|
Presenter:
Senior Defense Official |
Friday, February 1,
2002 |
Background Briefing on the Fiscal 2003
DoD Budget Submission
(Background Briefing on the Fiscal 2003 DoD Budget
Submission. Slides shown during this briefing are located at
http://www.defenselink.mil/news/Feb2002/g020201-D-6570C.html)
Staff: Welcome to the background session on the fiscal year
2003 Department of Defense budget submission. I'll just take a
second to go through some of the, remind about some of the
procedures.
The materials that you received earlier this afternoon and
the comments being made today as well as the ones that you
might receive later from the services are embargoed until
Monday morning, February 4th at 9:00 a.m. Eastern time. This
is in conjunction with the release of the President's budget
also scheduled for that time. You should have received the
conditions of this embargo with the packet of materials that
you were given earlier.
You most likely know our briefer today. When the embargo is
lifted on Monday remember this is a background briefing so the
attribution for his remarks, even when you use them Monday,
should be as a senior defense official.
After this session here the services will have
presentations on their specific programs. These will be in the
OSD, the Office of the Secretary of Defense, conference center
which is Room 1E801, downstairs from us here. The service
representatives will be there to answer any questions you may
have.
You should have a sheet with the room locations but let me
rip through these just to make sure. The Air Force is in room
one; the Navy is in room seven; the Army is in room four; the
Missile Defense Agency is in room six; and representatives for
DoD-wide questions such as personnel issues will be in room
five. Again, that's all within 1E801.
Also when we published the advisor for this particular
background embargoed briefing we said that the particulars for
Monday's briefing would be released at a later time. You
should have seen an advisory out this morning. The briefing on
Monday will be here at 3:00 p.m. Eastern time with Secretary
of Defense Rumsfeld and also the Comptroller, Dr. Dov Zakheim.
And just again a reminder, this particular briefing:
embargoed until Monday at 9:00 a.m., senior defense official.
And for your information this is who it is for those few of
you who may not know this.
Sr. Defense Official: I'm your friendly senior defense
official. I am accompanied by lots of other friendly senior
defense officials who will correct me whenever I'm wrong.
I have a surprise for you today. Unlike one of my other
briefings, I have some real numbers. I knew you'd like that.
Let's move to the next slide, and here are the real numbers.
I want to walk you through some of this because it's kind
of interesting.
This is not the number you're probably familiar with for
'02. The number you're probably thinking about is 328.9.
However, that is not what the Congress gave us 327 and change.
It then, in the second 20 billion of the 40 billion
supplemental, if you're with me, gave us another roughly 3.5,
you'll see the exact number momentarily. That also wound up in
'02. Now this is kind of weird so I'll walk you through it
again.
The 40 billion, as you know, is 20 and 20. The first 20 was
approved in fiscal year '01. By the time they got around to
the second 20 it was already fiscal year '02. So you get
whatever money we got for the defense budget in the second 20
winds up in '02. That's what drives that number.
If I haven't lost you yet, I will with this number, because
that number is what I call the St. Thomas Aquina number. That
is to say if there had been a civilian accrual add-on in
fiscal year '02, which there was not, but had there been it
would have been 3.2 billion. Now if that doesn't rival
elephants on the head of a pin or angels on the head of a pin,
I don't know.
So that is not really a number in the classic sense.
Q: Why is it up there then?
Sr. Defense Official: The reason it is up there is because
this year the Office of Management and Budget has indeed added
to our top line to fund civilian accrual. And therefore, in
order to give folks an 'apples to apples' sense, it gave a
shadow apple against the current apple. As I say, that
number's kind of in invisible ink.
Q: Where does the 20 to go?
Sr. Defense Official: The program, it was an OPM program.
This is actually, the civilian accrual which is part of that
new number is part of a government-wide effort by OMB to have
all our retirement programs in accrual funds which then pay
out.
The principle of an accrual fund is basically you project
when people are going to retire and how much benefit they're
going to get. And obviously you don't know that exactly so you
go to actuaries to do that. That is what is paid into a fund
each year.
At the same time you have actuals, people who have retired
and have claims. That is what is paid out.
Because we're starting this now as you will see in a later
chart, there is a bigger up-front payment this year to kick
this thing off, and that is on the military health care side.
The civilian accrual side is roughly the same principle.
Accruals are accruals.
So in '03 we have the number. In '02 we don't. But if we
had, that's what it would have been. If you're still with me,
it's remarkable. (Laughter)
So this is our number. Now why is it broken up this way?
We actually have, as you will see momentarily, a total of
approximately $20 billion that is related to the war. Of that
total, some $9.4 billion is for specific programs like
procurement or science and technology or what have you that
are essentially what we would call in non-English the tail,
the consequences of programs you've already started.
Those would have simply been in the baseline number except
that by the time we finalized that $9.4 billion we had pretty
much locked down the budget, so it was a mechanical issue. So
the question was well, what do you do with the money?
We have a thing called the Defense Emergency Response Fund
which gives you visibility as to how money's spent. In fact
that's what we used for the defense money that we got in the
supplemental in '02, the '01-'02 wartime supplemental. So
approximately 20 billion is going into that.
Of that 20 billion, however, 10 billion is what we're
calling a wartime contingency. That is to say we don't know
where we will be in a year's time. We know we will be
continuing the war on terrorism, but how, at what pace, in
what country, uncertain. But we can start some planning today.
I mean we have to because we are deeply concerned, as you
heard in the President's speech, about the linkage between
terrorism and weapons of mass destruction, and it is
critically important that we have some planning capability,
some sense of what we're doing.
Now in fact the war is costing us approximately 1.8 billion
a month, so if you annualize that, that's something slightly
in excess of $27 billion. You can see, therefore, that this 10
billion is roughly a third of the level of effort we're doing
right now, so it's an exceedingly conservative estimate of
continuing the war on terror beyond fiscal year '02.
Other elements, this is as you know in budget talk Function
051 is the defense budget. It is within a total budget
category called Function 050 and that is broken down into two
other major subcomponents. One is the defense-related portion
of the Department of Energy, and mostly in what is called the
NNSA [National Nuclear Security Adminstration], the new agency
that is run by General Gordon, as well as some other elements
that are related to national defense, for example the Coast
Guard and the Transportation Department, about $350 million a
year; the Maritime Security Program, defense-related FBI and so on.
So that if you were on the budget committee, for example,
and you looked at total national defense your number for this
year is $396.1 billion.
Next slide, please.
Here's another way to look at our budget, the Function 051.
That's the 331.2 and I explained to you how we achieved that.
There's the inflation number. This is what we received as a
top line increase from our brothers and sisters at OMB [Office
of Management and Budget]. Here's the homeland security
increase, and I'll discuss homeland security and generally the
war on terror a bit more later.
We conducted a nuclear posture review. It was as a result
of that review that the President announced we were reducing
our warhead levels to somewhere between 1700 and 2200, and the
rest were going to be primarily, I think, put in reserve. But
that begged a larger question which was okay, what else are
you doing for your strategic deterrent? Not strategic nuclear
deterrent, but strategic deterrent.
We've come up with a new triad -- we tend to think of
things in three's -- and this new triad consists of the
classic strategic nuclear deterrent, missile defense as a
second leg, and a third leg, a new conventional capability
which because of improvements in communications and in
targeting allow us to do some of the things that in the past
we probably didn't even do as well with nuclear forces.
So as a result of all of that that kicked up some new
programmatic requirements. That's about 700 million.
Then you've got the accruals which is another word for
entitlements. If you're going to have people and you're going
to be in your forces and your end strength or there are going
to be civilians working for you, you're going to have to do
some additional things. The Congress decided that military
retirees over 65 could draw on the TriCare program as opposed
to simply the Medicare program. Getting that accrual program
up and running this year is $8.1 billion. I've already talked
a little bit about civilian retirement and health care. That's
$3.3 billion. So these are kind of entitlements, if you will.
We are making transfers of certain accounts to other
agencies, primarily to DOE for example. We have moved a
plutonium program to DOE which is about 50 million. We've
moved certain discretionary programs to what are called
mandatory, that drop out of the top line, for instance current
health benefits. As part of this whole shift to accruals, what
we pay out -- remember I said there's two parts to this. You
estimate what you're going to pay out in the future and you
pay that in today, but you're also paying out today for what
it costs people. What you pay out is now called a mandatory
expenditure and it drops out of the top line. The cost of the
war are the two components I talked about.
Next slide, please.
Here's another way of looking at it, and I call this Mr.
Rumsfeld's personal chart. The reason I say this is those of
you who covered the testimony in particular may recall the
Secretary of Defense said look, if we leave everything alone
it's going to cost us at least $350 billion in the next fiscal
year, the next fiscal year being this fiscal year.
It turns out his estimate was conservative. This number
you've seen. Here's the must pay. These two you've seen. Pay
raises. We were told by the Congress that we should increase
military pay by what is called ECI, the Employment Cost Index,
which is essentially an index that we use as comparability for
our military. Here's what the people on the outside world are
getting as payment increases, and here therefore is what we
should compare our military earnings to, but it wasn't just
ECI which this year was 3.6 percent, it was ECI plus a half
percent, so it was 4.1 percent. And the military indeed the
President announced is getting a 4.1 percent increase. The
civilians are getting a 2.6 percent increase. If you aggregate
the cost of those that's another $2.7 billion.
These are the must pays. Again, not very much we do.
Here's another one that in a sense is discretionary but in
a sense is not if you're serious about budgeting. That is you
cost thing realistically. We had gotten into a pattern of
under-funding and under-requesting the cost of programs. What
would then happen is every year there would be a supplemental.
The President and the Secretary made very clear to everybody
that unless there was a war for which there would be specific
funds to fight that war, we would not request supplementals
any longer. We would be honest, up front, about how we
budgeted for things. And that's what this does.
There is a unit that is actually in my office called the
Cost Accounting Improvement Group or the CAIG, not K-E-G,
C-A-I-G. And the CAIG has a much better history of estimating
program costs than the services in charge of the programs. Not
every single time, but a good part, in fact most of the time.
What we said was we will either go with the CAIG's
estimates or with those estimates that are a product of
agreement between the CAIG and the services that in fact might
even be better than the CAIG estimates. Having done that, we
just added $3.7 billion to our budget.
Another case where we traditionally under-funded for a host
of different reasons was operational tempo, readiness, in
effect we added money for that, and depot maintenance -- to
maintain the readiness of our systems we added more money to
get them into depots and not to say afterwards, gee, we have
to spend more money on depot maintenance and therefore give us
a supplemental.
Well, if you add those up you'll see the Secretary was
actually optimistic because that totals something over $360
billion. So we came up with a series of programmatic cuts. I
will show you some of the highlights of those and you'll be
able to get all the detail ultimately, which total something
over nine billion, which bring us to the Secretary's number --
$350 billion.
I've talked several times already about the cost of the
war. Add those and you are now at 369.5. So if you take our
379 figure, 379.3, you see that for all other requirements,
all kinds of new stuff, you have less than $10 billion.
So what people perceive as a $48 billion increase in
practice, in terms of new things, is less than $10 billion.
You had a question. You can interrupt. I'm only an
assistant.
Q: I'm a little confused by the 19.4. That's -- ten is
reserve --
Sr. Defense Official: No, ten is that war contingency,
exactly. 9.4 is what would have been in the baseline had we
had probably another week, but we didn't and the budget was
already locked down. And that one goes to specific programs,
specific expenditures like procurement or like R&D
[research and development] or what have you. The $10 billion,
as I said, is a working estimate of what we would need to
seriously plan for follow-on.
Q: When you talk about the two figures for the war, the $19
billion total, you're talking about the war on terrorism in
general, not just the war in Afghanistan or --
Sr. Defense Official: Exactly. Because the war in
Afghanistan may no longer be in Afghanistan at some point in
'03, so this is a war on terrorism number. We may still be
there, we may be partly there, we may be there and somewhere
else, we may be at higher levels, lower levels, you know.
Q: When you talk about the 1.8 billion a month, you're
talking about the war in Afghanistan --
Sr. Defense Official: Yes, that's the war in Afghanistan.
Q: And the --
Sr. Defense Official: And Noble Eagle.
Q: Is that an average figure?
Sr. Defense Official: Yes, an average figure. What's
happened is when you get into December it has really
skyrocketed. The pace of activity really shot up and it looks,
the curve looks like that. You're down here, so we really
began in the beginning of October, last week of September, and
it literally looks like that.
Question: One more question on this. The 19.4 that you
reflected in there, that's what you expect the war to cost --
Sr. Defense Official: The 9.4 is what we know. What we know
and what we are spending as a result of the consequences of
the war.
Q: In '03.
Sr. Defense Official: That we are spending in '03 and there
will be money in '04 and '05 and so on. $10 billion is this
expectation.
Q: But the 19.4 number came out of the '02 supplemental.
Sr. Defense Official: No. Let me try that one again. I know
it's not easy.
We had a supplemental, all right? And we funded the war as
best as Congress was ready to let us and the Secretary said he
expects another supplemental because we're probably going to
run out of money before '02 ends.
But now we're looking at '03. What happens on October 1,
2002? Let's say we get another supplemental as the Secretary
expects, and we are carried and we're fine and we're whole
through September 30th, '02. What happens in '03?
That is the second $10 billion. That is our best working
estimate for planning purposes of what we will need in '03. It
could be lower, it could very well be higher.
The 9.4 on the other hand, and maybe this goes to the heart
of your question, is the programmatic consequences of the war.
In other words, as we spend money whether out of the 17-plus
billion we got in the supplemental, or spent money say on
JDAMs, we had a JDAM program -- Joint Direct Attack Munition,
I'm sorry, I used an acronym. A program before the war
started. But there are consequences to what we've done and
we've recognized those and those consequences got built into
the 9.4 billion, and that's why it's a little misleading,
although they're bunched together in this emergency fund. In
fact the 9.4 really needs to be treated differently from the
10 simply because the 9.4 is very program specific.
You had a question.
Q: You just answered it.
Sr. Defense Official: Okay. Anybody with questions?
Q: Would it be correct to say that the cost of the war,
this $19.4 billion in '03, you would not be wrong to say that,
would you?
Sr. Defense Official: This is our best estimate of
war-related costs as opposed to the cost of the war.
If the war ended tomorrow, ended today, we would still need
the 9.4. Okay? Because that is the consequence, there's a
long-term consequence to the things we've done. See what I
mean?
Q: So if the taxpayer asks what are we going to spend in
'03 on the war on terrorism --
Sr. Defense Official: That's a different -- I'll get to
that. That's a slightly different answer, okay?
Do you guys want to keep interrupting me or do you want me
to go ahead? I'm easy.
Q: Go ahead.
Q: One more on that.
Sr. Defense Official: Somebody wants to interrupt me. Go
ahead.
Q: The 9.4, when you say programmatic costs are you talking
about replacing stuff that you used? Replacing --
Sr. Defense Official: In some cases. In many cases it's
buying new stuff. Procurements you'll see, new procurements.
Q: Buy new stuff that the warriors are asking for --
Sr. Defense Official: Yes.
Q: -- in order to carry out the war.
Sr. Defense Official: Yes. Yes.
Q: Can you explain the 9.8?
Sr. Defense Official: The 9.8. You'll see, that's the total
budget and you'll see that. That is simply what we have
available after all this other stuff is done for new programs.
Now I'm going to walk through the whole program if you guys
let me.
Next slide please.
This is a word chart so since you're all journalists you
can read as well as I can if not a lot better.
Let me explain a little bit more about this one than about
this one. The right-hand column.
This indicates areas where we really would have liked to
have done more than we did. You will see as I brief you on
shipbuilding that we're buying actually fewer ships than last
year. We would have liked to have bought more.
Tactical aircraft, frankly I'm a little conflicted about
that one. We are clearly not buying as many aircraft as we
would like, and in some categories, say for instance the F-18,
we're buying fewer. However, as you will also see, we're
spending about a billion dollars on unmanned aerial vehicles,
and that demonstrates a major commitment to a new kind of
adjunct to our tactical aviation that we've never made before.
Q: How does that compare to this year? The billion.
Sr. Defense Official: About 300 more. So we're talking
about a significant increase.
If you didn't hear the other senior official, that's after
supplemental money in '02. We're all one senior official here.
So I'm a little less uptight about the tactical aviation.
S&T, science and technology. Our objective is to reach
three percent of the budget. If you take all but that
amorphous ten billion, because obviously by definition it's
undefined, if you take 369 billion, we are at 2.68 percent
with our science and technology expenditures. By comparison,
last year we were at 2.65 percent. So we're roughly the same,
slightly higher.
In actual spending terms, however, we are considerably
higher as you will see. Now some of you will say well wait a
minute. You're using last year's request as a baseline. In
fact if you add in congressional adds, that is higher than
what we're requesting this year and you'd be absolutely right.
And there has been a pattern for years and years and years of
Congress adding programs that, let me put it this way, are not
our highest priority. Okay? I see that there are some
knowledgeable snickers there.
In order to compare apples to apples, therefore, we have to
look at what we are requesting as our priority science and
technology relative to what we requested last year as priority
science and technology. We're still on the road to three
percent. We would like that moved more quickly. So that's one
that we made decisions about priorities there.
Legacy forces. This is a really tough choice because what
this basically, it goes to the heart of the planner's dilemma.
How much do you put in to fight the Kim Jong Il's and the
Saddam Hussein's of today who have conventional forces, who
have their legacy forces, and against whom you would like to
have the most modernized possible of those legacy forces. So
how much would you want to allocate to that vice truly
transformed systems?
So if we could have everything we wanted we would have done
more on the legacy systems, too, but we did make a tradeoff.
We think we've made about as reasonable a tradeoff as one can
hope. Reasonable being defined as scaring the pants off Saddam
and Kim Jong Il while also transforming. But sure, we could
have done better.
The same kind of dilemma, although structured differently,
is what colors this one. Congress in its wisdom decided not to
do anything about base closures in fiscal year '03 as we
indeed had requested they do. They did say that they would
allow us to begin a process in fiscal year '05, or actually
close bases in fiscal year '05, the process starts sooner.
Well, this begged a major question. Given that Congress has
also in a series of legislative provisions made it very clear
that you cannot forecast, preview, or in any other way
indicate your preference for closing one base against another
prior to the actual process beginning, that meant that you
have to treat all bases equally when you're spending money on
military construction. Unless you have some justification like
a building is about to collapse or whatever.
That in turn meant, given that the Secretary and the
Chairman have made it very clear that somewhere between 20 and
25 percent of our bases are not needed, that we would be going
to the American taxpayer and effectively saying every dollar
you're giving us for military construction we're throwing 20
to 25 cents away because they're going to places that are
going to get closed, or that we think should be closed.
So what we did was, since we had also wanted to
recapitalize, and let me explain recapitalization of
facilities to you. Essentially in business there's a principle
that if you have a bunch of assets, a bunch of office
buildings, whatever, you've got to replace them after a given
period of time. Now you don't allocate money to replace them
all at once. You allocate a certain sum of money to allow for
an orderly replacement.
In business it's about 57 years. We have some historic
facilities -- West Point, the Naval Academy, Monterey, a
number of places. That average therefore goes up to 67 years,
give or take.
So the idea is, you should out enough money in military
construction to allow you to turn your entire inventory over
in approximately 67 years. In fact we have been putting money
in the past, in the past decade, it led to a situation that
the money we were putting in would allow us to turn our
facilities over every 192 years. Which meant that you wouldn't
want your best friends to work there.
Now we have this dilemma. If we wanted to bring the
facilities average down, and we did indeed to that in this
past year, but further down, we would be spending money on
facilities that we were going to close. So the only way we
could deal with that in a way that was honest with the
taxpayers was to put less money in military construction and
only into those places that absolutely, critically needed
money. And that's what we did.
But that begged another question which was, well wait a
minute. If you're not closing these places are you just going
to let them rot? We felt that that wasn't right either, so we
put more money into what's called sustainment which is to say
repairing, doing the critical repairs in those places we don't
close down.
So would we have liked to have put more money in
construction? Absolutely. But given the nature of the BRAC
[Base Realignment and Closure] process, the limitations, and
all the stuff I've just talked about, we decided this was the
best way that we could be honest with the taxpayer.
Next slide, please.
Q: You'll be doing the same thing next year, right?
Sr. Defense Official: We will be doing the same thing next
year.
Q: Can I just ask you one thing there? That process, the
process you described, doesn't that mean that when you do
spend money to fix places up in the future it will cost you
more than if you'd done it now?
Sr. Defense Official: Maybe, maybe not. I mean on the
aggregate you'd have to spend a lot more money on the places
you fix in the future to compensate for the 23 percent savings
that you anticipate. All right? It's just such a large number
of facilities that we consider are subject to closure.
Q: But the communities that do get military construction
funding this year, can they read anything into that?
Sr. Defense Official: No. That's the whole point. You can't
read yes, you can't read no. We are absolutely in full
compliance with the law. You've got no way of guessing what's
going to happen. You know what? Neither do we. (Laughter)
Here's a list of programs that we've reduced. Now you're
going to turn around to me, anybody who's looked at this chart
for more than a nanosecond and say wait a minute, why are
minor changes equivalent to half of the total?
The reason is that I just listed the changes that are 100
million or more. All the rest of that stuff is less than a 100
million but it aggregates up. Those of you who want the
changes, the other parts of my senior defense official around
me will be happy to give you better insights into those.
Next slide please.
This is a pie chart with which most of you if not all of
you are familiar. Except for this. I asked my people -- my
colleagues. I can't say my people, that implies something
about me. (Laughter) I asked my colleagues to identify these
portions of the budget to show that there is 10 percent of the
budget over which we have virtually no control -- given
assumptions about how many people we're going to have. Ten
percent of that budget, roughly $38 billion, is going to these
accruals and to health care. Not to weapon systems, not to
bullets, not to operations, ship days, steaming hours, flying
-- No. Now should we not do that? Not if we want to keep our
people. That's a different issue.
But once we have our people they're entitled to these
things and we don't have control over it in a real way.
Next slide, please.
What this shows is how much we've increased over, well, I
don't know how I'd describe that red line. You see in 2001 the
previous Administration submitted a budget to the Congress. It
was the last budget the previous Administration submitted, and
it made estimates about what it was going to spend in 2002.
That estimate was approximately $296 billion.
But then before the new Administration took over the
Defense Department already had come up with an estimate that
it never submitted to the Congress, that brought that number
up from 296 to 306. So again, we get into this Aquinas type of
debate. Would it really have been 306? Would it really have
been, and so on.
We decided just to give a conservative sense of how much
we're adding to use that 306 baseline. So if you believe the
real number would have been lower than 306 had the other
Administration stayed, which it didn't, then the gap would be
even larger. So this is a conservative estimate of the
increase.
The next slide does the same thing if you can turn to the
next slide please, but it shows it to you by specific
categories. Military personnel includes the defense health
program. Okay? Remember that. That's about $22, $23 billion.
Procurement, though, although everyone's going to say wow you
always promise everything in the last year but nothing
happens, this is not trivial. This is this year, this is next
year, and as you will see, we have broken the $70 billion
limit, and those of you who follow all these analytical
studies know that $70 billion is within the window of what
expert analysts have said we need for procurement each year.
This is the first time I believe, and you guys will correct me
if I'm wrong, but I believe it's the first time in many, many
years that we have come within that window on procurement.
It's a major change.
Operations and maintenance. This is going to drive -- There
are lots of analysts around town that do these kind of trend
lines. This is going to drive them nuts because you can't do a
trend off of this because of this emergency response fund.
Because of the supplementals and the way they were broken out
between '01 and '02, you no longer have trend lines. It goes
like this. You can't predict a damn thing, which may be nice.
But including that you see serious increases in operations
and maintenance, and obviously you can imagine even without
these two you still see some very serious increases. Then
again look at research and development.
Now research and development of course is cyclical. There
are lots of things that may come up in the out years. For that
in particular what you really want to be looking at are the
first two or three years, the first one to three years, and
you'll see that we're healthy there. I'll give you the numbers
momentarily.
Q: Would you say that in fiscal year 2007 procurement
you're going to reach or approach $70 billion?
Sr. Defense Official: No, in '03. We have broken the
barrier in '03. What I'm saying is in '07 it's much higher.
But traditionally --
Q: I'm sorry, I'm confused by the graph then.
Sr. Defense Official: That's just the increase. This is the
cumulative increase. Again, I said what these graphs are meant
to show is simply how much more are we doing. We'll get to the
absolute numbers momentarily, okay? Which is now.
Next slide, please.
I've talked ad nauseam, I think, about how this has worked
out. This is the second half of the supplemental. This is the
grand total of the Defense Emergency Response Fund. Now you're
going to say wait a minute, you said 19.4. Why is it 21? The
difference is the 700 million I talked about in terms of the
Nuclear Posture Review. And that money was also included at
the 11th hour, and therefore in the Defense Emergency Response
Fund.
Q: I was going to interrupt you earlier on this, but the
nuclear posture, you started to talk about the new triad.
Precisely what's the 700 million for? Missile defense is --
Sr. Defense Official: This is simply the add-on. We have a
lot of programs that are going to be in that triad, but when
you cost them all up you actually wound up spending 700
million more than you would otherwise have done had there not
been a posture review.
Q: On conventional, on missile defense --
Sr. Defense Official: Not on missile defense. Leave missile
defense aside. On conventional stuff. Missile defense you'll
see momentarily is level.
So that's that one. Defense wide includes the defense
health program. And what that tells you is that the drop in
defense wide is greater than 0.8. Okay?
Next slide, please.
These just outline our priorities. I will give you three or
four seconds to look through those. You're more interested in
numbers, I think.
Move to the next slide, please.
I'll give you three or four seconds to look at those. If
you have a question -- This one actually I want to draw your
attention.
The UCAV, the Unmanned Combat Air Vehicle, is not like what
is called an armed Predator, where you have an unmanned aerial
vehicle and you give it the capability to fire something. That
starts out as an unmanned aerial vehicle without the
capability. The UCAV is being designed as, in effect, an
attack plane without the pilot. This is completely different.
And although there was, you know, minimal UCAV funding in the
past, it was so minimal as to be trivial. Now we're serious
about it. I will get back to that.
The rest of it I think is reasonably understandable. If
not, you'll tell me.
Next slide, please.
So somebody asked me before about the war on terror. This
row here is essentially the money that we have spent over the
year for what is primarily force protection. And you can see
that we have moved from fiscal year double zero to this fiscal
year by about 75 percent. And this as I say is fundalmentally
force protection. That's only the beginning.
Here again you have the how much we spent on the war on
terror, and this is obviously the Afghan war. This is the
original supplemental in '01. The anti-terrorism amendment
which is that 20 billion extra, so all of that goes into the
war on terror. You then have the 9.4 which as I said are the
long-term related requirements. The long-term consiquences of
the war which even if the war stopped today you would still
have to spend, and the new operational requirements which is
that undefined portion. What we call our best working
estatement for planning purposes of what we might need. And as
you can see when you agregate all of that whereas in fiscal
year '00, we committed less than five billion dollars to beat
the hell out of the terrorist. Now we're committing nearly 30.
I think that's a good message to them.
Q: For example the Philippines, the operation in the
Philippines, is that coming out of that 10 billion dollars.
Sr. Defense Official: It might at this stage. Remember your
talking about something that will only come into effect-- Lets
assume that it is fully approved by the Congress, which from
my mouth to God's ears I hope it is, that comes into effect on
October 1st. Now if we're doing stuff in the Philippines on
October 1st in a big way it could well come out of that. I
don't know. But you've put your finger on it. We may be
somewhere other than Afghanistan doing something other than
what we're doing today. That's exactly the point.
Q: On the off chance that you don't spend that ten billion,
what's going to happen to it?
Sr. Defense Official: Well, I think that will be up to the
wisdom of the Congress.
Q: You had said earlier that the ten billion was a very
conservative estimate. I believe the real number was 27.
Sr. Defense Official: No, no, no. You misunderstood.
If I were simply to take the current level of effort in
Afghanistan and spun it out over a year and assumed that we
would do exactly in fiscal year '03 what we have done up to
now in Afghanistan, then the number would be 27.
Q: That's the --
Sr. Defense Official: Therefore the ten is to give you a --
The 27 is to give you a reference point. The ten is obviously
a level of effort that is far below an annualized level of
effort in Afghanistan. That was my point.
Q: But my point is that in point of fact you do have 27 for
terrorism in the budget.
Sr. Defense Official: But that's not all for Afghanistan.
Okay? That's different. You've got lots of other things in
there. It's a coincidence that if you annualize what we've
spent on Afghanistan it comes out to roughly the same number.
That's a pure serendipity.
Q: Bottom line in '03, if that is true in 2002 the Pentagon
will spend $27.2 billion to fight the war on terrorism.
Sr. Defense Official: It's not the Pentagon will, I hope it
will, but it plans. I think it is true to say that in fiscal
year '03 the Pentagon plans and is requesting funds to spend
$27.2 billion.
Q: Could you make a simple statement about '02, what you
have spent? (Laughter)
Sr. Defense Official: Yes, I can make a simple statement.
Up to now in Afghanistan, is that what you mean?
Q: Sure.
Q: Correspond it to the 27.
Sr. Defense Official: Yes. I think I can. You've got 10.5
billion right now. I think that's the best comparison to the
27.
Q: How does that score with the 6.4 billion your own charts
talk about for Enduring Freedom and --
Sr. Defense Official: Because part of the 6.4 billion is
financed by this, '01. Here again you have this confusion.
Q: Spent to date.
Sr. Defense Official: Yeah. Spent to date in Afghanistan is
actually closer to -- I don't know if I can give the number
out. Who's in charge of me here?
Q: You are. (Laughter)
Sr. Defense Official: What's the story on how much we've
spent in Afghanistan? Can I say?
Q: I thought you already said 1.8 billion a month.
Sr. Defense Official: That's right, but you didn't do the
calculation, did you? (Laughter)
Okay, October, November, December, January, four times 18
is something about $7 billion. It's actually higher than that
if you aggregate some other things. It's around 10.
Q: Can you give us some insight on how you came up with the
ten billion? Why wouldn't you have taken 1.8 and multiplied it
out for a year?
Sr. Defense Official: For the simple reason that we didn't
know if the level of effort would be like that.
Q: -- pulled it out of --
Sr. Defense Official: No, not at all. (Laughter) You
wouldn't accuse me of that, would you? (Laughter) I'm shocked
that you would say something like that.
No. The difficulty -- You've put your finger on the
difficulty. The difficulty is we don't know where we're going
to be, we don't know what the level of effort will be. As I
just indicated a few minutes ago, the level of effort in
Afghanistan since the war began has gone up like that. If I
applied that kind of a projection, I might have asked for $40
or $50 billion. What we needed was a sum of money that allowed
us to do some planning on a very, very conservative basis with
the following two assumptions, and only those two assumptions,
in my view. One, that the war would continue somewhere. And
two, that we had to bear in mind that the terrorists could
well be linked to weapons of mass destruction. So that's how
we achieved 10 billion. Could it be 9.98 or 10.02? I won't
argue with you.
Q: Or 30?
Sr. Defense Official: But again, if that number would have
been 30, your question to me would have been isn't that too
high?
Q: Sure.
Sr. Defense Official: So I wanted to avoid that question.
(Laughter)
Q: -- for four months, it's only 21 billion over a year.
Sr. Defense Official: Right.
Q: Where did the 27 come from?
Sr. Defense Official: Oh, you mean -- Oh. You're asking me
now about the actual war. The actual war, my answer is that's
why we have to come in with another supplemental. We're going
to be running out. And indeed, the cost of the geometric
progression of expenditure, we're running out faster than we
even though we'd be running out.
Next slide, please.
Q: -- expenses, components of the war on terror. If you say
that you're requesting 27.2 billion in fiscal '03 to fight the
war on terror, what are the three or four most expensive
pieces of that? What do they go to fund?
Sr. Defense Official: Well, I think force protection is
probably the major one. There's some research and development
in there for new systems. There's the cost of operations.
Basically much of what we're spending on Afghanistan right now
is operations costs, so if you make an assumption about what
you might do in the future, it's mostly driven, the 10 billion
could be totally eaten up by operations with nothing else so
you've got lots of different components.
Q: Your notional terms, you made two assumptions, that the
war will continue somewhere, and that the terrorists, the
terror is linked to WMD [weapons of mass destruction]. What
are the fiscal controversies, financial controversies of the
second of those assumptions? What are the costs --
Sr. Defense Official: I think it goes to the question of
like intelligence and surveillance and what you're going to be
doing. How are you going to know that they're hooked up? How
do you know they have what they have. It's that kind of thing.
A large part of what we're doing now, and you'll see more
of this later on, is putting money into the ability to find
out what the other guy's doing without him knowing that you
found out and early enough to do something about what you have
found out.
- Q: Was the $10 billion number at all influenced by
- OMB? Did they come to you and say don't come in with too
much red ink for the overall federal budget?
Sr. Defense Official: Nope. (Laughter) Somebody asked me
before for a straight answer. That's pretty straight.
Here are some elements. Somebody asked me about some of the
key elements. So there you are -- force protection,
counterterrorism, and intelligence.
Next slide, please.
I talked to you a little bit already about the 4.1 percent
increase. Housing. As you know, family housing is an account
that's separate from military construction. We are putting
money in for improving and also privatizing housing. We have
programs like one at Brooks Air Force Base that essentially
allows us to work with private contractors to save money. It
saves the taxpayer money. And actually, considerable sums, and
if you want to ask other parts of my senior official body
about that they will give you some detail. They can give you
considerable detail particularly about the success at Brooks
and other places.
Q: Excuse me. I'm sure the figures are in here somewhere,
but since pay and health is such a huge part of this budget,
off the top of your head do you have the total cost out of the
379 billion, the total cost of pay, civilian and military, and
health care?
Sr. Defense Official: Yes, I do.
Q: How much?
Sr. Defense Official: You'll see.
Q: How much?
Sr. Defense Official: How much? Turn the page. The next
slide, please.
This number includes the pay and the health care. $94.3
billion in '03. That includes pay and health care and all
sorts of benefits. For military personnel only, by the way, so
it does not include the civilian side.
Q: Will it reflect the trends --
Sr. Defense Official: Yes. It includes the 8.1 billion
accrual program, the TriCare for life, yes.
Q: -- number lower?
Sr. Defense Official: We will have a slide on that, too.
You see, one of the problems with you guys interrupting me
is I can't give you the slides. You're just so eager. What can
I tell you?
Next slide please. Operations and maintenance. Bear in mind
again these two categories drive that operations and
maintenance number pretty high, but this is very significant
in my view. Defense health programs, part of the defense-wide,
I've told you that before. And I will get into some details
again in the tank miles, flying hours in the next, in a backup
slide if you want it.
Health care. Somebody asked me about the total cost of
health care. Next slide.
$22.4 billion. It includes the accrual costs in the
military personnel accounts. It reflects, not includes. It
reflects those costs.
Q: That's both for civilian and military --
Sr. Defense Official: This is military. Military personnel
addresses only military.
Q: How much of that is the TriCare for life?
Sr. Defense Official: $8.1 billion.
Q: If we want to project TriCare for life long-term costs,
do we just add on about that much every year?
Sr. Defense Official: No, because of that $8.1 billion the
amount that actually is being paid out is approximately four
to five billion. So next year when you look at the actual
payouts it will be probably closer to the four to five than it
is to the eight. And I anticipate an actual drop in the
overall health care costs as a result of that.
Q: -- and estimate the (inaudible) billion for military
pay?
Sr. Defense Official: I think that's not unreasonable. Pay
and benefits with absolute -- Yeah.
Q: There are other things like --
Sr. Defense Official: I speak --
Voice: -- move personnel and other support. So it's not
purely pay even though we named it, but it's largely pay.
Sr. Defense Official: Pay and pay-related and personnel
benefits of various kinds.
Next slide, please.
I've actually discussed both of these. This gives you some
detail.
Let me tell you something about this percentage. Remember,
we are talking about predictions of repair requirements
beginning, let me see, in October of '02 and running through
September of '03. So it begins ten months from now and ends 22
months from now. And anybody who can predict more than about
90 to 92 percent of what their repair bill can be ought to go
into prophecy immediately. So this is a pretty healthy
estimate of what we need to do repair and sustainment.
Next slide, please.
Q: -- billion for '03?
Sr. Defense Official: Yes.
Q: (inaudible)
Sr. Defense Official: Yes. It includes privatization, it
includes sustainment.
Transformation. Actually most of the sustainment is not in
the family housing, it's in the other amount, the 4.8.
That's pretty straightforward. Somebody asked me about
missile defense. 7.8, same as last year. All right?
Q: Reprogramming is there?
Sr. Defense Official: Sure. Bear in mind that the 7.8 last
year included Space-Based Infrared System, the low version,
SBIRS Low. It included the Navy area-wide program, both of
those, one of my colleagues who I guess remains nameless,
decided he would cut. And we terminated that program. Those
programs.
So in fact this number in '03 is net of those two
terminated programs.
Q: SBIRS Low was terminated?
Sr. Defense Official: SBIRS Low is restructured.
Restructured essentially means you've preserved the
acquisition program but you've totally changed the inside.
Q: -- contractors still working on their --
Sr. Defense Official: My understanding is that whole thing
has been blown open but the contractor base is still there.
Okay?
Q: What's being spent on that?
Sr. Defense Official: Navy Area Wide, by the way, is a
termination.
Q: But on SBIRS, I saw there was an amount of reduction
listed here. I didn't see what the total amount was, I just
couldn't find it in the charts before.
Q: What's the total on SBIRS Low? Does anybody know
offhand?
One of my other parts of my body will get to you later.
(Laughter)
Q: -- cancellations? Where will that money go --
Sr. Defense Official: As you saw in the earlier summary
chart, we essentially used those program cancellations, which
totaled 9.3 billion in all, to put it back into the budget for
other things.
Q: For instance, increased testing or --
Sr. Defense Official: In some cases, and I have a chart
about that. We have taken the money and we're going to improve
testing. For example, V-22 is a good example of that. We'll be
putting more money into testing.
By now I assume you've read all of that, and it's
straightforward. Let me give you the missile defense numbers.
You can see it's the same. Here's the termination, restructure
and delay. Here we're increasing.
This is simply, it's more an FYI than anything else. We're
establishing an agency and we are putting together a national
team for system integration. In other words, we're really
trying to get our arms around the entire problem in a coherent
way, the entire challenge. In the Pentagon they never talk
about problems, but I do.
Q: Can you explain the difference between the first missile
defense system and the three that come after it? Is one of
those formally known as NMD [National Missile Defense]?
Sr. Defense Official: Well, let me see. No. NMD would have
included terminal defense and mid-course defense and boost
defense as well.
So what would you define as missile defense, other part?
I'm trying to recall now how that differs from the following
three rows.
Voice: These are kind of general R&D programs that
benefit all across the entire spectrum. What they did is they
redesigned the structure of the missile defense programs, some
of which are now key to boost, mid-course and terminal which
are specific phases. Others are more generic, they cover the
entire umbrella. It's just a different portion of the R&D
program, all of which make up the system of systems.
Sr. Defense Official: So these are what you used to call
NMD. This addresses those. These are what you used to call PMD
[Program Management Directive]. And this is just additional
research and development. And these are all in the research
and development budget, by the way.
Q: When you say split SBIRS Low that means, it says two
years here, so --
Sr. Defense Official: Yes. It restructured, and the idea is
that the operational capability and the program as a whole
falls back two years.
What is the date now? 2000 and what for SBIRS Low?
Effective date? Six instead of four.
Q: -- SBIRS Low by two years, is that going to have a
corresponding effect on the mid-course and terminal if you
don't have your eyes out there looking for the missiles?
Sr. Defense Official: Well, I think the way that they're
trying to work this entire program is to keep testing things
and seeing what falls by the wayside as we move along. So to
say that it will have an impact presupposes that you've got
all kinds of stuff that will all be ready at the same time,
but you won't. Some things will obviously not be as capable
until you get the SBIRS Low on board. But in managing the
program and seeing what you want to get out sooner or what you
want to get out later, they're going to take that into
account. It's a much more flexible program that it's been up
to now and it will become even more flexible once we formally
have left the missile treaty.
Q: On this point, the Pentagon is still trying to do a
space-based sensor versus something else, which Congress says
might be, they might be amenable to.
Sr. Defense Official: The Pentagon still wants to do a
space-based sensor. That's correct.
Q: I'm sorry, I might have misheard you before on the dates
for SBIRS Low. I thought that SBIRS Low is now envisioned, had
been envisioned to supposed to be launched around 2006 and
that that has been moved to 2008.
Sr. Defense Official: Well, the other part of my body told
me four to six, so if we stand corrected. Does anybody have
the right answer? We'll get it for you. We're not trying to --
We will get you the right answer before you have to go to
print.
Q: -- theater-wide on --
Sr. Defense Official: Yeah. Now we know that we need the
answer to that, yeah.
Q: -- Navy theater wide on this chart?
Sr. Defense Official: Navy theater wide is part of the, as
I recall, that would be part of mid-course, isn't it? Yeah.
Okay, we're beating this one to death. Next slide, please.
This and the following slide are simply highlights of
transformation programs. And let me say that there are various
ways to look at transformation programs. For example, if you
have a B-52 and it is able to use a global positioning system
and information from a Predator to bomb something, it's not
the B-52 that you were operating 30 years ago. It is a
transformed B-52.
Or alternatively, if you have, and this is a true story
which many of you have heard, the fellow who was on horseback
who was being chased by the bad guys who apparently were also
on horseback, he was a special operations officer, and he
obviously couldn't call for the cavalry because it was far
away, so instead he gets on his satellite phone, he gives the
coordinates, and pretty soon a B-52 shows up, and pretty soon
boom, there is the bad guys in different pieces all over
Afghanistan.
So that is transformation. You have transformed the B-52.
(Laughter) You've also transformed the bad guys.
So you can take a very broad definition and say the B-52
and what we've done to it, the expenditures on making the B-52
a different kind of system, indeed is transformation.
If you want to take a narrower view and say what if just
the new systems like these and like the ones on the next
slide, then that's about $20 billion. These are just
highlights of what we're talking about, and I think they're
pretty straightforward. UAVs, as you know, are unmanned aerial
vehicles. The unmanned underwater vehicle is supposed to be a
mine smeller. It's essentially to go after mines.
The DDX, next slide, is really quite different from the
DD-21. The DD-21 has been terminated. I will not retract that.
It has not been restructured, it has been terminated. And what
DDX is is a test bed.
Now what's the difference? The difference is DD-21 was a
series of ships that were going to be built. DDX is a test
vehicle. We're not going to build a series of DDX's. So that's
quite different. What it's doing is taking new technologies
and testing them out for new naval capabilities in the future.
Q: You said you're not going to build a series of DDX's.
Are you --
Sr. Defense Official: We're not building a series of test
beds, no.
Q: But you are planning still to buy a new class of
destroyers?
Sr. Defense Official: Yes. A new class of something. Yes.
But it's not going to be DD-21 and it's not going to be a
series of test beds.
Q: Do you consider DDX to be the lead ship in a new class
of destroyers?
Sr. Defense Official: It's hard to know. I just don't know
yet, but you can speak to some of the folks later on and see
what they consider. I mean right now it's a test bed.
Next slide, please.
Remember I referred to that triad? Well, you've got the
conventional, I mentioned the missile defense, and you've got
the classic strategic. That's the triad now. Quite a change, a
revolutionary change from having a triad built on three kinds
of strategic systems. We now aggregate our strategic
capability. Strategic nuclear capability is one leg of the
triad, we have missile defense as the second leg of the triad,
and then we have conventional precision capabilities with far
improved intelligence, C4ISR, I'm really sorry about that --
command, control, computers, intelligence, surveillance and
reconnaissance. Do I get a prize? All part of a third leg of
the triad.
Next slide, please.
Procurement. See how I got my 70 billion? It's actually
71.9. Again, because that line, that 9.4 billion simply was
not inserted into all the accounts because the accounts had
been locked down. We know what we're spending on procurement
within that 9.4 billion, just like I said we know what we're
spending on science and technology. You add that money. It's
real money, it's real procurement, the 68.7. And as I say, for
the first time we are now within the bandwidth of what all
analysts say the Defense Department should be spending on
procurement. You remember year after year the Chairman of the
Joint Chiefs would come up and say we need 60 or whatever the
number was, and we're not doing it, and people would get
terribly upset. We're doing it.
Next slide, please.
This is Pentagonese. Again, what it means is stuff you need
and don't have. What we're doing is spending a lot of money,
and as you can see, nearly three-quarters of a billion
dollars, more actually, nearly 900 million on unmanned aerial
vehicles that we desperately need, and on the extension of the
53, the helicopter to give it special countermeasures as well.
That is due to delays in the V-22 for the special forces.
Next slide, please.
Research and development. As I mentioned, all of the
missile defense is in research and development. So in years
past I know people would say well, the reason R&D has gone
up is because missile defense has gone up. This year it didn't
go up but R&D has. So this is a non-missile defense
increase in research and development.
Next slide, please.
Q: On that one, Special Operations Command. Can you talk a
little bit more about that? How much more money you're talking
about?
Sr. Defense Official: Do we have a slide in there for the
special operations forces?
Voice: It wasn't more than 100 million.
Sr. Defense Official: It's not a big number.
Voice: They (inaudible) --
Sr. Defense Official: Remember, the Special Operations
Command budget as a whole is really quite small, less than $10
billion.
Next one.
Q: -- end up somewhere around --
Sr. Defense Official: Ultimately, yes. That's the next
slide. There it is.
As I said, we've gone up by a billion-one relative to our
request last year. The percentage is rounded to 2.7. If you
really want to get into the fine print, we're still higher
than last year and our ultimate objective is to get to three
percent. But 2.7 percent of a budget that's $48 billion higher
than the last budget is pretty healthy.
Next slide, please.
Management operations. I think most of this is
straightforward. I, of course, have a soft spot for financial
performance. We have begun this effort to come up with a
business architecture. And I ought to tell you that we did an
inventory of all the different systems we have, whether
financial or non-financial like logistics or personnel, that
aggregate things and calculate things for us at the top level.
There are 673 of those and counting. They're all supposed
to interface. So the real miracle is that our civil service
with all those opportunities to do all kinds of fraudulent
things don't do them. And I would argue, pretty proudly
actually, that if this situation existed in many other
countries of the world, there would be a lot more money in
Swiss banks right now.
But we obviously have to get those 673 systems and the
thousand plus systems that back them up down into a manageable
size. Even if people don't do things deliberately, they make
mistakes. This allows for too many errors, and that's what
we're trying to do with this architecture. Not to have one
massive mega-system, but to have a small enough number of
systems to allow top management to get the facts it needs, the
numbers it needs, the dollars it needs, when it needs them to
make decisions. I don't know if that's going to be 20 or 50 pr
60 or 80, but it isn't going to be 673.
Q: You've got 100 million for that project --
Sr. Defense Official: Yes.
Q: -- last year. Is there new money for this year?
Sr. Defense Official: We hope there will be. I believe
there is. About 100 million again.
Let me give you a feel for the magnitude of the problem.
We've already started going around to see how others in the
private sector have dealt with this. One example is Gillette.
Nine billion dollars in sales. To give you a sense of
relativity, the largest rev company in the world with the most
revenues I believe as of a year ago was Exxon-Mobil with $287
billion in revenues, so we're at $379 billion. So you take a
$9 billion company and it gives you a sense of the scope of
the problem. It took them five years to get their entire
management act together using cutting edge management tools
and the best consultants and the best of everything. So this
is a mammoth project. But we've started it, we've got to do
it, the GAO is not wrong. Senator Grassley and Senator Byrd
are not wrong. This place has not been operating as it should
be and if it isn't that means taxpayers are losing money and
we're just going to do everything we can to prevent that from
happening.
Q: How do you know there's not the fraud that's there? If
you can't do an audit --
Sr. Defense Official: First of all, we do do audits. Second
of all we've got all these waste, fraud and abuse protection,
we've got the Inspector General, we've got hotlines, and
there's some degree of fraud, but my point was that with these
sorts of opportunities we're not talking about isolated cases.
There could have been wholesale fraud. There isn't. There just
isn't.
Next slide, please.
Q: I've sat here for year after year and heard your
distinguished predecessors, several of them now, say pretty
much exactly the same thing. By God, we're going to do
something about it --
Sr. Defense Official: Okay. Why should you believe me?
Question: No, I'm just wondering what you came in and found
after --
Sr. Defense Official: I found a mess. I found an absolute
disaster.
Q: What is it they were doing?
Sr. Defense Official: I have no idea. (Laughter) Believe
me, I have no idea. I'm sure they meant well. (Laughter)
I can tell you what we're doing. For a start, we have done
something, the Secretary of Defense has done something that
hasn't been done before which was to issue a memorandum
telling the services that they were to report to him on
financial management but to deal with me, which meant that
everybody has to now coordinate with me. And me being my
office. And my colleagues in other offices. We can get you a
copy of that memorandum, if you're interested. You can call
the senior official's office later on.
That was a difference. It's already created a tremendous
difference in terms of the coherence of financial management
activities among the services and the Office of Secretary of
Defense. That was one thing.
A new business board has been set up, a business practices
implementation board bringing in people from the outside to
review what is being done. I mentioned we've already
inventoried the system. We are letting contracts to build the
architecture. None of this had been done before.
Q: You've got a bullet here, combined program budget
review.
Sr. Defense Official: Yes.
Q: My understanding is this is the first year that's been
done.
Sr. Defense Official: Yes.
Q: Can you talk about the lessons learned and why is that a
good thing?
Sr. Defense Official: Why is it a good thing? First of all,
the combined program budget review, it's the first time we've
made a major change to the planning, programming and budgeting
system since Melvin Laird was Secretary of Defense. That
already tells you something.
Why is it important? It's important because essentially the
system, whether you call it PPB or something else, any
enterprise worth its salt needs to have first order priorities
reporting to the Chief Executive Officer. Where do you want to
go? What direction do you want to take?
Having done that, you then want to figure out what are the
most cost-effective tools for doing it? Then you look at okay,
within the budget constraints I've got and within my ability
to spend money within the next year, what can I actually do?
That, in Pentagonese, became planning, programming and
budgeting.
Now what happened was, you had a whole series of overlaps.
You had decisions made on the programming side that were
revisited again on the budgeting side. You actually also had
decisions made on the program side that revisited what was
done on the planning side so that you have essentially a short
circuiting of the system.
So we've bitten off the first part which is to say by
combining the review, you enable the decisions that are made
in terms of program choices, fiscally constrained program
choices, to be upheld for the remainder of the review, and the
remainder of the review simply looks at what is the
executability -- that's not English. What is the ability to
get something done with that choice and the money you have in
the upcoming budget year.
One of the lessons learned was, boy, it would have been
nice to have more time. We've been meeting together like this
five times since just the middle of this past year. This is
the fifth budget since the new Administration took over. That
doesn't allow much time for a stable, well thought out
program, and we do our best within the time constraints to
make the choices, to think these things through, and to be
able to justify them and not do it in a haphazard way.
One of the ways we felt would allow us to do this within
the time constraints was to combine the program budget review.
So I'd say on balance I would give it probably a B or a B+.
There's a lot more that has to be done. It's the first time
we've done it. We still have to separate out decisions about
programs from decisions about execution. We have to build in,
even more than we've done, the ability of the planners to
maintain their influence over the direction of the program. I
think that's gone quite a way too, but not as far as it could
have. So I'd give it a B.
Q: If you could elaborate a little bit more, use of
realistic weapons costing. (inaudible) companies and the
program officers, managers, (inaudible) estimating up front
what their programs are going to cost.
Sr. Defense Official: Right.
Q: -- adjusted and supersized billion dollar messes now.
To what extent will program managers be held more
accountable for realistic estimates up front?
Sr. Defense Official: Well, I think there is a major effort
to do just that. I think our colleagues in the acquisition
side have every intention of doing that. And oh by the way,
when Navy, I think it was Navy Area Wide that was terminated
because of the Nunn/McCurdy breach, isn't that right?
Does everybody know what a Nunn/McCurdy breach is? Apart
from having to ask Senator Nunn who isn't a senator and Mr.
McCurdy who isn't a congressman anymore.
Basically they put in a law that said that if we could not
certify that a program that increased by 15 percent in some
cases and 25 in others -- I think there's two levels -- and if
we could not certify not only that it continued to be needed
for the national security, but that it could be managed, with
a management program in place, and we could therefore
guarantee that we had our arms around the problem, it was
automatically terminated. And until Navy Area Wide there had
never been a program termination for a Nunn/McCurdy breach.
The question is, are you saying now that nothing grew by 25
percent? No. The way the system worked was you issued your
certification, you said all the right words, and you continued
happily along. What Mr. Aldridge did was to say I'm not doing
that. And if ever there was a message to program managers that
things have changed, that was it.
Q: -- consequences are, in this budget it's $3.7 billion
and basically become the program manager's cost overruns. What
programs are the largest part of that universe?
Sr. Defense Official: There are a whole bunch of programs
that I think and you can ask later on for details, but
realistic costing essentially, as I said, we went with either
the Cost Analysis Improvement Group estimate or agreed
estimates between the CAIG and the services, and we can get
you some numbers on that.
Q: -- shipbuilding though? For the Virginia Class and LPD
[Amphibious Transport Dock] --
Sr. Defense Official: No. I don't know if most of it was
shipbuilding. There's a significant part, but not most. Not
most.
By the way, I've been going for an hour and a quarter, so I
hope you'll show me some mercy pretty soon.
Q: -- implementation board. When are they scheduled to
meet?
Sr. Defense Official: What?
Q: The defense implementation board, when and how often is
it scheduled to meet?
Sr. Defense Official: It is scheduled to meet I believe
next month, and I think it's going to meet several times a
year.
Q: The Army has a lot on its plate with transformation, but
it is the only element for which S&T funding dropped in
'03 compared to '02. Can you explain why those have dropped
and why --
Sr. Defense Official: Sure. Because they are probably --
The Army transformation is a good reflection of a general
point that ought to be made. We didn't discover every wheel,
and the Army transformation program under General Shinseki
started before the new Administration came into office.
They've been rolling along, as it were, and so in a sense for
them it's more a matter of continuing something that's a good
thing rather than starting something new.
Q: A housekeeping question. Where the POS, the procurement
book, and the more narrative book, you have programs
classified, weapons --
Sr. Defense Official: Yes.
Q: Is there some disagreement for the numbers? C-17 I
noticed, Global Hawk, Predator. Should we go with the more
narrative book or with the number that's in the budget?
Sr. Defense Official: What's the answer to that,
housekeepers? You have flummoxed the housekeepers. I suggest
you approach them later on.
Q: You mentioned earlier that you (inaudible) what you
might be reflecting for a supplemental?
Sr. Defense Official: No, we do not.
Q: -- change the whole part of not being able to occupy two
few countries at once?
Sr. Defense Official: Occupy two countries at once?
Q: The two MTW [Major Theater War] thing.
Sr. Defense Official: Oh, I see. (Laughter) You threw me
there for a second. All right, you're talking about the two
major theater wars. Okay.
Of course the requirements changed because what we did, and
really it's my colleagues in policy who would be far more
qualified to discuss this than a green eyeshade. Essentially
the approach had been to look backwards, to fight the last two
reasonably successful wars, mainly Korea and Iraq, and
basically to stop there.
In saying that we had to have a capabilities-based approach
because we didn't know where the next contingency would be.
How many people in this room predicted Afghanistan? Raise your
hands. And if you got that right, how many predicted Marines
would operate in there? The last time I checked it doesn't
have a coastline.
Because we are working with new contingencies and the
emphasis is on flexibility, then you're clearly developing a
new set of requirements that are generated by a transformed
force. However, as I mentioned very early on you have a
balance between that and the requirement to still have to
confront a hostile, nasty, aggressive Iraq; a hostile, nasty,
aggressive North Korea. So they're kind of overlaid, as it
were.
I don't know whether it reduces requirements. I think it
changes requirements.
Q: But there's no savings.
Sr. Defense Official: I don't know that you achieve savings
that way. It wasn't budget driven in that sense. There's been
a long time fallacy in the analytical community that somehow
you can take a budget and then go to the bad guys and say
please don't attack us until we have the money.
I'm going to stop after about two more questions, if I may.
Q: Can you say if there's anything in the budget on
creating this Homeland Defense Command or Northern Command or
whatever they're calling it?
Sr. Defense Official: There is -- Well, there's no decision
yet on a Homeland Defense Command or anything like that. There
is a little money set aside that would pretty much cover
whichever of the options are being considered, and there are a
number of options that are being considered and I can't really
discuss that. That's the purview of the Joint Staff.
Q: Can you say how much you put aside for --
Sr. Defense Official: I really don't have in hand how much
that is, and I'm not even sure I can talk too much about that.
Q: If Congress approves the Defense Emergency Response
Fund, the $10 billion, in who's account would that lie? Would
that be an OSD account?
Sr. Defense Official: Yes.
Q: And how would you dole that money out?
Sr. Defense Official: Well, by that time I think we'd have
a better fix on what are the requirements. So for instance you
would have deployment orders and we would have to finance
those. We may discover that we need more munitions of a
certain kind as we've already done with JDAMs and we would
have to finance that. So it would be requirements driven.
Last question.
(Multiple voices)
Oh man, I'm not the President. I don't have to hear you all
at once.
Q: -- skip generations of weapons during the campaign, and
the Administration was committed to that idea. What would you
point to in terms of weapon systems --
Sr. Defense Official: Really new, neat stuff?
Q: That represents efforts to skip generations?
Sr. Defense Official: I would say the UCAV is a good
example of that. I would say that the commitment to Global
Hawk is a good example of that. I would say that some of the
space systems are an example of that. Some of that we can't
talk about too much in public. I would say the new cruise
missiles submarine is an example of that. There are four
examples.
Folks, thank you. I've done my bit for the day. We will be
back.
| 
Printer-friendly Version
Email A
Copy
Printer Friendly