Can the DoD Afford Its Future?

Thought Much is said about the differences between Building a Program and Executing a Budget – Many in this room do both What should budget formulators and executors understand about how a Program is built and the multiple challenges we face annually?

The Army of the Future Observations of the Past

Agenda 2 Strategic Context QDR Forces vs Infrastructure ARFORGEN Supply and Demand Challenges Forces View Resources View Requirements View Capital vs Operations Balance Summary

Strategic Context Pre-2001 POM POM transformational? Yes or No Are we at a strategic inflection point? Yes or No Answers to these questions impact the Army narrative for POM POM transformational? Yes or No Are we at a strategic inflection point? Yes or No Answers to these questions impact the Army narrative for POM  Opportunity to institutionalize the Army three major initiatives since 2001—Modularity, ARFORGEN, and the RC as an operational force  Opportunity to continue to gain acceptance of the Army’s supply-based ARFORGEN model  Opportunity to adopt an enterprise approach and reform requirements and resource processes  Opportunity to restore operational and strategic depth  Opportunity to meet combatant commander and service-specific requirements while achieving sustainable levels of OPTEMPO and PERSTEMPO across all components Some Opportunities: Some Perspective Conflict EpisodicPersistent Providing Forces Demand BasedSupply Based Readiness TieredCyclic Reserve Component Strategic ReserveOperational Force Structure AOEModular Force Operating Concept AirLand BattleFull Spectrum Operations Equipping UnitUnit and Pooling Manning IndividualUnit Management HQDA-CentricEnterprise Strategic Inflection Point—”…occurs when the old strategic model dissolves and gives way to the new….a point in time…when fundamentals are about to change.” Grove,

Strategic Capability High Moderate Low Perceived Capability Emphasis Lesser Contingencies Future Near Peer Major Theater War ’93 Bottom-Up Review High Moderate Low Perceived Capability Emphasis Lesser Contingencies Future Near Peer Major Theater War ’01 QDR High Low Perceived Capability Emphasis Lesser Contingencies Future Near Peer Major Theater War ’05 Defense Strategy High Moderate Low Perceived Capability Emphasis Lesser Contingencies Future Near Peer Major Theater War ’97 QDR Strategic Capability  2 MTWs  State-on-State  Cross Border Conflict  2 MTWs  State-on-State  Cross Border Conflict  Smaller Scale Contingencies   Ungoverned Areas  Asymmetric Threats  Future Peer  GWoT / Ungoverned Areas  Irregular Warfare  Low-End Asymmetric  (State-on-State War)  Disruptive Technologies  Superiority in the Commons (Space, Cyber, Seas, Air)  Industrial Age Near Peer Desert Storm Soviet Collapse Desert Storm Soviet Collapse Somalia, Bosnia, Rwanda, Haiti Somalia, Bosnia, Rwanda, Haiti Citadel I & II Citadel I & II 11 Sept / GWoT OEF / OIF 4 Challenges 11 Sept / GWoT OEF / OIF 4 Challenges Two Decades of Strategic Evolution 4

QDR 2010 Near Term QDR –Wartime QDR –Priority on current conflicts –Broad focus / Broad portfolio Supports rotational readiness Consolidates resources to create a 12 th AC CAB, procures a 13 th AC CAB, and converts an HBCT to an SBCT Consolidates USCYBERCOM and creates Service component commands for cyber operations 5 “Our judgment with regard to the overall capacity of the force reflects in part the heavy demands being placed on portions of the force by ongoing operations. As those demands evolve, so too might the appropriate size and mix of forces.” What would the QDR 2010 chart portray?

Forces vs Infrastructure Bottom- Up Review 1993 Commission on Roles/Missions 1995 BRAC 1988 BRAC 1991 BRAC 1993 BRAC 1995 BRAC 2005 QDR, NDP 1997 QDR 2001 QDR 2006 Defense Management Report 1989 Defense Reform Initiative 1997 Business Initiative Council 2001 Berlin Wall 9/11 GWOT Program Reviews Budget Reviews Seeking Effectiveness and Efficiencies 6

Forces View 8 OIF 1/2 & OEF IV/V OIF / OEF 04-06OIF / OEF 05-07OIF / OEF 06-08OIF / OEF 07-09OIF / OEF 08OIF / OEF 09 Demand Exceeded Supply Expectations

Requirements View Over Time Expect ~$11B per year in emerging requirements Demand Exceeds Supply 9

POM Emerging Requirements Requirements POM Manning Strategy Institutional Adaption FY12-17 Strategic Choices CY10 Objectives 41 Strategic Issues from POM Strategic Choices & CY10 Objectives More Flexibility Less Flexibility Installations/Quality of Life Force Mix ARGFORGEN Tng Mgmt Operationalize the RC Modernization Strategy Estimated FY12-17 TOA Senior Leaders face significant challenges to Refine the 21st Century Army Fueled $21B to $65B in additional emerging requirements across POM

Resources View Supply Projections Missed Demand 11

Capital vs. Operations Efficiencies difficult to find –LSS projects –MIL --> Civ conversions … which turned into Mil --> Nil conversions –Reductions of DA Civilians and Contractors in the work force –BIC Iniatives Hollowing can result Reduces capacity Operations ~ 75% Capital ~ 25% Capital more fungible Small to leverage Shifts one way Reduces capability Shifting Capital to Operating Shifting Operating to Capital 12

Balancing Need = ƒ (Manning, Training, Sustaining, Base Support, Equipping, Military Construction) Investment Operations and Support Title X Function Manning Training Sustaining Equipping Stationing Organizing Primary Driver(s) Based on End Strength Based on Robustness of Training Based on Operations Tempo Shortages, Recap/Upgrade, Modernization Housing, Family Programs, Facilities, Construction Operating/ Generating Forces; Reserve Components Current ratio sustained through the application of supplemental funding Even if the total Army budget shrinks, there will be pressure to maintain the current level of Operations and Support expenditures 25% Capital 75% Operations Capital Operations Based on these cost drivers, can the Army (or any Service) proportionally scale back its expenditures? ? ? 13

Balancing? What kind of Army does the Nation need? How capable should that Army be? Topline Driven? Need Driven? Balanced? Need = Capability + Capacity Capability Approach ( Adjust Investment Strategy – Mortgage current force) –Define and procure future force; Maintain current capabilities at reduced need and support levels –Reduce Manpower and associated support costs Capacity Approach: –Maintain size of force with associated support costs –Mortgage future – maintain current investments 14

Updated IPM wheel... Strategy Planning Strategy Planning/ Programming Budget Formulation Budget Execution Operational & Management Reporting External Reporting Program Analysis Intervention Realignment Centralized Activities Fueling Requirement Growth Annual Cycle – Another View Decentralized Activities Immediate Needs of the Nation 15

Putting It Together Discussions ongoing as to future of the Army Department will face tough choices in the future –Continued reliance on OCO not a viable option –Operations and Support needs may force a migration from capital investment –Future Force investment may force a migration from Operations and Support –Doing both may not be in the best interest of the Nation 16