnel strengths for such 
fiscal year for the Armed Forces, and for other purposes.
    The Senate Armed Services Committee (SASC) reported the 
bill on May 13, 1996 and it was referred to the Select 
Committee on Intelligence in accordance with Section 3(b) of 
Senate Resolution 400, 94th Congress.

                       scope of committee review

    The Committee requested an opportunity to consider S. 1745 
because it contained provisions authorizing a major 
reorganization of the intelligence community through the 
creation of a new agency, the National Imagery and Mapping 
Agency, as well as a number of provisions directly conflicting 
with the Committee's efforts this year to make substantial 
improvements in the management and operation of U.S. 
intelligence activities. After careful review, including 
extensive discussions and negotiations at the staff and member 
level with the Armed Services Committee and with the Director 
of Central Intelligence, the Deputy Secretary of Defense, and 
the Vice Chairman of the Joint Chiefs of Staff, the Committee 
voted to report the bill with amendments on June 11--well 
before the expiration of the thirty days of session allotted in 
Senate Resolution 400 for consideration upon referral.

Prior committee action

    These amendments to the National Defense Authorization Act, 
along with the Intelligence Authorization Act for Fiscal Year 
1997, S. 1718, reflect the conclusions this Committee has 
reached after six years of focused examination aimed at making 
the U.S. Intelligence Community operate more effectively, more 
efficiently, and with greater accountability in light of the 
significant changes in the world over the last decade. In 1994, 
this effort led Congress, at the urging of Senator Warner, 
Senator Graham, and others, to establish a Commission on the 
Roles and Capabilities of the U.S. Intelligence Community (the 
``Aspin-Brown Commission'') to conduct a ``credible, 
independent, and objective review'' of U.S. intelligence. The 
Commission was given a deadline of March 1, 1996, with the 
expectation that its report would inform a legislative debate 
resulting in enactment of needed changes during this Congress.
    Armed with the Commission's report and enlightened by the 
Committee's own examination, including numerous hearings, 
briefings, and interviews, the Select Committee on Intelligence 
voted on April 24, 1996, to report S. 1718, the Intelligence 
Authorization Act for Fiscal Year 1997, containing a number of 
measures to improve policy guidance to the Intelligence 
Community, strengthen the DCI's ability to manage the Community 
on behalf of all intelligence consumers, and enhance the 
ability of the Congress and the American public to ensure that 
the secrecy necessary for the conduct of intelligence does not 
prevent the vigilance and oversight necessary for an effective 
democracy. The Armed Services Committee took the Intelligence 
Authorization bill on a 30-day sequential referral as they have 
done every year since the establishment of the Select Committee 
on Intelligence.
    The Armed Services Committee staff was briefed on S. 1718 
in the weeks leading up to the April 24 vote to report the bill 
and the Chairman and Vice Chairman testified extensively on the 
Committee's legislation in a hearing before the Armed Services 
Committee following that vote. During this same time frame, the 
Armed Services Committee was considering the National Defense 
Authorization Act for Fiscal Year 1997, which it reported to 
the Senate on May 13. Despite expressing in a letter to the 
Select Committee on Intelligence dated April 15, 1996, initial 
concerns about passage of intelligence reform legislation in 
this compressed legislative year, the Armed Services Committee 
included in the National Defense Authorization Act for Fiscal 
Year 1997 a number of provisions for intelligence 
reorganization, including the creation of a new national 
imagery agency and a new structure for military intelligence 
under a Director of Military Intelligence (DMI). They also 
included a number of other provisions that directly conflicted 
with the reform attempts of the Intelligence Committee 
contained in S. 1718. The 
Intelligence Committee requested referral of the bill to 
consider these intelligence provisions, pursuant to section 
3(b) of Senate Resolution 400, which provides for referral to 
the Committee of any legislation containing provisions within 
its jurisdiction for up to thirty days, not counting days on 
which the Senate is not in session.

Discussions with Armed Services Committee

    During the weeks of negotiations that followed, the 
Intelligence Committee agreed to a number of changes in S. 1718 
to address concerns raised by the Armed Services Committee 
about protecting the equities of the Secretary of Defense and 
the Joint Chiefs of Staff. Notwithstanding that the objective 
of the reform provisions in S. 1718 was to improve the quality 
of intelligence provided to all consumers, including the 
Department of Defense, the Armed Services Committee did not 
want any changes that might diminish the current authority of 
the Secretary of Defense, who now controls about 85 percent of 
the intelligence community budget. The Intelligence Committee 
is concerned that the current arrangement, under which the 
Director of Central Intelligence is responsible for ensuring 
the nation's intelligence needs are met effectively and 
efficiently while having direct authority over only the CIA--
which represents only a small portion of the intelligence 
budget--has led to problems like those reflected in the recent 
revelation that several billion dollars at the National 
Reconnaissance Office (NRO) in funds were never expended and 
were carried forward year after year.
    As the current DCI John Deutch, who was formerly Deputy 
Secretary of Defense, testified on April 24, ``[t]he Deputy 
Secretary of Defense has got a tremendous set of issues 
covering a much larger range of resources--10 times--managing 
ten times the resources . . . of the whole intelligence 
community. So to say that you are going to go to the deputy--
and I am not talking about personalities--and say to the Deputy 
Secretary of Defense, why didn't you catch this, he's going to 
say, well, I count on the DCI to keep track of this and to let 
the Secretary of Defense know. So in some sense, if we are 
going to say that the Director of Central Intelligence does not 
view himself or herself as being responsible for the NRO, 
fundamentally nobody will be.''
    The Director of Central Intelligence is in a unique 
position to balance the cost and effectiveness of intelligence 
programs throughout the government. It makes sense to hold this 
person responsible for ensuring that the various elements of 
the intelligence community are more responsive to this national 
objective than to parochial, turf-driven goals that too often 
typify bureaucracies. Yet he lacks the authority needed to 
accomplish this objective, particularly with regard to the 
intelligence elements within the Department of Defense. The DCI 
can be given enhanced authority without removing the elements 
of the intelligence community from the various agencies in 
which they reside or interfering with the ability of those 
agency heads to manage their departments, i.e., without 
creating a ``Department of Intelligence.'' The reform 
provisions in the Intelligence Authorization Act for Fiscal 
Year 1997 were designed to accomplish this goal.
    This fundamental difference of opinion over the need to 
strengthen the authority of the DCI made reaching consensus 
with the Armed Services Committee over its provisions in the 
DOD bill and the provisions in the Intelligence bill difficult. 
However, both sides made accommodations and ultimately resolved 
all but a few issues, agreeing to changes in both bills. On 
June 6, the Armed Services reported S. 1718 with amendments 
that reflected the consensus and the two remaining areas of 
disagreement.

Remaining areas of disagreement

    The first area of disagreement was on the national mission 
of the National Imagery and Mapping Agency. The creation of 
this agency, provided for in the Defense and Intelligence 
bills, eliminates the DCI's independent photographic 
interpretation center and transfers to the Department of 
Defense authority for processing and disseminating satellite 
imagery. While the Intelligence Committee supports this 
consolidation, believing it can be justified by the benefits of 
the synergy it will bring to imagery analysis, it has worked to 
ensure that national customers outside of DOD will continue to 
receive the imagery support they need. Specifically, the 
Committees disagreed on the appropriate role of the DCI in 
representing these national customers, including the President 
and the National Security Council, as well as the Secretary of 
State and other Cabinet officials and key decisionmakers. Given 
the Administration's decision to establish NIMA as an agency 
within the Department of Defense, with its budget controlled by 
the Secretary of Defense, and to designate it as a combat 
support agency subject to review by the Joint Chiefs of Staff, 
the Department of Defense clearly will be able to ensure 
appropriate consideration of DOD's imagery needs, both tactical 
and national. The issue debated by the Committees was whether 
the Secretary of Defense should be able to effectively block 
adjustments in the programs and policies of NIMA that might be 
needed to address deficiencies in the imagery agency's ability 
to meet the needs of other national customers such as the 
Departments of State, Justice, Treasury, Commerce, and Energy, 
as well as the Office of the U.S. Trade Representative and the 
U.S. Representative to the United Nations. The Committee was 
concerned that the proposals of the Armed Services Committee 
would allow the Secretary of Defense to effectively veto 
changes needed to meet these other national needs.
    The second issue that remained unresolved was the ability 
of the DCI to make adjustments in the allocation of funds 
within the National Foreign Intelligence Program (NFIP) during 
the fiscal year to meet unexpected intelligence needs. Director 
Deutch, along with all former DCI's who testified before the 
Committee, publicly supported this enhanced authority as 
important to effective management of the national intelligence 
community. The DCI has the authority today to make the initial 
allocations within the NFIP in formulating the budget. However, 
when unforeseen requirements arise during the fiscal year and 
funds are available from a lower priority intelligence 
activity, the DCI does not have the authority to transfer those 
funds unless the affected agency head does not object. S. 1718 
contained a provision to enhance the DCI's authority by 
shifting the burden to the affected agency to convince the 
President or his designee that the transfer is unwarranted. The 
Armed Services Committee objected to giving the DCI this 
authority and amended S. 1718 to delete the provision.
    With the exception of these two issues, the Committee 
believes the consensus reached by the two Committees preserves 
significant elements of the reform effort and significantly 
enhances the ability of the DCI to manage intelligence 
activities. In addition, the Committee is more comfortable 
that, with the changes agreed upon, the DCI will have the 
ability to ensure that a new National Imagery and Mapping 
Agency will be responsive to the needs of all national 
customers.

                   recommended amendments to s. 1745

Defense HUMINT Service

    Section 905 of the bill, as reported by the SASC, would 
have made the Secretary of Defense the sole executive official 
responsible for oversight of the clandestine human intelligence 
activities of the Department of Defense and prohibited the 
Secretary of Defense from delegating this authority to anyone 
other than the Deputy Secretary of Defense. The provision would 
have severely hampered the ability of the Director of the 
Defense Intelligence Agency to manage the Defense HUMINT 
activities within his agency today and would have effectively 
prohibited the consolidation of the clandestine activities of 
the Defense HUMINT Service into the Directorate of Operations 
of the CIA, under the direction of the Director of Central 
Intelligence. This consolidation had been recommended by the 
Aspin-Brown Commission, and the Committee had included a 
provision to effect it in S. 1718.
    The two Committees have agreed to the deletion of this 
provision and the provision in the SSCI bill that would require 
consolidation and to require instead that the DCI and Secretary 
of Defense submit a report on efforts to achieve greater 
cooperation and consolidation.

Director of Military Intelligence

    Section 906 of the bill would have designated the Director 
of the DIA as the Director of Military Intelligence (DMI) and 
would have created a Military Intelligence Board (MIB) inside 
the Department of Defense.
    This Committee has previously opposed the creation of a 
single Director of Military Intelligence inside the Department 
of Defense because military intelligence functions are 
appropriately shared among the Director, DIA; the J-2 of the 
JCS; and the Assistant Secretary of Defense for Command, 
Control, Communication, and Intelligence. For this reason, the 
Aspin-Brown Commission also recommended against creation of a 
DMI.
    The Committee also notes that the Deputy Secretary of 
Defense has also testified against legislation creating a DMI 
and a MIB.
    The Committee recommends that Section 906, as reported by 
SASC, be deleted from the bill.

DCI role in appointment and evaluation of national agency heads

    The Committee recommends that a new Section 906 be added to 
S. 1745 that would amend Section 201 of Title 10, U.S. Code, to 
require the Secretary of Defense to obtain the concurrence of 
the DCI, or note the non-concurrence of the DCI, when 
recommending to the President an individual to be Director of 
NSA or NRO. (A separate new provision in Title 10, USC, would 
require the Secretary of Defense to obtain similar concurrence 
of the DCI with respect to appointment of the Director of 
NIMA.) This would parallel an amendment to Section 106 of the 
National Security Act that would be made by S. 1718 as amended 
by the Armed Services Committee. Section 201 would also be 
amended to require the DCI to provide to the Secretary of 
Defense an annual performance evaluation of the Directors of 
NSA, NRO, and NIMA.

Restriction on obligation of DOD funds

    Section 1007 of the bill, as reported by the SASC, would 
have added a new Section 2215 to Title 10, U.S. Code, 
prohibiting the obligation or expenditure of funds appropriated 
to the Department of Defense for intelligence activities of the 
Department by any individual who is not an officer or employee 
of the Department of Defense.
    This provision, the intent of which is unclear, would have 
far-reaching implications for the conduct of U.S. intelligence 
activities, the funds for which are largely appropriated to the 
Department of Defense. The Administration is still studying the 
full effect of this provision if it were enacted, but it is 
clear, at minimum, that it would significantly interfere with 
the obligation and expenditure of funds by the NRO, many of 
whose officers and employees are not DOD employees. The 
provision would also likely interfere with transfers of funds 
under the Economy Act.
    The Committee recommends that Section 1007 be deleted from 
the bill.

The National Imagery and Mapping Agency

    Title IX, Subtitle B of S. 1745, would consolidate the 
Defense Mapping Agency, the Central Imagery Office, the 
National Photographic Interpretation Center and the imagery-
related functions of a number of other agencies into a single 
National Imagery and Mapping Agency (NIMA).
    The creation of NIMA would constitute a major 
reorganization of U.S. intelligence activities, and accordingly 
the Committee has focused considerable attention on the 
provisions of Subtitle B. The Committee believes that Subtitle 
B, as reported by SASC, must be amended in several key 
respects.
    Most important, the Committee believes that the DCI must 
have clear authority to set imagery collection requirements and 
priorities, and to resolve conflicts among priorities. The DCI 
has such authority under existing executive orders and 
presidential decisions, but, in light of the establishment of 
NIMA as an agency of the Department of Defense, the Committee 
believes the DCI's authorities should be restated in statute. 
The Committee recommends that these authorities be specified 
both in Title 10, U.S. Code (together with other provisions 
establishing NIMA) and in the National Security Act of 1947 in 
Title 50 (which specifies the DCI's authorities as director of 
the Intelligence Community).
    In addition, as noted above, the Committee paid 
particularly close attention to the provisions of Section 921 
of Subtitle B that would define the national mission of NIMA. 
As reported by SASC, these provisions would have been included 
in a new Section 442(b) of Title 10. The Committee has not 
recommended changes in the wording of the provisions but 
believes that, like the DCI's tasking authorities, they should 
be included as part of the National Security Act in Title 50, 
rather than in Title 10. In addition, while the Committee has 
not changed the requirement that the DCI and the Secretary of 
Defense jointly determine whether and what corrective action is 
necessary to address deficiencies in NIMA's performance of its 
national mission, the Committee expects that neither the DCI 
nor the Secretary of Defense will use the requirement of a 
joint determination to block corrective action sought by the 
other. The Committee expects that the DCI and the Secretary of 
Defense will work together cooperatively to ensure that NIMA 
provides adequate support to non-DOD customers.
    The Committee is also concerned that, as reported by the 
SASC, Section 921 of Subtitle B would have stated that NIMA is 
established ``as a combat support agency of the Department of 
Defense.'' The Committee recognizes that the largest component 
of the new NIMA is the Defense Mapping Agency, which is 
currently designated in statute (10 U.S.C. 193) as a combat 
support agency, and that NIMA will continue to have significant 
combat support functions. But unlike the Defense Mapping 
Agency, NIMA will also have important responsibilities to 
provide imagery to non-military customers. Accordingly, the 
Committee believes it would be a mistake to establish NIMA ``as 
a combat support agency,'' even if other statutory provisions 
specifically state that NIMA also has national missions. The 
implication would be left that NIMA's primary purpose is to 
provide combat support.
    In this regard, the Committee notes that when Congress 
enacted Section 193 of Title 10, which specified the combat 
support agencies of the Department of Defense, Congress 
specifically declined to list the National Security Agency as a 
combat support agency because NSA serves customers outside the 
Department of Defense. Congress, nevertheless, subjected NSA to 
the same JCS review procedures as other combat support agencies 
but only with respect to its combat support functions. The 
Committee believes that it would be most appropriate to treat 
NIMA like NSA, i.e., not list NIMA as a combat support agency 
but subject it to JCS review with respect to its combat support 
functions. The Department of Defense and the SASC, however, 
have insisted that NIMA be listed as a combat support agency. 
Given that the Defense Mapping Agency will comprise the largest 
activity within NIMA, the Committee is willing to agree to have 
NIMA listed as a combat support agency in 10 U.S.C. 193 for 
purposes of JCS review of its combat support functions but 
recommends that Section 921 be amended so that NIMA is not 
established specifically ``as a combat support agency.''
    The Committee also disagrees with provisions in Section 921 
of the SASC bill relating to the appointment and status of the 
Director of NIMA. The legislative package drafted by the 
Administration to create NIMA provided that (1) the Director of 
NIMA could be either a civilian or a military officer; and (2) 
the Secretary of Defense must obtain the concurrence of the 
DCI, or note the non-concurrence of the DCI, when recommending 
an individual to the President for appointment as Director of 
NIMA. As proposed by the SASC, new Section 441(b) of Title 10 
would have required that the Director of NIMA be a military 
officer and that the Secretary of Defense simply consult the 
DCI before recommending a nominee from appointing a civilian 
Director of NIMA (thus implying that NIMA performs exclusively 
military functions) and would have given the DCI only a minor 
voice in the appointment of the head of a critical national 
intelligence agency. The SASC formulation was opposed by the 
DCI and by the Secretary of Defense. Accordingly, the Committee 
has amended proposed Section 441(b) to revert to the 
Administration's proposal.
    Finally, pursuant to agreement with the Armed Service 
Committee, the Committee has deleted proposed Section 445 of 
Title 10. This section would have prohibited the Inspector 
General of the Central Intelligence Agency from conducting any 
inspection, investigation, or audit of NIMA without the written 
consent of DOD Inspector General.

                            committee action

    On June 11, 1996, the Select Committee on Intelligence 
voted to report S. 1745 with amendments. Because the provisions 
considered by the Committee constituted a relatively small 
portion of the entire National Defense Authorization Act for 
Fiscal Year 1997, the Committee did not make a recommendation 
to the Senate on the overall bill. However, the Committee 
supports the provisions related to intelligence as amended.

                           regulatory impact

    Paragraph 11(b) of rule XXVI of the Standing Rules of the 
Senate requires that a report on the regulatory impact of a 
bill be included in the report on the bill. The Committee finds 
that there is no change in the regulatory impact of S. 1745 as 
a result of these amendments.

                           estimate of costs

    The Committee finds no changes in the estimate of costs as 
a result of these amendments.

                        changes in existing law

    Pursuant to the provisions of paragraph 12 of rule XXVI of 
the Standing Rules of the Senate, the changes in existing law 
made by certain portions of the bill have not been shown in 
this section of the report because, in the opinion of the 
Committee, it is necessary to dispense with showing such 
changes in order to expedite the business of the Senate and 
reduce the expenditure of funds.