(Slides used in this briefing are available at http://www.defenselink.mil/news/Feb2004/05brief.pdf)

 

            The information below, originally provided on background, is now attributable to the Under Secretary of Defense (Comptroller) Dov Zakheim.

 

            Briefer: We're doing this again. Same ground rules as always. In addition to what you just heard, just interrupt me. If you can avoid using my name that would be nice. At least one guy, one person each time forgets that, but I know who I am, you know who I am, so no need for it.

 

            Next slide.

 

            There you see the top line. The reason we got to seven percent is because we're working off of that number. The 6.1 rescission is all booked against FY04. Now in fact we haven't taken it all out of '04. For instance. $3.5 billion has come out of the '03 Iraq Freedom Fund. That's a two-year fund, so we took money out of that one.

 

            In addition you've got $800 million that is coming out of other prior year rescissions, $192 in procurement, $28 in RDT&E, $333 MilCon, $164 in family housing, $105 in the National Defense Sealift Fund which is a revolving fund.

 

            $1.8 billion in rescissions in '04, over and above the $4.3 that I've just talked about. Now that came out of the '04 appropriation. What they allow us to do is take it out of either '04 funds, '02 funds or '03 funds. We don't have to make that final, final decision until the middle of August, roughly. We have to take the money out by September 30th. We're supposed to inform them 30 days ahead of time so that brings us to the end of August. So obviously decisions have to be made in August.

 

            Again, it's booked against '04 so that's where you get your $26 billion delta and your seven percent increase.

 

            Next slide, please.

 

            Here we're talking about outlays. Before we were just talking about budget authority. Why are the outlays down here? Well, this is what we've actually spent in '04 or expect to spend, $433 billion in '04. If you add our supplemental to the baseline budget we're at about $440 billion, with the actual expenditures about $433. And so when you count the supplemental in, there's no supplemental in '05. I know you're going to ask me all about it. There's no supplemental in '04 for '05 is what I was about to say. So right now this is the delta, 3.6 percent with a slight drop from the previous year.

 

            Next slide, please.

 

            Again, an outlay slide. Here we are as a percentage of the federal budget. If you want to look at, and again the drop is the same drop because of the supplemental in '04.

 

            If you want to look at discretionary spending, because the defense budget is part of discretionary spending, we're at 47 percent. However, I would draw your attention to the fact that somewhere in the region of $27 to $30 billion depending on how you count it, is discretionary in name only because that's the medical accrual account which is about $10 billion; it's the defense health program which is upwards of $17 billion. That's not discretionary. The accrual account, for instance, is decided by actuaries. I get a letter from them, they tell me this is what I've got to put away, this is what we put away. I don't call that discretionary.

 

            Nevertheless, the entire budget is considered discretionary and we're 47 percent of the total discretionary spending.

 

            Next slide, please, by title.

 

            Again, I left the supplemental out so I wouldn't distort a comparison between '04 and '05 -- keep it apples to apples.

 

            A few footnotes, these footnotes simply show you where the rescissions bite. So for instance O&M, the Iraq Freedom Fund comes out of the O&M account and that rescission. Here we don't know where it's going to go so we put it in others. Then we've got prior-year program rescissions. So in terms of measuring apples to apples, it doesn't really show at all except in terms of the actual number itself.

 

            Again, you'll probably have questions about this particular change. How come procurement's gone down? To steal my thunder from a later slide, we have funded two ships this year that in the past would have been funded under the SCN account, the Shipbuilding Conversion Navy account. We have funded them in the R&D accounts. Those two ships are the Littoral Combat Ship which is a revolutionary ship, the first non-blue-water, it's not really a brown-water ship, for those of you who are Navy buffs, but it's a non-blue-water ship, the first of its kind, probably in 40-odd years if not longer. That ship as well as the new DDX, together if they were fully funded would be about $2 billion. That would mean that the procurement number in practice is higher.

 

            Now the impact on the shipyards is non-existent. In other words you'll have the same level of effort in the shipyards with the same levels of employment and all the rest of it, as you would have if you had fully funded it. This is a budgetary mechanism. It is not a real life impact on how the ships are being built.

 

            RDT&E is up. MilCon, and I'll talk a bit more about this later. If you take that number which is pretty close to where Congress enacted it. Very often we come in lower than the enacted, significantly lower than the enacted figure for the previous year. You add that to the privatization program which gets you about $8 to $10 for every U.S. government dollar invested. You add that to the sustainment program to keep the facilities up to snuff which is also increased, and you see that we actually have an extremely healthy military construction and family housing program, and family housing has gone up. I'll talk a little bit more about that later.

 

            Let's move along. By service here you are.

 

            Why is there this disparity? There are two reasons. Between the Air Force, and Navy/Marine Corps and the Army.

 

            The first one is the Army's more manpower intensive, person-power intensive, whatever term you want to use. Personnel intensive. That hasn't changed.

 

            The Air Force in particular has a lot of pass-throughs, as does the defense-wide account. A lot of intelligence money and space-related money goes into those accounts and literally passes through.

 

            Finally, some of the more evolutionary things that are happening aren't necessarily fully reflected in terms of dollars. I'll talk a bit more about it. General Schoomaker's totally new concept of how to restructure the Army tooth and also the fleet response plan of the Navy which increases the operational availability on very short notice of our major fleet units, particularly carrier battle groups. I'll talk to both of those in a little while. And those aren't really dollar driven, per se. They have dollar implications but that's not where the major changes are really taking place.

 

            You've been reading, you've been writing about what the Army's doing. I would argue that what the Navy is doing is equally as revolutionary and what the Air Force has done, well they already started that in the '90s. So they had their kind of revolution with their expeditionary forces a few years ago, and the Special forces, as you know, Special Operating Forces, that started a couple of years back. We are still with them better aligning particularly the Marine Corps with the Special Forces, moving some of the Special Forces missions into the general purpose forces. So again, you've got a major change there and I'll talk to that a little later.

 

            Those all are not really -- the dollar implications are second order, maybe that's the way to put it.

 

            Next slide, please.

                       

            Q: This $9.6 billion increase to the Air Force, you're attributing mostly to intel and space?

 

            Briefer: Not mostly, but a significant proportion. Obviously I can't give you the intel dollars. All I can tell you is there's a chunk of change in there. You can ask my colleague, Steve Cambone. He'll tell you there's a chunk of change in there, ask my colleague. [Laughter] Whoever you're speaking to. Ask my colleague, the unnamed official. [Laughter]

 

            The themes. I think these are pretty self-evident. One of the interesting things about Bullet 4 and Bullet 1. MacGregor [Douglas A. Macgregor], who is clearly now widely recognized as a brilliant thinker and an iconoclast, Colonel McGregor has just written a new book. It's called ‘Transformation Under Fire.’ That really goes to these two points. We are under fire. We are still in a war on terrorism. And I'll get to the details about how we're dealing with that momentarily, but that is bullet number one. We're in a war.

 

            Then everything else has to account for that situation, that we are still in a war.

 

            Next slide, please.

 

            So what are we doing about it? It's pretty self-evident there. Readiness requirements including the operation and maintenance funding.

 

            Immediate needs. Force protection is a program that is of extreme urgency. We have been moving funds around in the '04 budget to provide the skirts for our HUMVEEs, to provide the protection for individuals, to get better sensors, and this continues it. This is a direct result of the war on terror. Also there's UAV's.

 

            Future acquisition up there tells you exactly, laser satellites and so on. I'll get to those too. We'll talk a little bit about the legislative authorities momentarily, and the intelligence, what you read is what you're going to hear.

 

            Next slide, please.

                       

            Nothing really dramatic and new in this slide except that once again we're meeting our goals.

 

            Now let me talk a little bit about the Army tank miles. Here you have an example of why we need to rethink the way we do readiness reporting. There's always been this question in the analytical community, ready for what? In other words, give me output measures. Don't give me input measures. That doesn't mean you don't want to have input measures. For instance, let's take the tank miles.

 

            On the one hand you can say look, General Schoomaker is moving the Army in a completely new way and those units are going to be lighter. Well, how relevant are tank miles? On the other hand, what goes into the measurement of tank miles? Not just training at the home station, but training at the National Training Center which is the most advanced center of its kind in the world. It also includes simulation training which is a reflection of whatever developments we've made in computer and information technology. So you can't just say well this isn't a relevant metric. What you can say is this may not be the only metric, but since this is the metric we've got, until we work this out, and the reporting system goes to the question of whether you use C ratings or not as well. C1, C2, C3, C4.

 

            In the meantime, these are the measures we've got and we're meeting the requirement. That's the important measure.

 

            On the system itself, the DRRS [DoD Readiness Reporting System], it's going to get $25 million to support implementation. It's going to begin running this September. We're going to have a phased implementation over the next three years. And as I say, what we're really looking for are output measures. Ready for what?

 

            Let me talk a little bit about this. As I said earlier, when you're thinking about family housing, when you think about military construction, you can't just think about new construction. You also have to think about sustainment.

 

            Ninety-five percent is important in several ways. First, it's higher than last year. We were at 94 percent. Second, it's across the board. All the services are sustaining at 95 percent. Third, it's approaching the level where you pretty much have set aside as much money as you need. Now could it be 96 percent, could it be 96.5 percent? Maybe. That's one of the reasons we have to keep improving our measures and metrics. Because what does this do? What this does is set aside money for anticipated maintenance that will begin 11 months from now and end 23 months from now, so you're projecting what you think is going to break down and how much it's going to cost to fix. Obviously you have scheduled maintenance and that's what governs this. But in practice, in addition to scheduled maintenance you're going to have unscheduled maintenance. So the real question is are we close enough? Is there a better, more refined way of deciding whether it's '95, '96 or '97 percent? We're awfully close to 100 percent. So we've got a pretty good answer here.

 

            Next slide, please.

                       

            Legislative authorities, I mentioned, it showed up in the slide earlier. We have been fortunate that the Congress gave us some authority to train and equip the Afghan National Army and the new Iraqi Army. We're trying to broaden that authority in two directions. One is with respect to Iraq and Afghanistan to include not just the military forces but the security forces. In other words, in Iraq the Civil Defense Corps, the Facilities Protection Service, the Customs folks, the border police. Why? Because basically the Army is set up, as all armies are, to defend against external threats. Guess what? Between us and our allies there are what, 150,000 or more troops in Iraq right now. They're not worried about an external threat. The real question is internal security.

 

            We have currently a couple of hundred thousand Iraqis -- the largest, by the way, force in Iraq -- under arms mostly in these various units. We want to train them and equip them properly. They provide the best sense of security and stability to their neighbors, they provide the best sources of intelligence to us. So we're trying to broaden that authority to take care not just of the Army, but of security forces, and to do the same in Afghanistan.

 

            Q: -- that $500 million compared to the current fiscal year including supplemental?

 

            Briefer: The current fiscal year was $150, wasn't it?

 

            Q: Including the supplemental?

 

            Briefer: Yes. It's a real jump.

 

            Q: How does it break down between Iraq and Afghanistan?

 

            Briefer: My guess is that the majority, as in the case of what we're doing with CERP [Commanders Emergency Response Program] this year, I'll get to that, we’ll go to Iraq. A significant proportion will go to Iraq. We haven't broken it down yet.

 

            Then you see we've also got part two, which is friendly nearby regional nations. This is one, we go to Congress each year, Congress says we don't want to do it.

 

            We originally wanted it worldwide, Congress said no. Be more specific. We said, fine, nearby nations. There are a whole bunch of countries near Iraq and Afghanistan that could use this train and equip support.

 

            Remember, what am I talking about? I'm talking about authority which means that it's money that's going to come out of the defense budget as opposed to money that's being added to the defense budget. I would have to reprogram to do this, which if I can steal my own thunder, creates a different problem for me because the Congress in its wisdom will only let me move three-quarters of a percent of my budget around. When you think about that, since I'm also -- let me put it this way.

 

            If you are managing cash in any kind of enterprise you recognize two things. One, the budget's only an estimate; and two, your responsibility is to make the best use of the cash that you can.

 

            If you can only move three-quarters of a percent of what you estimate a year and a half ahead of time, you're going to need, you're in really serious difficulties.

 

            Now when we go and we ask Congress to reprogram funds, we go and we tell them in advance and they can always say no. Any committee, all the committees that are involved can say no and it stops. So it's not a question of not informing them. But to make these programs really work, you add them up you see it's $1 billion right there, $800 million involved in pure reprogramming. That's a drawdown, a slightly different situation. You're using up your transfer authority. ON a $400 billion budget right now we're working off of $2.5 billion in transfer authority. That's a serious problem for us.

 

            I'll get back to that later, but this is an excellent example of why we need additional transfer authority.

 

            The CERP, the emergency response program. This is the single most successful program we've got in Iraq right now. For an average cost of $7,000 per project. We eliminate the middleman, we contract with locals. These are neighborhood projects. These are the things like if you're on a city council what you do all day. You deal with sewers, you deal with health, you deal with sanitation, you deal with telecommunications. If you've got farmers in your district you deal with irrigation. You deal with civic cleanup.  You deal with cultural stuff. That's what this deals with.

 

            This is the best way we tell the Iraqi people we're not here to occupy you, we're here to provide you with enough stability so you can get on your own feet and run your own country. No games being played, no hidden card tricks. Nothing.

 

            Q: So why is DoD doing this and not USAID?

 

            Briefer: Because these projects are being done quickly. USAID deals with big projects. It deals with projects that take a lot of time with RFPs and so on. They have a whole procedure.

 

            You want to move something quickly, you want to get a street cleaned up tomorrow, AID is not functionally capable of doing that. That's not what they do. You've got a commander on the ground. He sees that a street needs cleaning up. He sees that the neighbors are getting real upset and the dogs are starting to bark and the women are starting to shout and the men are starting to grumble. All of a sudden the commander, he or she realizes if we don't clean this up, somebody may decide they want to go over to the other side. If you clean it up you make a lot of friends. You clean it up in six months it's going to take you longer to make friends. You clean it up in 24 hours, 48, 72, 96 hours, people go my God, these people are responsive to us.

 

            Q: So what's the increase from '04 for those two accounts?

 

            Briefer: Okay, that one I said was 150. This one we were at, it's kind of complicated. We were at 340 but only 180 in appropriated funds. The reason is we took $160 million of seized funds, that is to say the stuff that Saddam and his buddies tried to ferret out of the country or bury in sewer holes, and we used that to fund that program. And out of that, and this goes back to the question earlier about proportions, just to give you a sense. Out of that $340 million, $300 is going to Iraq, $40 is going to Afghanistan.

 

            Then the drawdown authority. The 2003, I believe it was, Afghan Freedom Support Act, allowed us to draw down equipment to supply the Afghan National Army. It's worked out real well. The Afghan National Army, I don't know, those of you who may have been out to Afghanistan and seen these folks when they start out, these are guys, they start out they're crawling on the ground in simulated attacks, they're being shot at, the helmet falls off, everything stops. Got to pick up your helmet. Oh, I forgot, I'm being shot at. That's how they start out. By the time they're finished they're a really well organized, well trained, impressive force. You see these folks, sometimes if you go out to some of the towns where we have Provincial Reconstruction Teams, PRTs, in the outlying areas. Sometimes you'll see this rag-tag band of the folks who are working for the warlords. Then you see these Afghan National Army folks, and it's night and day. It's having an impression on the locals. It's helping the central government. And oh, by the way, even the way they think is becoming much much more professional. It's not just spit and polish stuff.

 

            You go and ask the sergeants what they want. They don't say we want a new tank or whatever, they say we want communications equipment. That's what this program is doing for us.

 

            Next slide, please.

                       

            Q: You didn't give us [inaudible]. Did that not exist?

 

            Briefer: As I said, it was $180 million for CERP.

 

            Q: That was for emergency response --

 

            Briefer: Right, and the previous one was $150 million.

 

            Q: And the increased drawdown authority --

 

            Briefer: We got $300 million two years ago, and we used $150 million each. So now we're asking for $200.

 

            The SUPP. This is the '04 SUPP. Obviously the biggest -- We think we're going to do fine. This money will carry us through fiscal '04. We're not asking for another SUPP. If we anticipate we're likely to have one but there will not be a request even if we're likely to have a need for one until calendar year '05. We would cash flow whatever we might need in the first quarter of '05.

 

            You're going to say why are you doing that? It's very simple. I challenge anybody in this room to tell me what's going to happen in Iraq after July 1st. Boy, you can make a lot of money if you know.

 

            Q: I know where you're going with this because this is --

 

            Briefer: I'm glad you do. Can I finish for everybody else? [Laughter]

 

            Q: I think people looking, it's an election year, and with the deficit and Iraq becoming huge issues, this is going to look to perhaps people more cynical than I that this is just an effort to sort of keep a lid on the cost of Iraq until after the election.

 

            Briefer: No, and I'll tell you why not.

 

            I can give you three equally plausible scenarios as to what will happen in July of this year.

 

            Scenario number one, the handover is smooth. The United Nations loves it. The French say we're ready to send troops in. [Laughter]

 

            Q: Plausible?

 

            Briefer: Hey, our French friends have said we want United Nations approval. The Germans have said United Nations approval. A lot of countries that voted in the Security Council said we want United Nations approval. What happens if the United Nations approves? I think it's plausible.

 

            Scenario number two. Everything that was predicted that would happen when the war began and didn't happen -- mass migrations, mass interethnic killings and interdenominational killings, all happens. All of a sudden we have a greater demand on our forces. And by the way, the French don't come in.

 

            Scenario number three. It goes reasonably well, the handover is reasonable, we have a plan to reduce our forces somewhat and we move along that track.

 

            You tell me which one of those is going to happen.

 

            Q: I can't tell you, but I think some people might suggest that the Pentagon knows it's going to need extra money for FY05 because the budget doesn't cover contingency operations. It only covers sort of normal day-to-day operations, so therefore some sort of marker might be laid so that Congress knows what it's getting into.

 

            Briefer: Look, when we laid down a marker, and it was a very accurate marker at the time -- In 2002 we went to $10 billion for Afghanistan, Operation Enduring Freedom. Congress didn't give it to us. It turned out our estimates were pretty good.

 

            This time we don't have a good feel for those estimates.

 

            Sure, we can project roughly what a maximum level is likely to be, but we don't want to go to the Congress and ask for a maximum level and effectively say well, it might be a lot less but you give us more. Somehow I don't think that's going to sit well. There is no way to predict, number one.

 

            Number two is, since everybody knows full well that we can cash flow the first quarter of the next fiscal year and manage it, because whenever we're late with a supplemental that's what we always have to do anyway, what is the reason?

 

            I would argue the other way around. It's not why are we being cynical about not asking for the money. I'm wondering whether people are thinking clearly enough when they ask that we should come up with it now?

 

            Q: If it did take so long for the supplemental to pass wouldn't it be prudent to start it earlier than early next year?

 

            Briefer: Not necessarily. If we sent it up with the budget or around that time it would be quite different. If everybody knew it was coming around then, it would be quite different. It's a matter of working closely with the Congress on this. I think it's perfectly plausible to be able to make this thing happen properly, and I don't think the Congress would hold off.

 

            Q: With the first anniversary of the war coming up in March how much did the buildup and the war combat phase actually cost? After all the dust settles. And how much has the occupation cost from April 1st to January 1st, roughly, so we'll have apples and apples there.

 

            Briefer: We're still working those numbers. I can give you sort of an average sense and then I'll give you a sense of why it's hard to give you a precise answer.

 

            We said, and we reestimated, but basically we were hovering around the $4 billion mark in just about all our estimates. Even the very first estimate that was given to the Foreign Relations Committee which had a lower number, left out the reserves. And if you brought the reserves in there it came to about $4 billion.

 

            We've seen in the last couple of months reporting, and the reporting runs two months late, so already I can't answer your question directly. But the October report showed something in the region of $4.5 billion. The September report showed something in the region of $3.7 billion. Why the disparity?

 

            Well if you remember, before we got the supplemental and until really January of last year we did not have a special account for those operations. We were forward (cash flowing), forward financing those. Well, when you forward finance you obviously have to pay it back so since the war we've in effect been paying back, it was about $30 billion as I recall, and we've been paying that back. The monthly figures reflect that so there's been that fluctuation. In September we simply apparently paid somewhat less back than we did in October. There's going to be another bump-up and that will be when the troops, when we have the rotation that's going to take place. When you're going to have this massive rotation you're going to have transportation costs. So it's very hard for me to predict at this stage what the total cost will be, except I can say that as we're getting closer and closer to paying off what we had originally cash-flowed, you're going to see the numbers coming down.

 

            Q: In cost accounting in the buildup you must have a somewhat solid figure there.

 

            Briefer: That's the best that I've got right now. Do you have any number? I don't think we have anything right now. We can get something. We'll try to generate something.

 

            It's because of this complication that makes it kind of --

 

            Q: -- the building and the actual conflict, that will be a year in March. You don't have the solid figures yet for that?

 

            Briefer: Again, because, how do you want to attribute the cost of the conflict? Do you want to just do the month or so or the six weeks or so of the conflict itself?

 

            Q: The buildup and the conflict.

 

            Briefer: Okay, but again, if you talk about the buildup and the conflict, what about things that you actually spent on that you continue to use after the conflict, for example? You buy ammunition. You're going to use it -- you bought it in the buildup, you use some of it in the conflict, and then you use some more after the conflict. It's not simple.

 

            Q: Just to get back to her question a minute ago, how is what you're doing different in terms of --

 

            Briefer: You can mention her name.

 

            Q: She's not unnamed. Her question about the supplemental. How is what you're doing different from what past Administrations always did and that this Administration said you wouldn't do, which is to have supplementals to pay ongoing expenses?

 

            Briefer: Sure. The very simple answer is because I was the one that said it in some locations, not necessarily this one so you won't know who I am and what location, but as you recall the statement was made that we would only fund wartime supplementals. This would be a wartime supplemental. It's as simple as that. We have not done anything other than fund costs related to the war. And we have been very scrupulous about this. OMB has been very scrupulous about this. We have worked jointly with them to make sure that unless there was a direct relationship to the various operations -- Enduring Freedom, Iraqi Freedom, Noble Eagle -- it didn't show up in the supplemental. And quite honestly, I can tell you that that disappointed the expectations of some folks in this department who were used to just what you were talking about and thought this was going to be a way to pick up some monies they would have liked but for whatever reason didn't get. They've been disappointed.

 

            Next slide, please.

           

            Q: Can I have one last question on that?

 

            Briefer: Yeah.

 

            Q: If as you say the supplement comes along with the next budget.

 

            Briefer: Roughly.

 

            Q: Sometime next year, early next calendar year.

 

            Briefer: It's hard for me to give you a predicted date at this time.

 

            Q: But if that were to come along with the next budget cycle, and taking into account the kind of deficit that might be part of it at that time, do you think that's going to put an enormous burden on the '06 budget?

 

            Briefer: I don't think so. Look, you have to go back to where the outlays are relative to the overall budget and relative to GDP and you're making certain assumptions. You're making assumptions about revenues. You're making assumptions about economic growth. It seems to me that you won't find two economists that will agree on those things. They congenitally don't agree. That's why they become economists.

 

            Therefore, you give me a set of assumptions and I'll give you an answer on the impact on the deficit. The President has said he wants to cut the deficit in half over five years. That's based on a set of assumptions. Those assumptions come true, a supplemental's not going to be a problem.  Anybody else?  Can we move on?

 

            Q: That says you don't anticipate another supplemental in the current fiscal year.

 

            Briefer: In the calendar year.

 

            Q: But I think you've said you definitely will not --

 

            Briefer: I know I'm not a president, but presidents aren't the only people who never say never. As we stand here now, I don't anticipate it. If something happens on December 31st at 11:49 at night, what are you going to tell me? I'm trying to give you an honest answer.

 

            As I see it now, there isn't going to be one. Anticipate is just a more prudent way of saying what I said.

 

            Q: Can I take one more crack at -- I just want to make sure we understand. If you're going to submit a supplemental theoretically early next year around this time, it will take a few weeks, you're still going to have to be projecting your costs through October.

 

            Briefer: Sure.

 

            Q: So why is it okay to project that much but not another three months --

 

            Briefer: Because I'd much rather be projecting costs sometime after July 1st when I have a pretty good idea of what's going on in Iraq than right now when I have no idea what's going to go on in Iraq.

 

            Next slide, please.

                       

            Military personnel. What you see there is pretty straightforward. Let me just tell you, we keep seeing these reports about the Secretary having added 30,000 troops yesterday or the day before. That's not the way it's worked.

 

            You have end strength which is what the Congress tells the department to have on the last day of the fiscal year in terms of people. Then you have emergency authorities which allows the Secretary to get more people called up to go on active duty. That's called actual strength. That's where we are.

           

            We need to understand that end strength is not necessarily relevant to an emergency situation which we are now in. That's why the actual is actual. For some reason that constantly gets misunderstood.

 

            The budgeted levels do not include supplementals and reserve mobilization.

 

            Fiscal year '03 ended $44,000 above, and this is the January 1st number. It's going to fluctuate.

 

            Let me give you some more points before I move slides. We've obviously kept our word here. Several years ago we said we were going to go down. It was 18 percent in fiscal year '01, out of pocket expenses. That makes a significant difference to people who have to spend money out who don't necessarily have the highest incomes. Now it's gone down to zero as we promised.

 

            Recruiting and retention results are still very very good. There are some weaknesses in some states in the Army Guard and we're looking into that. But Guard attrition rates are historically low right now, less than 20 percent. They might go up some. We're doing pretty well.

 

            Again, employment cost index plus a half percent, we believe that we are continuing to meet our obligations to our people.

 

            Next slide, please.

                       

            You'll note it says managing demand. It doesn't say reducing stress or anything like that.

 

            The basic point is this. You've got a force that is about, as you just saw, nearly 1.4 million active. You've got 887,000 selective reserve. Yet we keep hearing about problems maintaining 120,000-odd in Iraq. That's not a stress problem, that's a management problem. So we're doing a number of things to deal with it and I'll talk about these on this slide and the next.

 

            Expanding capabilities is straightforward. We're restructuring our forces between active and reserve. The next slide will show that.

 

            New ways to achieve flexibility to retain military professional skills. We're going to need congressional help on that to really realize this initiative properly.

 

            Temporary authorities. What we have done in the past and continue to do is use Stop Loss. That's how the numbers go up. Now you're not going entirely eliminate Stop Loss because Stop Loss as it's properly intended is to ensure that just as a unit's about to deploy John or Jane Doe doesn't raise his or her hand and say “Whoops, I'm ready to go, goodbye. I'm gone.” That doesn't do much for unit cohesion. So you're going to have Stop Loss.

 

            The question is are you going to use Stop Loss in the kind of large, widespread way we're using it today? The answer is we don't want to. We're going to do something about that. That goes again to the new proposals of General Schoomaker.

 

            Military/civilian conversion. This is actually ongoing already. I'll give you a case in point.

 

            The DFAS, the Finance and Accounting system which is under the Comptroller had several hundred, approximately 300 uniformed Air Force personnel as part of its personnel chart. The Comptroller and the Secretary of the Air Force worked out an arrangement where all those folks moved back to the Air Force. Because we have the new National Security Personnel System which Congress enacted last year and this year we're going to start to implement to the tune of affecting about 300,000 people ultimately. We will be able to hire civilians more quickly to replace those several hundred Air Force folks. We will not have to hire them on a one-for-one basis. So we will be much more efficient on the civilian side.

 

            Fewer people to do the job that more people were doing before.

 

            Meantime, all of a sudden you've got several hundred people back in the Air Force who can be retrained or recycled if they retire and others come in, to do missions that civilians can't do. This is going on right now in Fort Leavenworth as well, by the way. They're retraining, in terms of just retraining itself, the Army is retraining people to the military police function. That's another part of this. As we move to the next slide I'll talk about that.

 

            First I want to talk about reducing the need for a really involuntary reserve mobilization. Somebody volunteers, that's fine in the first 15 days. But you don't want to call people up in the first 15 days if they don't want to go, so we want to reduce that.

 

            We want to limit involuntary reserve mobilization generally. We don't want people to be serving more than one year every six. Now in fact, there's been a lot of misconceptions about the use of reserves and the fact that reserves are constantly redeploying and so on. In fact if you go back to the Haiti operation, that's right after the Gulf War, 13.5 years, give or take, to now, and you look at how many people have deployed more than once, including perhaps more than once in OEF or OIF, it's about three percent of the reserves. That's it. Again, you've got this kind of imbalance here.

 

            Remember that great phrase, low density/high demand? This is what this is. It's low density/high demand for people.

 

            So you've got certain folks -- military police, transportation, civil affairs, medical -- tremendous high demand, low density. Not enough of them.

 

            So what the Army's doing is phasing out artillery, air defense and other units, moving folks into these kinds of terribly needed positions. And they're doing the training right now. They've started.

 

            You can see the number of positions that are being affected -- rather a large number.

 

            Again, let me emphasize, this isn't just something for the future. This says you can see fiscal year '03, '04, this is ongoing. It's something we’ve started.

 

            Next slide, please.

                       

            For those of you who are not familiar with all the dates on BRAC -- Base Realignment and Closure -- here they come. Get your pencils out.

 

            No later than February 16, 2004, final selection criteria are published and transmitted to the Congress. Submitted with the budget itself is our force structure plan and our inventory of military installations. No later than the Ides of March -- those of you who don't remember Shakespeare, that's the 15th -- nominations for the BRAC Commission to the Senate. No later than the 16th of May, this is all this year, Secretary of Defense recommendations are transmitted for closure and realignment. No later than September 8, that goes to the Commission. The Commission transmits to the President their recommendations. No later than September 23rd, the President approves or disapproves, an up or down decision, the recommendations move on to the Commission. Then Congress has 45 legislative days, that's not consecutive days, it's legislative days, to disapprove the recommendations in a joint resolution. If they don't disapprove -- double negative. If they don't do anything, these recommendations become law. So this is BRAC year.

 

            The other --

 

            Q: 2005.

 

            Briefer: Yeah, 2005. The only thing that happens in 2004 are two things. February 16th this year and the '05 budget. The Ides of March is 2005. Stay tuned. Is that clear?

 

            Q: Yes. 

 

            Briefer: Did I confuse anybody?  No?  Good.  I cannot give you anything like that kind of precision for the second part.

 

            We have started talking to folks since the middle of 2002. When I say folks, I mean other countries. Here you're talking about an overall shifting of our global posture. There are going to be countries that we might pull all our forces out of. There are going to be countries that we might pull some of our forces out of. There are going to be countries that we might not pull any forces out of. Then there will be other countries that we're going to move forces into. Maybe as forward operating locations, maybe as collocated operating bases, maybe as classic bases the way we're familiar with them. Those countries are a huge, broad spectrum. For instance, they include some countries in the former Soviet Bloc -- anything east of Germany today. So we've got a lot of different countries, a lot of different situations, a lot of different types of facilities that we might be thinking about. These all involve delicate negotiations. No way we can predict cost savings or anything else except to tell you it's ongoing.

 

            I have to point out that as a result of the congressional restrictions against what's been called in the parlance BRAC-proofing -- [Laughter]. That is to say you cannot tip your hand regarding your intentions for any particular facility until the Commission has done its work. It will mean that some forces that might have come back to Iraq and gone somewhere in the United States because they weren't going to stay overseas, because we were going to close facilities overseas, will now have to stay overseas somewhere, say Germany, whatever, because we can't tip our hands as to where they will go.

 

            So you do have some kind of interconnection between the posture review and the footprint issue and BRAC. BRAC does kind of make it difficult to move your forces directly to where they ought to go if you don't want them to be overseas. We'll have to sort through that.

 

            Next slide, please.

                       

            Q: On that, you mentioned about resources and not really being able to project. Obviously that's the case. But when, is it fair to say, that the global posture review is finished, and do you wait for that to be finished to finish the BRAC?

 

            Briefer: I think we'll have to wait until the posture review is finished. We're going to consult with the Congress on that. We'll make our changes in conjunction with the '05 BRAC so that I would have thought, correct me if I'm wrong, that the first time we'll really have a good feel for that is '06. I don't know if you could do it sooner than '06 in terms of the global posture and the costs related to it.

 

            Staffer: FY06. The two are intertwined and they're going to have to --

 

            Briefer: That’s right.

 

            Q: --be worked and balanced together.

 

            Briefer: You can't do them separately, is the point.

 

            Q: So this isn’t really so much a budget issue is what you're saying.

 

            Briefer: Right, but we want people to know where we're going, and we want people to know that there's a connection to the BRAC and the BRAC is calendar year '05, FY05.

 

            Q: Another BRAC question. You used the phrase BRAC-proofing. Each of the last few years there have been a number of members through the MilCon budget and otherwise who have done add-ons for the express purpose of trying to BRAC-proof their bases, to make their bases more attractive. Is the department going to be any more active this year, any more outspoken about opposing those kinds of add-ons?

 

            Briefer: I think the first question is we'll have to look at whether the add-ons really are BRAC-proofing, and that's one for the lawyers. So we begin with the lawyers, and once they tell us in their wisdom what it is that's going on, then we'll probably be able to react to it. But as you can imagine, this is a highly technical issue. You've got to really see whether money that's being put into a particular facility can be justified under all circumstances or not.

 

            If a roof collapses you're not going to say well I'm not going to fix that roof because it's BRAC-proofing. But the problem is of course that many of the kinds of issues you're talking about are not as cut and dried as that one. So our first step would be our legal counsel.

 

            Q: If you want to remove troops back from Germany now or in the near future, why do you have to wait until '06 to do this? Can't you move them to a place and then decide later if they need to move yet again?

 

            Briefer: No. I used Germany just as an example because we have troops there, so if you're moving them from Iraq, I mean in theory they could go anywhere. You could move them to Paris but I don't think we have a base there right now.

 

            So I was just using that as an example. The real point is this. If you move them to some facility in the United States aren't you by definition saying this facility is so important that you can't consider it for BRAC. That's the problem.

 

            Q: But one could argue that Fort Bragg is so important, because it's got troops there now.

 

            Briefer: But all facilities have something going on now. That's what the realignment and closure is about. You look at what you have now.

 

            The Secretary of Defense has made very clear that we have in excess of 20 percent more facilities than we need. But everything's being used. That's why this process is so complex, because one could in theory justify the use of any facility. I believe it was the late Senator John Tower who said everybody supports base closures in somebody else's district. [Laughter] So that's why we have the process we have. That's why you cannot simply move somebody to a given facility because you are in effect -- even if you aren't intentionally tipping your hand, people will interpret it as tipping your hand.

 

            Q: Are you prohibited by law from doing this, or is it a policy decision?

 

            Briefer: No, the law says you should not --

 

            Q: Should not or could not?

 

            Briefer: you should not. Therefore the lawyers have to tell you whether you would be violating the law if you moved.

 

            Q: How about military construction funds then? I mean that tips your hand too.

 

            Briefer: The same considerations. We're being very careful about that for the same reason. You're not going to stop all military construction because you have people who have to live and work in decent facilities. The question is how do you do that? How do you do that within the framework of the law? We've been very careful about how we're putting our proposals together.

 

            Q: Is it 20 percent excess facilities or 20 percent excess capacity?

 

            Briefer: Capacity. Excuse me. I stand corrected. You're right.

 

            Q: Does that affect your rotation plan?

 

            Briefer: It affects our ability to deploy people back from places that we --

 

            Q: [inaudible]

 

            Briefer: It makes it harder.

 

            Q: How is rotating in '05 different than rotating in '04 if you're fighting a war? I mean the global war on terrorism --

 

            Briefer: The real issue is this. When you're going to bring people home, are you going to bring them directly home or are you going to bring them to some place overseas? If you are going to -- ideally if you had already decided you were going to reduce a presence in a given country, then you would really want to bring them directly home from Iraq. It's not that you can't rotate. It's that if you have people that are scheduled to come back home and you're not going to add to the number of people at a given facility or anything like that, it's going to be as usual, that's fine. The question is, suppose I wanted to instead of having force in Country X and I was going to move those forces in Iraq to Country X where they would be, I really wanted them not to go to Country X. I wanted them to come back to the United States. I can't do that. That's what I'm saying.

 

            Q: Do you have a ballpark figure of how much money you could save if you were able to do that, bring them back?

 

            Briefer: I don't have one on the tip of my tongue. Except that we expect there will be some savings, by definition.

 

            If you're going to start closing down facilities overseas, you're going to save money.

 

            Q: Just to clarify, we're not --

 

            Briefer: By the way, my colleagues can correct me if I've got this wrong. I don't think I do. But jump in, please.

 

            Q: We're not likely to see the global posture review recommendations until what point in the BRAC procedure?

 

            Briefer: All I'm saying is they have to be worked out in the context of BRAC procedures. You've got this whole other issue of negotiating agreements with other countries. When the other countries reach agreements with you, they're not worrying about your BRAC procedures.

 

            I'm simply saying there are these two factors that affect how this is going to happen. One is the pace of negotiations, the other is BRAC. They're linked for us. They're not linked for the other countries.

 

            Q: I understand that. Is there any way that -- At what point will the department make it public what they would like to do in --

 

            Briefer: I think the first thing the department would have to do, and I would really probably prefer that you address this to my brothers and sisters in policy, but it seems to me that the first thing the department would have to do is know where these people are going to or coming from. In other words you'd have to have a sense of what countries are prepared either to take or release forces.

 

            I've got about 20 minutes. If you would like I'll move on. If you want me to just continue to answer questions, then we'll stop when I stop.

 

            All right. Missile Defense Agency.

 

            About a $1.5 billion more this year. And that has two parts to it. $900 million to continue fielding the initial capability, and by the end of calendar year 2005 -- it's calendar year as opposed to fiscal year, is my understanding -- we're talking about having 20 ground-based interceptors and up to 10 sea-based interceptors, upgraded radars, the X-Band radar capability, and command and control upgraded as well. You then have another $600 million to begin fielding the next increment of the Ballistic Missile Defense System.

 

            Now sometime early in calendar '05, and I don't know when exactly, we expect an initial capability of up to 10 ground-based interceptors -- six in Alaska, four in California; and up to five sea-based ones. Obviously the ultimate goal is this layered system where you can get a missile in its boost phase, in its mid-course phase, and in terminal phase of flight.

 

            So we have -- And by the way, this does not include Patriot or MEADS [Medium Extended Air Defense System]?. Those were --

 

            Q: -- go from nine to ten billion in round figures when you include Patriot and MEADS.

 

            Briefer: Yeah, they were moved out in the '04 budget, as you know.

 

            Q: How much of the $9 billion is sea-based?

 

            Briefer: Do we have a number right now? I don't think we do. I don't. We can probably get one. We can get it for you.

 

            Q: Is that a change in the number of sea-based? Wasn't it 20?

 

            Briefer: Originally? Was it 20 originally? I can't recall. We can check on that too.

 

            Q: The $9.2 billion in '05, is that the amount that you had programmed last year at this time?

 

            Briefer: We added some money to it.

 

            Q: Roughly how much?

 

            Briefer: Roughly half a billion.

 

            Q: Why is that?

 

            Briefer: Because what we wanted to do was move ahead with the next increment.

 

            Q: -- is there an increase in scope?

 

            Briefer: This is purely to move ahead with the next increment.

 

            Q: Adding missiles, you mean?

 

            Briefer: Yes.

 

            Q: $1.20 million?

 

            Briefer: I can't remember. I can't remember the number. I know we're adding missiles. It's to keep the industrial base going and buy more missiles.

 

            Q: Can you go over the deployment base again? You'll have an initial deployment by the end of fiscal year '04, right?

 

            Briefer: By the end of year '05 we're going to have the 20 ground-based ones and we're going to have up to 10 sea-based ones. By the end of calendar '05, excuse me.

 

            Early in that same year, in other words --

 

            Q: Calendar year '05.

 

            Briefer: Right. And early that year, in other words roughly a year and give or take some months from now, you will have up to 10 interceptors, the initial capability -- six Alaska, four California -- plus up to five sea-based interceptors.

 

            Q: Wasn't that going to be by September 30th of this year? Roughly.

 

            Briefer: This is where we are right now.

 

            Q: So you're looking at calendar year 2005, you'll have the initial deployment at Fort Greeley and at Vandenberg.

 

            Q: Didn't the President say that he wanted it by September?

 

            Briefer: I can check on that, but that's what I'm being told. If I'm wrong, I'll get back to you. You'll have another shot at me.

 

            Q: Are all ten of the sea-based on one ship, or are you going to have one ship in each ocean?

 

            Briefer: I don't know how to answer that. Do you know? Three ships.

 

            Q: I just wanted to clarify my previous question. You said a half a billion dollars was added, and you said to keep the industrial base going and to add more missiles.

 

            Briefer: That's the same thing, isn't it?

 

            Q: Well how many more missiles are you adding? These are the same missiles that I remember hearing about for some time.

 

            Briefer: I'll have to get you the number of how many more we're adding. We're buying more missiles.

 

            Q: That's a lot of money for a few more missiles.

 

            Briefer: I didn't say how many, so I don't know how you can say it's a lot of money.

 

            Q: I'm sorry, what you said would happen in the early calendar year 2005, the six deployed and the five. What is then scheduled for IOC at the end of 2004?

 

            Briefer: I don't have anything right now. I think this is what we're talking about and I will double check on that because I've had the same question four different ways now. So I'll answer you the same way, I will double check on it.

 

            Next slide, please.

                       

            Q:        [inaudible]

 

            Briefer: No, I didn't say that either. I said I was going to check on it.

 

            Q: Okay.

 

            Briefer: Here are some of the key land forces programs. I think you're familiar with all of those. The key thing on the Future Combat System is that it's on track for 2010. It includes precision direct and indirect fire, including the follow-on to Crusader.

 

            The key about that, of course, is that the precision indirect fire is expected to be more precise than precision direct fire was say 20 years ago. It's not indirect fire as we understand it, or we have understood it.

           

            As you see, 11 aircraft, the ongoing development there.

 

            Q: Are you highlighting?

 

            Briefer: No, we're simply pointing out that we're buying 11 aircraft and the thing's moving along. It did attract a lot of attention last year and the year before that, so we're saying the program's moving on. That's all.

 

            Q: Aren't you actually just buying eight aircraft with the '05 money? It's the 11 aircraft that were funded in 2000.

 

            Briefer: No, it's 11. We're buying 11. Not eight, 11.

 

            Next slide, please.

                       

            Shipbuilding, I talked a little bit about the SCN account versus the RDT&E account. The big story is really in that box. We've got all kinds of new programs, the DDX destroyer which is meant to be a rather different kind of destroyer from the past. The same with the cruiser. And of course the Littoral Combat Ship is the first ship, correct me if I'm wrong, but in a good several decades if not longer that is not designed to be a blue-water ship. It will be able to operate in the blue water, but it is not classic blue-water navy kind of ship. It is meant to operate in littoral areas. Not really brown water in the riverine warfare sense, but not really blue water either. So it's a revolutionary kind of designed ship, and we have an R&D ship in this year's budget and another in next year's budget.

 

            Q: Why is DDX in the R&D budget? It's not a new --

 

            Briefer: Well, traditionally SCN was funded differently in that they never had R&D money and what you did was --

 

            (END SIDE A)

 

            Briefer: -- It’s the first of a class.  It’s a lead ship.  Or if it’s a first of a different kind of design, even of the same class, maybe in a different yard, then it’s really R&D money. This is actually providing a better clearer representation of what’s really going on.

 

            Next slide, please.

                       

            This gives you the details on shipbuilding. I think the important thing to remember here is not just the numbers but also all the other things that we're doing in terms of refit and conversion. The conversion side of this program.

 

            You can see, by the way, the prior year bills have gone down. We're really done a lot with that. We inherited huge prior year bills and we've managed to control that account.

 

            Q: Is it realistic to go from seven, nine, six ships to all of a sudden 17 in fiscal '09?

 

            Briefer: It is if you're talking about a ship that's roughly half a billion dollars as opposed to $1.5 billion. We're talking about small ships in serial.

 

            Again, this is the Littoral Combat Ship. We used to produce, I don't know, six, seven, eight, nine submarines a year. I'm not talking about in World War II, I'm talking about in the mid '70s. We have moved away from that with a lot of our bigger units, but this ship is meant to be produced in serial numbers, serial quantities, so it's not at all unrealistic.

 

            Q: On the previous slide you talked about why the shipbuilding account went down in 2005.

 

            Briefer: Yes.

 

            Q: But then it goes down even farther in 2006.

 

            Briefer: Another R&D ship in 2006 as well. That's number one.

 

            We still have, and this goes back to the issue of how you do your two-year budgets. I will answer your question by switching to the next slide.

 

            When you look at the next slide you see that basically we've got stability in tactical air mobility aircraft. We have gone to a two-year budget, and we basically felt that if you're going to do in effect a bottom-up review, you do that every two years; and on the off year, the second year, you deal with initiatives that have come up that may have been generated by events, like General Schoomaker's initiative.

 

            We will look at and we are planning to look at the entire shipbuilding budget and to review exactly what goes in it. As we will in fact look at all the aircraft. But the aircraft programs are quite stable and there was no real reason to revisit them in '05 unless you wanted to just spend a lot of people's time reinventing the wheel. We will do that in '06 and we will look at the shipbuilding budget in '06.

 

            So the first answer is I do have another ship that's in R&D next year and that again will affect the total. But second of all, we're going to have a complete relook.

 

            Q: On the tanker issue, there's no money in this budget for tankers.

 

            Briefer: That is correct.

 

            Q: Can you walk through the mechanics? If in fact the IG and the building blesses going forward, roughly how much would be needed in '05 and '06 and what's the mechanism to put it in during a budget cycle?

 

            Briefer: I think the first question is when will the IG come out with what it comes out with? You say assuming, but that's hypothesizing. One thing I learned in this business is don't assume anything about anything. So I can't make any assumption about when the IG will be done.

 

            Second of all, what then happens is going to be a function of a relook based in part on what the IG says and based on other factors as to what is the future way to go. And as you know, right now this tanker program is on hold, which by definition means it's without prejudice to the program. But equally so, it means that we have to see what happens with the IG and we have to again revisit what we plan to do. So there's no way I can predict what it is we're going to do, when it is we're going to do it, or how much it is we're going to spend on it. I just can't.

 

            Q: Roughly in '05 what would have been misspent had this thing not gone astray?

 

            Briefer: Oh, I don't have that number offhand. I don't think we ever advanced that far.

 

            If you recall, the budget gets, as we say, scrubbed in December and late November and it was around that time that we were already revisiting the tanker. So there was no, I couldn't give you a refined estimate and if it's not a good estimate, I don't know why I should give it to you.

 

            Q: Can you elaborate on what you said about reexamining the shipbuilding budget in '06? What kind of questions are you going to ask when you do that?

 

            Briefer: We're going to be looking at all sorts of issues regarding the future of the force and projected force levels. We have a number of multiyear programs. We want to see whether we want to expand those, extend those, curtail those. All kinds of issues that properly should be visited when you are doing a full-blown budget program and budget review.

 

            It's not to say that any particular program is going to necessarily be affected. It is to say, as with aircraft, that we're going to look at them and we're going to see whether, after a two-year hiatus, whether we still feel we're on track. That's all.

 

            Q: If you're going to do that kind of look, how much confidence can we have in those numbers in the out years? Seventeen ships by '09.

 

            Briefer: Well because I don't think the look is going to result, for example, in curtailment of ships that are relatively new programs or completely new programs, and to which we are committed. I think there are other programs, and that's where the tactical air model and mobility model comes in that are longstanding programs and just need to be looked at.

 

            Q: Can you give us the Joint Strike Fighter, a thumbnail sketch of what that cost growth is all about?

 

            Briefer: Yes. How many more slides do I have? This is going to be fun. Five minutes to go.

 

            Q: You can stay longer.

 

            Briefer: I know I can.

 

            The Joint Strike Fighter, basically it's a function of primarily an increase in weight. If you look back to any aircraft program produced anywhere in the world in the last 40 or so years you will find that every one of them got fatter. There is a very high correlation between the cost of aircraft and their weight. It shouldn't be. It's counter-intuitive because over the years you've had much more micro-miniaturization, and therefore weight shouldn't be the same factor, it shouldn't have the importance in the multivariate equations that it once did, but it does. So weight is the big cost driver.

 

            Now what you have here is a bunch of countries that all agreed that (A) they want to proceed with the program; (B) they want to restructure the program so that you have the cost growth in the system development and demonstration phase, which is the right time to do it, rather than let things go on and then you have to start worrying about form, fit and function because you start taking things out and putting other things in and it gets much more costly. So this is the responsible way to deal with cost growth when it's identified.

 

            Q: Overbudgeted?

 

            Briefer: I don't think we are over budget. What we did was we essentially moved monies around within the program.

 

            Q: Does that indicate that as with the F-22 you're not going to add money to the program at all on top line, but you're going to eat S&T costs by shrinking procurement costs?

 

            Briefer: As I understand it, that's what we're doing so far. Correct me if I'm wrong.

 

            Q: Do you have a number to buy down?

 

            Staffer: In the next couple of years they're going to buy fewer and put more money in R&D. The R&D program went from $33 billion to $40 billion.

 

            Q: Right, over the next couple of years, but in the long run you're still going to buy as many as you previously planned?

 

            Voice: The total quantity stayed the same.

 

            Briefer: Right now that's what we project.

 

            Q: So eventually you're going to have to add money to the program.

 

            Briefer: If the quantity remains the same.

 

            Q: Could you just describe the restructuring within the program a bit?

 

            Briefer: I couldn't do that right here. I mean that's well beyond my scope.

 

            Q: On the tankers does the FYDP then assume sustaining the KC-135 fleet because you cannot count on the 767 showing up?

 

            Briefer: We had some money for a tanker replacement, and we still do. Out year money. You asked me about the FYDP. That's out year money.

 

            Q: I'm talking about O&M money mainly though for the 135 fleet.

 

            Briefer: Well, until we replace them we have to maintain them.

 

            Q: Can you talk about the buy to budget on the F-22? There's some language in the program both that says the Air Force is still committed to that, but I'm not quite sure what that means.

 

            Briefer: What it means is you're going to buy within that top line that we were just talking about earlier. The question I had about the Joint Strike Fighter. And the Air Force believes that it can still meet the current number of F-22s within that overall top line, but depending on what it spends on cost growth, it could affect the numbers. What they're basically saying is they'll buy as many as they can.

 

            Q: Congress didn't let them do it last year. Why would you think they'd let them do it again this year?

 

            Briefer: Partly because I think you've got some stability in the program so I don't think it's going to be as big an issue.

 

            Next slide, please.

                       

            Transformation. Here are some of the key systems involved. The unmanned aerial vehicles, apart from the joint one, which as you know combines all the unmanned combat aerial vehicles into one consolidated program and has a common operating system, and we'll do the operating assessment in fiscal years '07-'09. The other ones include four Global Hawks and RDT&E on those, about $700 million -- $696 to be precise. Nine Predators and RDT&E on those, about $309 million. Then there's the Army Shadow as well.

 

            Transformation satellite communications. As you know that's the laser communications that really gets you out of the bandwidth straight jacket.

 

            JTRS, the Joint Tactical Radio System, is the one that's internet protocol based and allows you not just to talk within the military but to talk to civilians as well.

 

            Space Based Radar I'm sure you're familiar with.

 

            The thing about this one is that three or four years ago everybody thought this was not going to happen. It's happening, it's moving along. A significant commitment to it.

 

            Finally the last one. I have briefed this internally, this briefing several times now, so let's see if one of you can win the bagel. I want you to tell me what JLAENS stands for.

 

            Q: Joint Land Attack Elevated Netted Sensor. [Laughter]

 

            Briefer: No, you have lost the spelling bee. Next?

 

            Q: Joint Land Attack Elevated Netted Sensor Cruise Missile Defense System.

 

            Briefer: Close, but no bagel.

 

            The answer is, Joint Land Attack Cruise Missile Elevated Netted Sensor System.

 

            We should have, instead of spelling bees, acronym bees. But that's part of the cruise missile defense.

 

            By the way, that is also spelled as B-L-I-M-P. [Laughter]

 

            Q: The KUCAV. How does that funding compare to the current year?

 

            Briefer: Well, we combined all the programs. I'd have to get you the answer unless you know it offhand.

 

            Staffer: Approximately $170 million to $175 million this year amongst the three or four programs that got moved together.

 

            Q: Is that all considered S&T at this point?

 

            Briefer: No. It's not S&T. No, no, no. That was a question I was asked before.

 

            Q: On Space-Based Radar, this number, does it work around and recoup some of the money that was lost in '04?

 

            Briefer: My understanding is yes, but I stand to be corrected on that one. We'll double check, but my understanding is yes.

 

            I've got a couple more slides.

 

            Q: Question?

 

            Briefer: You have a choice. I've got four slides, 30 seconds. Go ahead.

 

            Q: Last year DoD requested $27 billion for IT. I don't see a top number here for a total IT expenditure.

 

            Briefer: We will get you a number. I don't have it offhand.

 

            Q: The '04 figure for cruise missile defense?

 

            Briefer: I don't have that either. Do we have it? I don't think we looked at it that way but we can get it for you. We'll get it.

 

            Q: Is JLAENS the only cruise missile defense program in there?

 

            Briefer: No, no, no, no. SLAMRAM.

 

            Q: What about the Air Force Z-10? They’re trying to say that’s a cruise missile defense program.

 

            Briefer: I've got three that we're highlighting. We've got SLAMRAM, we've got the blimp, and we've got the Joint Integrated Fire Control. Now there may be others. Talk to the Air Force. You're going to have briefings after this one where they'll tell you everything I said was wrong.

           

            Another slide on transformation. Let me talk to you about what we see as General Schoomaker's restructuring efforts. First of all, these brigades are going to be under the 10 division headquarters. Right now we are committed to one additional brigade for each division. That brings you up from 33 brigades to 43 brigades. You've been hearing 48. Forty-eight is a goal. We are not committed to 48. We are committed to 43 and we will see how things go. That's the official word.

 

            Second, we're going to increase the number of Army National Guard Enhanced Separate Brigades. We currently have 15.

 

            Third, the real importance of this plan is that this is the first time since Napoleon made divisions the central maneuver element of land forces that you've got a change. The brigade will become the central maneuver element. And just like divisions didn't mean the extinction of corps, brigades don't mean the extinction of divisions. What it does mean is that these are going to be maneuver elements that can work independently with the Air Force, with the Navy, with the Marine Corps that have a different kind of communications capability to help them work independently, that obviously are more deployable and more efficient. And we are not talking about permanent end strength increases.

 

            Q: So why do you need to have the division headquarters? What are they going to do?

 

            Briefer: Just as corps headquarters. They will provide some additional capability, but a number of things that previously were totally at the division level are now being moved down to the brigade level. That's why I said, the divisions aren't going to be extinct and they will provide something. If you have larger battles you need a division. If you have even larger battles you need the corps. You can talk to the Army about that. They're the experts, not I. But the central maneuver unit is going to shift.

 

            For us it's a radical idea. It's been both embodied and discussed in a variety of different ways. You've got MacGregor and his ideas; you've got the Marine Corps regimental approach; you've got the British who have been doing this for years. This is our way of moving out smartly with a new restructured Army that again is not going to involve a permanent end strength increase.

 

            Secondly, I'll tell you right now we're talking about funding this with the '04 supplemental and looking at how we'll deal with it in the '05 supplemental and that's all we're looking at right now. There will be some additional costs. Not clear yet. We don't know how this is going to affect, for instance reserves that have been called up to active and what we do with those. There's a lot of analysis that still needs to be done, but we're creating a different kind of focus for our maneuver units and we are creating a lot more brigades.

 

            Q: Any kind of figure you can apply to that right now?

 

            Briefer: No. We're working on the numbers.

 

            In terms of the fleet response plan, this is in its own way as radical and revolutionary as what the Army's doing. The CNO began this in this fiscal year. It essentially gets us away from the paradigm where the Navy was out on fixed deployments, you knew you needed six ships to support one in the Indian Ocean. Once you were out on deployment you flew the wings off an aircraft, regardless. Now it's going to be responsive in the way the Army and the Air Force are responsive in that you will be able to deploy more quickly with more force because you're having a different operational cycle.

 

            The Air Force, as I said, has already moved out smartly with its Air Expeditionary Forces and Space Expeditionary Forces. That's its transforming concept.

           

            Special Operations, the role of the SOCOM continues to expand. We're aligning the Marine Corps even more with the Special Ops Forces so that the Marine Corps and the other general purposes forces will pick up some of the Special Ops missions and the Special Ops folks will specialize in still others.

 

            Then of course the Joint Forces Command which again in its own way is, in terms of transforming training and integrating the forces, has become a model for a lot of other countries around the world.

 

            Science and technology, very quickly. Focus on nano-technology, computers, sensors, propulsion systems. An increase over last year was enacted. A lot of money for basic and applied research and exploratory development. I touched on that a little earlier I believe. Real growth of about 1.6 percent.

 

            A words chart which you can just look through on intelligence. I'm not going to be able to add much more to that anyway except we are also, if you can move ahead, we have really a fifth bullet. I don't know how to express it in Pentagonese so you'll have to just let me do it in English.

 

            It's knowing whatever we want to know whenever we want to know it. Okay?

 

            Q: Battle space awareness. [Laughter]

 

            Briefer: Not quite. That doesn't capture it. I don't have the way to capture it.

 

            Q: Back to that 9.6 number from the Air Force you said was largely attributed to intel and space?

 

            Briefer: Not only, but significantly.

 

            Q: The Air Force background briefed a billion dollar increase in space. That still leaves that $8.6 billion.

 

            Briefer: You've also got Air Force R&D, number one.

 

            Q: That was included in the space number though.

 

            Briefer: No, no, no. You've got $9.6 which is the total Air Force R&D number, right?

 

            Q: No, the 9.6 million increase in your total top line chart.

 

            Briefer: I don't follow your question.

 

            Q: You said it's largely attributed to intel and space. Not all.

 

            Briefer: There was a lot of pass-through in that. Yes.

 

            Q: The Air Force background briefed a billion dollar increase in space for FY04. That's only a billion. You've still got like $8.6 billion.

 

            Briefer: You've got an intelligence component as well beyond that.

 

            Q: So does that include --

 

            Staffer: Quite a bit of money for readiness and other things.  The Air Force can go through that in more detail.

 

            Q: Does the space portion of that include only white space?

 

            Briefer: I don't know how I can answer that. Talk to the Air Force about it.

 

            Q: Talk about transformational operations and what not, but yet you have yet to kill any programs, and it doesn't look like anything is getting a major cut. Can you talk a little bit about how you really transform if you don't kill any programs?

 

            Briefer: A number of things. First, you've got a lot of older systems that you keep retiring. That's number one. Number two, we did kill a whole bunch of systems over the last three years. Number three, this is the second year of the two-year budget cycle, so next year will be the time to decide whether you want to kill other things, and in fact that's what the bottom-up review kind of approach is all about. I don't like using the term bottom-up review, but it's essentially a review of all your programs. So that will be the year for doing that.

 

            I think it's a little unfair to say that we haven't cut programs.

 

            Q: Any major ones this year?

 

            Briefer: No.

 

            Q: Any major ones last year?

 

            Briefer: We had Crusader. When was Crusader? Last year. That was pretty major.

 

            Q: Why don't you invest more in S&T? I looked in the R1 books and each of the three components --

 

            Briefer: Glad you had them, huh?

 

            Q: Yes, they were helpful.

 

            Briefer: No thanks to me, I can tell you that.

 

            Q: They dropped down, the amount dropped down in all three categories of S&T for all the services with the exception of basic research for the Air Force. So you've seen a real drop.

 

            Briefer: Not at all. Why do you say that? A drop relative to what? To the enacted?

 

            Q: Yes.

 

            Briefer: Of course, because the enacted always is higher than what's in the requested and we always compare it to our requested. The reason is that a lot of what's enacted are things that the Congress believes are important for us to do research in but we don't necessarily share that same assessment.

 

            Q: Are you meeting the three percent large goal that's --

 

            Briefer: No, because I don't think it's relevant any more. Three percent might have been relevant but first of all we never met it. We were at 2.69 percent, now we're going to go down to 2.62 percent. But the real question is, is that really a meaningful measure when you're at a budget of $400 billion? That means we're approximately $100 billion over where we were three years ago. Does that mean that we necessarily must throw $3 billion at universities and so on? There's an argument for putting more money in but there's not a knee-jerk argument percentage wise that says well, you increased $100 billion because you're fighting a war in Iraq and you're modernizing, you're transforming, you're doing this, that and the other. I need my three percent bite. It just doesn't work.

 

            I think what you're finding here is by having $1.3 billion in basic research you're putting an awful lot of money into universities, into labs, into research centers, and you don't know if anything's going to come out in military terms because that's what basic research is all about. The same to some extent with applied research. And I would even argue the same to some extent with exploratory development. There's a lot of money going into this and I don't think three percent's the relevant measure.

 

            I am going to have to stop here. I apologize for not being able to walk you through the rest of the slides, but I am sure that my colleagues both in the services and OSD will help you out.