1. Supporting the Secretary’s Top Priorities
Brad Berkson,
Director, OSD Program Analysis and Evaluation

2. Agenda
National Economic Outlook
PB 07 Decisions
QDR Themes

4. Total DoD Budget Authority
Budget authority has gone up and down since Korea- in time of war we have cycled up (for purposes of discussion the Reagan buildup is considered a time of war). When there is no active hostilities, budget authority has fallen off. In this graph of constant dollars over time, you note we are near our histoircal peak in spending. Also note, unlike the Reagan buildup when we bought significant hardware, during this administration we have put much resources into RDTE with procurement intended to follow. Also much spending put into O&M etc. As a result little additional hardware has been bought to date to replace equipement bought in the ’80s.

5. Benefits Growth from Past Congressional Actions
Growth between FY03 ~ FY10
$13.9 Billion
$22.8B
$21.4B
$20.0B
$19.0B
$17.4B
$16.4B
$12.7B
$8.9B
Enormous pressure inside DoD from the cost of additional entitlements- part of which was paid to those who already had left the service (Tricare for life, SBP changes etc). These benefits are consuming nearly 20B per year which would otherwise be available for procurement.

6. Agenda
National Economic Outlook
PB 07 Decisions
QDR Themes

7. PBR 07: Financial State of Play
419
443
462 6 7 9
400
420
440
460
480
FY06
FY07
FY08 2 3
19.2B 2
15.4B $B
440
Baseline
Over-Programmed
Fact of Life
QDR

8. Actions Taken in FY07-11 (1 of 2)
Cancel B-52 Stand Off Jammer
Cancel/Restructure ACS
Retire 39 B-52s over two years
Retire E-4B
Cancel E-10 Procurement, limit to technical demonstration
Retire 50% of C-21’s, accelerate U-2 and F-117 retirements
End C-130J production in FY08
End C-17 production in FY07
New Air Force tanker slip 6 months
Delete JSF second engine
AF manpower reduction (15K in FY07 to 40K in FY11)
Army Brigades; 42 vs 43 AC, 28 vs 34 RC

9. Actions Taken in FY07-11 (2 of 2)
Military pay raise at 2.2% plus targeting
Increase Medical premium (Retiree only)
Significant MILCON reduction
Significant reduction in Minor Procurement and non-readiness O&M
Missile Defense Reduction (ABL Procurement)
Reduce peacetime OPTEMPO
FA-22; stretch production / restructure to multi-year
Slip 9th LPD-17 (FY07 to FY08)
TSAT/SBR and other Congressional reductions/reduce unobligated balances
Restructure JTRS, ASDS
JUCAS restructure to Navy variant / Classified program
V-22 pricing changes

10. Nov 21 SPC: Balancing Risks (FY 2007 TY$ Billions Est.)
Force Management
Operations
Flying Hours 11
Steaming Days 3
Tank Miles 5
Depot Maintenance 11
Training 9
Base Ops / Environ / Other 18
Battle Group / Wing 0.8
Air Wing 0.3
Army Brigade 0.4
Base Pay 54
Bonuses 4
Retired Pay Accrual 13
Allowances, Special Pay 41
& Other
Civilian Pay 56
Health Care 29
(~7K)
(~5K)
(~4K)
Institutional
Future Challenges
Aircraft Production 17
Shipbuilding 12
Modularity / FCS 9
Helos 7
Ground Vehicles 4
C4ISR 36
BMD 10
S&T 11
Intel / Weapons / Minor 54
BRAC 5
Global Posture 1
Other MilCon 6
Facilities Sustainment 6
Contractors 5

11. Nov 21 SPC: Balancing Risks (FY 2007 TY$ Billions Est.)
Force Management
Operations
Flying Hours 11
Steaming Days 3
Tank Miles 5
Depot Maintenance 11
Training 9
Base Ops / Environ / Other 18
Battle Group / Wing 0.8
Air Wing 0.3
Army Brigade 0.4
Base Pay 54
Bonuses 4
Retired Pay Accrual 13
Allowances, Special Pay 41
& Other
Civilian Pay 56
Health Care 29
( )
( 4)
( )
( )
(~7K)
(~5K)
(~4K)
Future Challenges
Institutional
( )
Aircraft Production 17
Shipbuilding 12
Modularity / FCS 9
Helos 7
Ground Vehicles 4
C4ISR 36
BMD 10
S&T 11
Intel / Weapons / Minor 54
BRAC 5
Global Posture 1
Other MilCon 6
Facilities Sustainment 6
Contractors 5
( )
( )
( 1)
( 2)

12. Agenda
National Economic Outlook
PB 07 Decisions
QDR Themes

13. Strategic Priorities
The Quadrennial Defense Review – the first conducted in an era of global terrorism – continues this shift in emphasis by identifying strategic priorities
The Fiscal Year 2007 Budget invests in capabilities and forces in these priority areas
Prevail in Irregular Warfare Operations
Defend the Homeland Against Advanced Threats
Maintain America’s Military Superiority
Support Servicemembers and their families

14. Security Environment: 4 Challenges
Irregular
Unconventional methods adopted and employed by non-state and state actors to counter stronger state opponents. (erode our power)
Catastrophic
Acquisition, possession, and possible employment of WMD or methods producing WMD-like effects against vulnerable, high-profile targets by terrorists and rogue states. (paralyze our power)
Higher
(e.g., terrorism, insurgency, civil war, and emerging concepts like “unrestricted warfare”)
(e.g., homeland missile attack, proliferation from a state to a non-state actor, devastating WMD attack on ally)
VULNERABILITY
Lower
Traditional
States employing legacy and advanced military capabilities and recognizable military forces, in long-established, well-known forms of military competition and conflict. (challenge our power)
Disruptive
International competitors developing and possessing breakthrough technological capabilities intended to supplant U.S. advantages in particular operational domains. (marginalize our power)
Higher
(U) Catastrophic Challenges
Catastrophic capabilities are increasingly escaping responsible control– e.g. nexus of terrorists, NBC proliferation, and rogue states.
Used to terrify innocent populations, paralyze political leadership, and/or disrupt critical functions.
Vulnerability to even a single catastrophic attack is unacceptable.
Terrorist attacks using NBC weapons must be treated as imminent threats.
(U) Irregular Challenges
Irregular methods—terrorism, insurgency, unrestricted warfare, societal war, and/or third party coercion—are increasing in sophistication and will challenge U.S. security interests worldwide.
Impact generally accrues cumulatively, thus opponents likely to employ long-term to weaken U.S. resolve.
Most troubling when combined with catastrophic capabilities.
Trends of irregular warfare driven/enabled by competing ideologies, expansion of un-governed territory.
(U) Disruptive Challenges
Disruptive capabilities are being developed in a number of technological areas (e.g. advanced sensors, information processing, biotechnology, nanotechnology, cyber-technology, directed energy, and anti-space)
If strategically employed to exploit perceived U.S. vulnerabilities, could pose significant future dangers to U.S.
If innovatively employed, could generate strategic surprise capable of changing fundamental power relationships.
(U) Conventional Challenges
U.S currently dominates potential conventional adversaries, dominant position is secure for some time.
“Accidental war” or intervention against an irresponsible state actor require maintenance of conventional capabilities.
Costs of retaining dominant conventional capabilities must be gauged against vulnerabilities in contending with irregular, catastrophic, and disruptive challenges.
(e.g., sensors, information, bio or cyber war, ultra miniaturization, space, directed-energy, etc)
(e.g., conventional air, sea, land forces, and nuclear forces of established nuclear powers)
Lower
LIKELIHOOD
Capabilities-based planning should apportion risk across challenges

15. Today's Capability Portfolio
QDR Focus Areas
Irregular
Catastrophic
Defeat
Terrorist
Extremism
Counter
WMD
Defend
Homeland
Shape
Choices
Today's Capability Portfolio
Disruptive
Traditional

16. New Investment in QDR Focus Areas
Defeat Terrorism ($12B)
Increase SOF forces (10 K) and equipment, establish MARSOC, increase PYSOPS & Civil Affairs capacity
Increase Predator procurement
Enhance littoral warfare capability
Counter WMD ($2B)
Invest in research into advanced biological threats
Homeland Defense ($2B)
Invest in NAOC, conventional TRIDENT, distributed COMMS, E-6B
Shape Choices ($9B)
SAP, IMINT, Long Range Strike, existing 3-Star Component Operational HQ to Deployable JTF HQ
The purpose of this study is to identify and assess options that achieve fully integrated Defense capabilities--with maximum effectiveness, at best value to the nation. Clearly, the context is a fiscally constrained environment.
We do not plan to provide a single option, but to lay out alternative paths and their implications.
While we will consider “out of the box” and even radical alternatives, we are keenly focused on options that will achieve and end state and are implementable,” including in the immediate term.

17. QDR Themes Not a Radical Departure - Continuous Change
From a peacetime tempo . . .
to a wartime sense of urgency
From crisis response . . .
to shaping the future
From broad-based industrial mobilization . . .
to targeted commercial solutions
From massing forces . . .
to massing effects
The purpose of this study is to identify and assess options that achieve fully integrated Defense capabilities--with maximum effectiveness, at best value to the nation. Clearly, the context is a fiscally constrained environment.
We do not plan to provide a single option, but to lay out alternative paths and their implications.
While we will consider “out of the box” and even radical alternatives, we are keenly focused on options that will achieve and end state and are implementable,” including in the immediate term.

19. Final Thoughts While maintaining conventional forces that can deal
Are We…
In a War
Likely to Fight Massed Armies / Navies
Countering Nation States
Dealing with a Distant, Short-Lived Problem
Or…
In a Struggle
Likely to Fight Small Groups / Networks
Countering Extremists (Supported by Nation States?)
Dealing with a Threat to World Freedom
The purpose of this study is to identify and assess options that achieve fully integrated Defense capabilities--with maximum effectiveness, at best value to the nation. Clearly, the context is a fiscally constrained environment.
We do not plan to provide a single option, but to lay out alternative paths and their implications.
While we will consider “out of the box” and even radical alternatives, we are keenly focused on options that will achieve and end state and are implementable,” including in the immediate term.
While maintaining conventional forces that can deal
with emerging world situations