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THE COST OF CURRENT DEFENSE PLANS: 

AN ANALYSIS OF BUDGET ISSUES 

HEARING 

BEFORE THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

HEARING HELD IN WASHINGTON, DC, OCTOBER 14, 2009 

Serial No. 111–16 

Printed for the use of the Committee on the Budget 

( 

Available on the Internet: 

http://www.gpoaccess.gov/congress/house/budget/index.html 
(II) 

COMMITTEE ON THE BUDGET 

JOHN M. SPRATT, JR., South Carolina, Chairman 

ALLYSON Y. SCHWARTZ, Pennsylvania 

MARCY KAPTUR, Ohio 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL BLUMENAUER, Oregon 

MARION BERRY, Arkansas 

ALLEN BOYD, Florida 

JAMES P. MCGOVERN, Massachusetts 

NIKI TSONGAS, Massachusetts 

BOB ETHERIDGE, North Carolina 

BETTY MCCOLLUM, Minnesota 

CHARLIE MELANCON, Louisiana 

JOHN A. YARMUTH, Kentucky 

ROBERT E. ANDREWS, New Jersey 

ROSA L. DELAURO, Connecticut, 

CHET EDWARDS, Texas 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

JAMES R. LANGEVIN, Rhode Island 

RICK LARSEN, Washington 

TIMOTHY H. BISHOP, New York 

GWEN MOORE, Wisconsin 

GERALD E. CONNOLLY, Virginia 

KURT SCHRADER, Oregon 

PAUL RYAN, Wisconsin, 

Ranking Minority Member 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

MARIO DIAZ–BALART, Florida 

MICHAEL K. SIMPSON, Idaho 

PATRICK T. MCHENRY, North Carolina 

CONNIE MACK, Florida 

JOHN CAMPBELL, California 

JIM JORDAN, Ohio 

CYNTHIA M. LUMMIS, Wyoming 

STEVE AUSTRIA, Ohio 

ROBERT B. ADERHOLT, Alabama 

DEVIN NUNES, California 

GREGG HARPER, Mississippi 

ROBERT E. LATTA, Ohio 

PROFESSIONAL STAFF

THOMAS S. KAHN, Staff Director and Chief Counsel 

AUSTIN SMYTHE, Minority Staff Director 
(III) 

C O N T E N T S 

Page 

Hearing held in Washington, DC, October 14, 2009 ............................................. 1 

Statement of: 

Hon. John M. Spratt, Jr., Chairman, House Committee on the Budget ..... 1 

Hon. Paul Ryan, ranking minority member, House Committee on the 

Budget ............................................................................................................ 2 

Hon. Robert B. Aderholt, a Representative in Congress from the State 

of Alabama, questions for the record ........................................................... 60 

Matthew Goldberg, Acting Assistant Director for National Security, Congressional Budget Office ............................................................................... 3 

Prepared statement of ............................................................................... 9 

Responses to Congressman Aderholt’s questions for the record ........... 60 

Stephen Daggett, specialist in defense policy and budgets, Congressional 

Research Service ........................................................................................... 27 

Prepared statement of ............................................................................... 33 

Responses to Congressman Aderholt’s questions for the record ........... 62 

(1) 

THE COST OF CURRENT DEFENSE PLANS: 

AN ANALYSIS OF BUDGET ISSUES 

WEDNESDAY, OCTOBER 14, 2009 

HOUSE OF REPRESENTATIVES, COMMITTEE ON THE BUDGET, Washington, DC. 

The Committee met, pursuant to call, at 10:11 a.m., in room 210, 

Cannon House Office Building, Hon. John M. Spratt, Jr. [Chairman 

of the Committee] presiding. 

Present: Representatives Spratt, Doggett, Etheridge, Yarmuth, 

Edwards, Scott, Schrader, Ryan, Jordan, Aderholt, Lummis, and 

Harper. 

Chairman SPRATT. This is your typical weekday session. You 

know we have multiple conflicts with the meeting today. I am sure 

we will have some members joining us later on, and those like our 

distinguished Ranking Member who just arrived. Do you have anywhere to go later on? Ways and Means? 

Mr. RYAN. Not for a while. Yeah, I have Ways and Means at 

noon. 

Chairman SPRATT. Well let us get under way. We got two good 

witnesses, and we welcome you and everyone else to the hearing 

today on the Cost of Current Defense Plans. 

Our witnesses this morning are excellent witnesses. They have 

made a career literally of studying expense spending. Steve 

Daggett, Specialist in Defense Policy and Budgets with the CRS, 

Congressional Research Service, and Matthew Goldberg who is the 

Acting Director of National Security Division of the Congressional 

Budget Office. 

Our purpose today is to get an update of current defense plans 

and to gain better insight into the issues that are driving defense 

spending over the longer term. 

Our Nation is faced with some enormous fiscal challenges. The 

worst recession since the great depression the record budget deficit 

and defense budgets at record levels as well. To take on these challenges and to ensure that we are spending the taxpayer’s money 

wisely, we need to consider the whole domain of federal policy making, including defense, which after all makes up more than half of 

all federal discretionary spending. 

Next week we will hold a hearing, a second hearing on the topic 

of longer term challenges of the defense budget. Our witnesses will 

be Deputy Secretary of Defense William Lynn, and Defense Comptroller Robert Hale, that will be next week. 

Since 2001 the federal government has more than doubled what 

the Nation spends on defense. Defense spending now stands at its 
2 

highest level since World War II, in real terms surpassing the peak 

spending years of Korea and Vietnam. Splitting war costs out, defense spending over this period grew well above rate of inflation, 

increasing seven to eight percent a year. Future costs are projected 

to follow the same rising path, and if these plans remain unchanged we will have a significant increase in defense over the 

next five years. 

The Congressional Budget Office has issued a number of reports 

showing that the Bush Administration’s defense plan would require 

tens of billions of dollars more per year than its own budget projected. This last budget request the Bush Administration projected 

defense spending to slow down and flatten out this year, but it did 

not project scenarios or engagements or troop levels consistent with 

such a decline in the real defense spending and it is not likely to 

happen. 

The Obama Administration submitted its 2010 budget this May 

with a number of changes to the defense budget. The Obama Administration has proposed tocancel or to slow down a number of acquisition programs which are experiencing problems and calls for 

acquisition reform to control cost growth. This marks a move in the 

right direction, but much more needs to be done. Great challenges 

lie ahead. 

For example, O&M, operation and maintenance and military personnel. These make up two-thirds of the Defense Department’s 

budget, and they are growing at a rate far above the rate of inflation, threatening to squeeze out our ability to fund R&D and new 

acquisitions. And of course we cannot ignore or overlook the cost 

of overseas deployment. Even though we are beginning to draw 

down forces in Iraq, we are also beginning to add to forces in Afghanistan, which diminishes the prospect of any peace dividend 

and implies that the cost of our overseas deployments will continue 

to be significant. 

The Administration is now conducting the QDR, the Quadrennial 

Defense Review. This will assess programs and consider costs and 

roles and missions and ultimately defense strategy recommendations that will form the basis of the 2011 budget. In preparation 

of the release of the QDR recommendations and the 2011 budget 

we hope to get a better understanding of how the long-term projections of the Nation’s defense plan have changed since the 2010 

budget and a clearer understanding of the issues that lie at the 

heart of ongoing defense spending. 

Before we turn to your witnesses let me turn to the Ranking 

Member, Mr. Ryan of Wisconsin, and ask for any opening statement that he would like to make. Mr. Ryan. 

Mr. RYAN. Thank you, Chairman Spratt, I also want to welcome 

our witnesses. Steven Daggett, welcome back, good to have you. 

Matthew Goldberg welcome. We appreciate you being here. 

I think it is fair to assume that the chief concern on most American’s minds these day and the minds of Congress remains the economy, jobs, and the future of our health care sector. But even as we 

continue to address these challenges others are coming to a head. 

Among them of course is how we are going to handle Afghanistan 

and Iraq, as well as other developing threats like Iran and North 

Korea. 
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So even with the countless competing commands in the budget, 

this Congress must continue to honor the primary role of the federal government providing for our national defense. 

In short that means ensuring America’s men and women in uniform have whatever resources are necessary to complete their missions. We simply cannot take our national defense for granted. 

Now that being said, I did not mean to imply that there is not 

a great deal of room for improvement on DoD’s budgetary front, 

there sure is. There is clearly an opportunity for savings, particularly in the procurement programs. So I look forward to exploring 

how the Department might more efficiently meet its critical mission. But I also want to discuss how this Congress might avoid the 

growing temptation to raid DoD’s budget for more domestic spending as resources get tighter. That is my current budgetary concern 

when it comes to discretionary spending. We saw this in the 1990s, 

I fear we may be returning to a time where we are raiding defense 

not necessarily for efficiency gains, but just for the sake of raiding 

defense in order to plus up more domestic spending, building in a 

higher spending baseline, and creating more deficits. I hope we can 

resist that temptation while we do get the kinds of savings we need 

from defense for deficit reduction. 

I am eager to hear from both members and witnesses on their 

thoughts on how we can achieve savings in the DoD budget without eroding its ability to provide for our Nation’s security. Thank 

you, chairman. 

Chairman SPRATT. Thank you, Mr. Ryan. Before proceeding with 

the testimony of our witnesses just a few housekeeping details. I 

would ask unanimous consent that all members be allowed to submit an opening statement for the record at this point. And as to 

our witnesses I would say we have your complete statements, there 

are just two witnesses today, you should feel free to take as much 

time as necessary to explain your testimony, but we will make the 

full testimony part of the record so that you can summarize where 

you see fit. 

Dr. Goldberg, I understand you wish to go first? 

Mr. GOLDBERG. Yes, sir. 

Chairman SPRATT. Then the floor is yours, and we welcome you 

once again to the hearing, and we appreciate your participation 

and the efforts you put in producing the statement that you made 

part of the record today. 

STATEMENTS OF MATTHEW GOLDBERG, ACTING ASSISTANT 

DIRECTOR FOR NATIONAL SECURITY, CONGRESSIONAL 

BUDGET OFFICE; STEPHEN DAGGETT, SPECIALIST IN DEFENSE POLICY AND BUDGETS, CONGRESSIONAL RESEARCH 

SERVICE 

STATEMENT OF MATTHEW GOLDBERG 

Mr. GOLDBERG. Thank you, Mr. Chairman, and Congressman 

Ryan and other members of the Committee. It is my pleasure to 

be here today representing the Congressional Budget Office to talk 

about the long-term implications of the 2010 budget submission for 

the Department of Defense. 
4 

As you probably recall, Mr. Chairman, over the past seven years 

what CBO has done is looked at the DoD’s plans as presented in 

their budget and in their FYDP, their Future Years Defense Program, which generally takes the budget out and projects another 

five or six years. This year, the first year in the new Administration the budget came over, but without a FYDP, so we are working 

at a bit of a disadvantage this year, and especially in light of the 

changes that Secretary Gates announced for acquisition programs, 

and we don’t have full information on how those programs will play 

out. Indeed I don’t think those decisions have been made, so we are 

truly presenting today projections that are somewhat preliminary 

based on the information we have, which is the 2010 budget, the 

announcements made by the Secretary and senior defense officials 

since the budget rollout. 

Our projections start in 2011 and go out through 2028. The 

amount that the Administration requested in regular defense funding, and that is putting aside for the moment overseas contingency 

operations, that is 534 billion for 2010. Our projection is that in 

constant 2010 dollars carrying out those plans would require a 

larger amount. It would require 567 billion. In other words, some 

30 billion more than was currently planned. We estimate we would 

be required to carry out those plans in the future to continue buying the systems and the programs of record, to continue the levels 

of personnel, the end-strength plans, et cetera, that are reflected in 

the 2010 budget. 

The reason that we are projecting higher resource demands in 

the future than in 2010, I will talk about those today, there are 

four main categories to start. 

One is that military pay raises have generally been higher than 

the employment cost, index which is a measure of parity in the civilian sector. And in fact there is permanent law that passed in 

2003 that would have the military pay raises equal to the change, 

percentage change in the ECI. And many years Congress has chosen to grant higher pay raises of half a percentage point above the 

ECI, so that compounds over the years, and so military pay is 

growing, growing in real terms, growing faster than inflation. 

There have also been increases in the O&M accounts as you 

mentioned in your opening remarks, Mr. Chairman. O&M is growing. Interestingly we see O&M growing for the older systems as 

they get older and harder to maintain, and we also see the newer 

and more complex systems requiring more O&M as well. 

Turning to the acquisition area, DoD has plans to field new advanced weapon systems. In some cases to replace other systems, 

existing systems that are reaching the end of their service life, and 

also to switch toward newer capabilities such as advance intelligence, surveillance, and reconnaissance, so-called ISR assets. 

This year we had the Administration’s request for the overseas 

contingency operations as $130 billion, that is on top of the 534— 

they requested in the regular budget, and that reflects a shift of— 

early this year we were estimating that in March there were 175 

service members in the Iraq theater and 40,000 in the Afghanistan 

theater. The Administration’s request of 130 billion would support 

100,000, a smaller number in Iraq, but a larger number, 68,000 

troops on the ground in Afghanistan. 
5 

In our projections we have a category of what we call those contingency unbudgeted costs. In other words they are costs to continue overseas contingency operations, they are separately identified in 2010 as the 130 billion. The Administration has a place 

holder for 50 billion per year in the next five years, what it would 

cost to continue those operations. We have our own estimates that 

are somewhat higher than that, and that is what we call contingency unbudgeted costs. 

And then we have other types of unbudgeted costs. Other things 

that can happen as they have in the past that could cause the need 

for defense resources to be higher than what is in the budget. For 

example, weapon systems often end up costing more than preliminary estimates. We have cost growth in weapon systems. DoD’s 

medical costs often grow faster than what has been in the budget. 

And for those and other factors we are projecting that the total demands on average through 2028 could be as high as 624 billion per 

year, including overseas operations, including these various kinds 

of cost growths, again in weapon systems and in health care and 

in other places. 

In terms of the share of gross domestic product we are projecting 

that defense spending would nonetheless decrease below four percent of GDP, because we are expecting GDP growth to pick up 

again, and that has been discussed elsewhere in the CBO testimony. 

What are the factors that are driving these increases? Well 

again, military pay. There are several aspects of military compensation. One is that the military pay raises have been more generous than the increase in the ECI, the Employment Cost Index, 

for civilian workers, and in many of the most recent years, in particular in 2004, ’05, and ’06, and then again more recently, and in 

our projections we have military pay growing at the same rate as 

ECI, but nonetheless ECI grows faster than the price index. So 

even if the Congress would enact pay increases just equal to the 

ECI without the extra half percent that is sometimes been granted, 

you will still have real increases in the cost of the military personnel. 

Similarly civilian personnel often end up getting the same pay 

raise as military personnel. It is called the pay parity principal. 

That has been true in 20 or the past 28 years. So in our projections 

again, we have military personnel receiving real pay increases, we 

have federal civilians, including civilians working for DoD receiving 

pay increases, most of them are paid out of the O&M appropriation, so that is another reason that the O&M appropriation is projected to grow. And of course we have other military benefits that 

have been enacted over the past decade that are built into our projections. Establishment of TRICARE for life, the changes to the 

REDUX retirement system that restored retirement at 50 percent 

of basis pay, rules regarding concurrent receipt so that military retirees can receive their military retirement pay as well as their veterans compensation with fewer offsets, and they recently passed 

changes to the age at which retirees can start drawing their pay; 

below age 60. 
6 

So all of these changes that have been made in the past ten 

years and are built into our projections as well as real pay increases, that is pay increases at the ECI, they exceed inflation. 

Now part of the discussion about the military pay raises has to 

do with the so-called pay gap, and the pay gap is computed by 

going back to 1982, which was a year when after two big pay raises 

when it was widely thought that military pay was brought into 

parity, into equity with civilian pay, and then the issue is whether 

the military pay raises have kept up since ’82 with the ECI, that 

is the civilian pay raises. And using this pay gap, this comparison 

to the ECI as a benchmark, has been a justification for many of 

the recent pay raises, and in fact there are folks who still claim 

that the pay gap is 2.9 percent. That is that military pay has not 

quite caught up. It is about three percent behind where it should 

have been based on 1982. 

We put out a paper earlier this year where we argued that a better measure of military pay is not basic pay, but what we call 

RMC, Regular Military Compensation, which includes the food and 

housing allowances, and also accounts for the fact that those allowances are not subject to federal tax. And if you use the RMC to 

make the comparison rather than basic pay our analysis reveals 

that in fact there is not a pay gap, that there is a pay surplus. That 

since 2002 pay has caught up and then some since it would have 

been based on the benchmark started in 1982. 

So those considerations apply to the military pay raise, they also 

apply to the civilian pay raise, to the degree that civilians are 

granted the same pay raise as military with the same justification 

compared to the ECI and compared to the pay gap. 

Nonetheless in our estimates in our high case and we call 

unbudgeted pay increases, which is the high dash lines in your Figure 1, we do have military and civilian pay raises above the ECI, 

the employment cost index, by half a percentage point for each of 

the next five years, 2011 through 2015. And to fund those pay 

raises would cost about 2.8 billion in military personnel account 

and 2.3 billion in the O&M account by 2015, and those raises 

would continue to compound so that by 2028 it would cost 3.6 billion in the military personnel appropriation, and 2.8 in the O&M 

appropriation, according to our estimates. 

I would like to use my remaining time of my opening statement 

to talk a little bit about the procurement and the RDT&E, the Research and Development Accounts. We are actually projecting less 

in those accounts than we were last year at this time based on the 

2009 FYDP. Again, we don’t have a FYDP this year, we just have 

the 2010 budget, we don’t have the out years that ordinarily come 

with the FYDP; however, based on that and other information that 

we do have, if you go out to a common year comparing our projections now to projections that were briefed here a year ago based on 

a 2009 FYDP, we are projecting that procurement funding by 2020 

would be $8 billion lower than where we thought it would have 

been in 2020 as of the information a year ago, and that total investment will be called procurement plus RTD&E would be 7 billion lower. So there is some impact that we see immediately from 

some of the changes that Secretary Gates announced that are built 
7 

into the 2010 defense budget. And I would like to talk a little bit 

about three or four of those if I could. 

The active Army had started off with 42 brigade combat teams, 

and the plan in the 2009 FYDP was to grow that number from 42 

to 48. We observed earlier this year that it would probably take additional endstrength to fill out an Army with 48 brigade combat 

teams. It would probably take about 23,000 additional soldiers, and 

that would cost about 16 billion over the next five years. In fact 

what the Secretary announced in April is that rather than going 

all the way up to 48 brigade combat teams he would stop at 45. 

So roughly speaking the 16 billion for those last three brigades, 

numbers 46, 47, and 48 is avoided—is contained by stopping at 45 

brigade combat teams, and that is reflected in our projection. 

Probably the biggest single change in regards to the FCS program, the Future Combat System, where the ground vehicles portion was suspended by Secretary Gates, we had been projecting 

based on the 2009 FYDP, that as a year ago that for the next ten 

years, starting from that point, that is fiscal years 10 through 19, 

the FCS program would have cost about 60 billion, that the spin 

out of technology, communications, and other technology to all of 

the infantry brigades in the Army would cost another 10 billion, 

and upgrades to combat vehicles that we thought would have been 

necessary, keep them modern, would have cost another 28 billion. 

The total of the ten-year cost of those three aspects would have 

been 98 billion. Ten years worth of FCS and related programs. 

In light of what Secretary Gates announced we are projecting a 

smaller number, 80 billion, 18 billion less over ten years. And I 

should say that this is a very preliminary estimate in that I don’t 

believe the Department has decided, and they certainty haven’t announced, exactly where they are going with replacement to the vehicles program in the FCS, but in our estimates if you were to upgrade existing Abrams Tanks, Bradley Fighting Vehicles, M109 

self-propelled howitzers and by continuing to buy Stryker vehicles 

that would cost you about 43 billion between 2010 and 2019, and 

that the spin out of communication and other equipment would 

cost another 37 billion. So in total those related programs would 

cost about 80 billion. Given our current understanding of where the 

Department is going that may change. And that is again compared 

to the 98 billion, the estimate a year ago at this time. 

I want to talk finally about ballistic missile defense. As you 

know, Mr. Chairman, there were several important announcements 

made in April. The Secretary announced plans to freeze the number of ground-based interceptors in Alaska, but to continue research and development on defense against long-range ballistic 

missiles. The Secretary also asked for 200 million to start converting Aegis warships, six of them, to perform ballistic missile defense. And then on top of announcement the President in September announced that he was canceling for now the previous Administration’s plan to field tracking radar in the Czech Republic in 

ten ground-based interceptors and silos in Poland, and that plan 

was replaced by a four-phase plan. The first phase of that would 

rely on the Block 1A of the standard missile, the SM-3 missile deployed on existing Aegis warships, and then there were three more 

phases that would introduce land-based element, as well as up-
8 

grades to the standard missiles, some of which are still under development. 

The thing I want to point out here, and again, this is very much 

a program that is in flux and we don’t know where it is going, and 

nobody has announced where it is going, a big driver in cost here 

is going to be the types of ships in the ship-based option. And there 

are basically three ways I think you could go. 

One is to take existing Aegis warships and upgrade them to do 

the ballistic missile defense mission. One thing I should point out 

is if you want three ships permanently on station around the war 

of Europe you need to dedicate nine ships in total. Because for each 

ship that is on station you have another ship that is roughly speaking in training, the next one to go out, and another ship that is in 

maintenance and overhaul. So three stations require about nine 

ships. The Secretary asked for 200 million to upgrade six ships, 

and that would ultimately be in CBO’s estimation nine ships to do 

the mission. That is the lowest cost way to do the mission is to take 

existing ships and convert them. The problem then is that you will 

have nine ships dedicated to this mission that can’t do something 

else. That is the trade off. Or you could build new ships, nine new 

ships that are dedicated to this mission. And then the question is 

what kind of ships do you want? To build Arleigh Burkes configured for this mission, nine of them would cost about 19 billion in 

total. 

There is another option that we have looked at which is to take 

a ship that looks more like the Littoral combat ship, the LCS, 

which is a less expensive ship, add a spy one radar and vertical 

launch cells to the LCS and that would cost about 6 billion in total 

for the nine ships. So 6 billion for the converted LCS versus about 

19 billion for the Aegis destroyers to perform the same mission. 

All told in the missile defense area we are projecting that costs 

will be quite a bit lower than we were seeing a year ago. In 2010 

alone the Secretary of Defense asked for 1.4 billion less than the 

prior year, and we are estimating on an average through 2028 that 

with all the changes that were announced the total bill for missile 

defense could average about 2 billion less per year than what we 

were looking at based on the 2009 budget and FYDP. 

And with that I would like to close my statement and I of course 

welcome your questions, Mr. Chairman. 

[The statement of Matthew Goldberg follows:] 
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Chairman SPRATT. Thank you very much, Dr. Goldberg. Mr. 

Daggett. 

STATEMENT OF STEPHEN DAGGETT 

Mr. DAGGETT. Mr. Chairman, Mr. Ryan, members of the Committee, thanks very much for your invitation to testify. I appreciate 

it. 

Chairman SPRATT. Steve, pull the mic a little closer. 

Mr. DAGGETT. When I was here last in February I discussed the 

major factors that I saw as driving up the cost of defense even 

more quickly than defense budgets that had been increasing. In the 

months since February the Defense Department has announced a 

number of significant changes in the defense program, particularly 

in acquisition programs, and is also engaged in a Quadrennial Defense Review, which will look ahead 10 to 20 years with a view towards future requirements. 

In this statement I want to address first of all the impact of the 

changes that Secretary Gates announced last April. Second talk 

about what kind of additional trade offs the Department of Defense 

might face, given the possibility of limited budgets over about the 

next ten years, not just within the current future years defense 

plan but a little bit beyond that. And then third say a few things 

about what I see as potential even longer term challenges that the 

Quadrennial Defense Review appears likely to address. 

When I testified in February I laid out six major factors that had 

driven up the cost of defense dramatically in recent years. One was 

the increase in cost to military personnel. By my account a military 

service member in 2009 was about 45 percent more expensive than 

in 1998 after adjusting for inflation. 

The increase in cost of operation and maintenance which has 

continued to grow by two and a half by three percent per year per 
28 

troop above base inflation every year since the end of the Korean 

War and it appeals likely to continue to do so. 

The apparently accelerating rate of increase in costs from one 

generation of weapons to another. 

Fourth factor was just apparently worsening DoD’s ability to estimate the cost of major programs resulting in cost overruns and 

delays. 

A fifth factor was increasing demands and budget requirements 

therefore for ground forces which entailed a pretty substantial increase in ground force endstrength and also substantial new equipment requirements. 

And then finally DoD over time has been seeing itself facing a 

much expanded array of challenges in the international security 

environment. Not just traditional state-on-state conflict with other 

militaries, but also irregular warfare, disruptive challenges by enemies that would try to exploit our vulnerabilities, and potentially 

catastrophic effects on the homeland. 

And I also saw all of these factors as driving up the cost of defense more rapidly than even very rapid increases in the top line 

for defense, which as Mr. Spratt said, by historical standards appears to be very robust. 

The changes that Secretary of Defense announced in April may 

have some effect on all of these. Some of the changes will drive up 

costs. He announced some increases, in particular in Medical care 

and also social services, particularly for service members returning 

from aboard. He reaffirmed increases in Army and Marine Corp 

endstrength, and will be taking those costs into the base budget, 

which also implies driving up costs at least in the base defense 

budget. He also announced some increases in production rates for 

a couple of weapon systems-the F-35 and the Littoral Combat Ship. 

But the main impact of his statement was to announce termination 

of a number of major weapons programs. And my view, as Matt 

said, is that these will likely drive down costs over the long term. 

I think they may serve to drive down costs even more than the 

immediate impact of the cuts in those programs themselves. And 

the reason is this. That the Administration’s decisions appear to go 

in the direction of narrowing down the number of different new 

kinds of major platforms that we are building. And to the extent 

that that remains the case, it creates means for DoD to really pursue increased efficiencies in production. 

If you look at tactical aircraft production. The decisions that Secretary Gates announced reduced production really to two major 

systems: Variance of the F/A-18 fighter aircraft for the Navy and 

Marine Corp, and of the F-35 for all of the services. 

In ship building we are now focused on producing the DDG-51 

destroyer, and perhaps with variance of that for future missions 

LPD-17 amphibious ships, Littoral Combat Ship, and Virginia class 

submarines. Even in satellites giving up the transformational communications satellite means we will be going back to producing satellites for similar missions of quite proven designs. 

To the extend this leads to our focus and production on a relatively smaller number of relatively mature technologies with relatively stable designs, I think there is a possibility for DoD to really work with defense industry to drive down production costs, to 
29 

make productivity improving investments on the basis that there 

is a guarantee of income coming in in the future, to work on production practices, to use more multiyear contracting which improve 

the financial stability of the program and also drive down costs, to 

require the industry to engage in much broader competition at the 

subcontractor level. 

So the potentially biggest change is not necessarily in the specify 

weapons programs that the Secretary announced, but in the longterm kind of pattern of defense industry production. 

Same thing in the development side. The termination of the 

transformational communications satellite, of the presidential helicopter, of the combat search and rescue helicopter for the Air 

Force. These were all programs that had real technical difficulties, 

that in effect each tried to go a technological bridge too far, and 

therefore had run into technical problems and schedule delays and 

big cost increases. 

Now there is still debate about the wisdom of terminating each 

of them, and of the cost of potential alternatives, but leaving that 

aside what I see reflected in this is a determination that in the development process we are going to be more careful about the technical risks that we are taking. And the acquisition reformat that 

Congress passed in May by the way reflects the same basic principal. It requires in general that before there is milestone approval 

to go ahead with the next stage of design and invest more money 

we are assured of the technological maturity of the technologies 

that are going into the system. It means we are not going to try 

to make as great technical leaps ahead, and that to some degree 

may be a cost, but the benefit is much more predictability and the 

cost of systems at the inception and much more stable cost trends 

in systems as we develop them. 

So you know, I don’t think we have a full answer as to the longterm impact of the effect of the changes Secretary Gates announced. The effect depends on the extent to which they represent—their continued in the future and represent changes in policy that will apply to weapons production in the future. 

That said, looking ahead beyond the current FYDP and beyond 

the changes that Secretary Gates announced in April, unless defense budgets begin to turn up to some extent, the Defense Department is going to inevitably face a real budget crunch and face some 

very difficult budget trade-offs. And just not as a way of predicting 

what the budget would look like, but as a way of illustrating the 

possible trade-offs I prepared the chart that is now up and is in 

Figure 1 in your written testimony. 

And what I did here was just assume that the defense budget is 

frozen at the Fiscal Year 2010 level for the next ten years, which 

is about $534 billion in 2010, just the DoD budget. And then I said 

suppose that military personnel costs and O&M costs grow at a 

given level. For military personnel I assumed just growth at the 

Employment Cost Index, which as Matt said is a measure of costs 

in the civilian sector, that has typical increased by about 0.7 percent per year above inflation. 

Chairman SPRATT. Can I interrupt you. Does this include 130 billion, 150 billion for overseas deployment? 
30 

Mr. DAGGETT. No, it does not. This is excluding overseas contingency operations. I don’t talk about that at all. This is just the base 

defense budget. Okay? And we know that those will come down as 

well and effect trade-offs as well, but I just wanted to look here at 

the base defense budget. Okay? So military personnel I assume will 

grow at a cost of 0.7 percent per year above inflation. That is a 

pretty limited rate of growth. It is a lot slower than growth in recent years. And the premise is the military service support organizations have gotten for service members most of what they were 

seeking, so cost growth can level off from now on. That may or may 

not be true, but that is the projection. And operation and maintenance I assumed that O&M costs are going to increase by 2.7 percent per year above base inflation, as they have historically since 

the end of the Korean War. 

Well what happens to the defense budget in ten years under 

those assumptions? The answer is that the amount of the budget 

that remains for defense acquisition to climb substantially. It goes 

from 186 billion for procurement and R&D, which is about 35 percent in the budget in 2010, down to about 127 billion or 24 percent 

of the budget in 2020. So it is a decline in real terms after adjusting for inflation about 32 percent. Almost one-third, at a time when 

the QDR is projecting that we will face a larger number, an array 

of challenges in the future. It would be very hard to sustain anything like a robust weapons modernization program with that kind 

of funding. 

So I think we face some other trade-offs. And those trade-offs include first of all potential reductions in the size of the force. Are 

we going to give up on the increases in the Army and the Marine 

Corps that we will have just completed by the end of 2010, which 

added 92,000 troops to the force? You can make a strategic argument for doing that, and that is that based on lessons of Iraq and 

Afghanistan we are going to be more reluctant in the future to 

commit forces to military actions that would involve a constant rotation of large numbers of forces into long-term stability operations. 

So you can make a case for that, but it certainly will be a contentious argument. 

Will we reduce the size of the Navy and the Air Force and rely 

instead on higher technology systems? Those are the kind of tradeoffs that we face. 

An alternative is to modestly increase the budget. If we increase 

spending by about two percent per year above inflation that adds 

about $10-$11 billion per year to the top line. If you did that for 

five years you would have about $50 billion more by the end of that 

period, and if you put that into acquisition that would get the acquisition accounts up more towards what they were in 2010. 

Another alternative that the QDR certainly will explore is to try 

to look at ways to rein in operating costs. Can we draw down the 

2.7 percent per year increase in O&M accounts? For my part, DoD 

has tried to do that in the past by the way. In the 1990s they always projected from year to year that O&M accounts would level 

off, and they engaged in a number of vigorous management reforms 

to try to accomplish that. They also closed a number of military 

bases in the 1990s with three rounds of military base closures to 
31 

try to get infrastructure costs down. None of that really succeeded 

in drawing down the rate of growth of O&M. 

So my view would be to be quite skeptical about potential impact 

of efficiency measures. It doesn’t mean you shouldn’t try, but in the 

past these efficiency measures seem to have served to keep O&M 

growth down to the historical level rather than to achieve additional savings. 

So budget trade-offs over the next ten years look potentially pretty severe, unless there is some room to have at least modest increases in the top line for defense. 

Final discussion, and I will be very brief about this, but it opens 

up a very, very wide array of questions, and that has to do with 

the current Quadrennial Defense Review. 

QDRs in the past have often been subject to quite a lot of criticism, frankly for not being radical enough. The argument has been 

it is been very difficult to trace each Quadrennial Defense Review 

to any significant changes either in the size of the force or the composition of the force or the decision whether to go ahead with certain major weapons programs or not. 

My view is that is a bit unfair. That it is I think more realistic 

to look at QDRs as snapshots of an ongoing discussion inside the 

Defense Department and in the broader national security community of changes in the international security environment and how 

the Defense Department, as well as other agencies, need to adjust 

to that. And when you look at QDRs that way you can see a real 

progression. The initial pre-QDR Defense Reviews, the base force 

review of 1990, the bottom up review in 1993 really provided a rationale for maintaining strong military forces after the end of the 

Cold War, but those forces looked very much like a smaller version 

of Cold War forces. 

Beginning in 1997 and with the 2001 QDR and 2006 QDR DoD 

began to say quite explicitly that that wasn’t adequate, that the 

new requirements of changes in the international security environment required not just a smaller version of Cold War forces but 

other kinds of capabilities. In the Army, for example, required in 

particular the ability to rotate forces forward on a regular basis 

without disrupting personnel patterns throughout the force. Prior 

to the 1997 QDR the Army was really organized on a basis that 

required large scale mobilization of additional troops to fill out deploying units. After the 1997 QDR it was pretty clear that senior 

leadership of DoD regarded that as inadequate, and finally in 2001 

the Army adopted a new organizational structure around modular 

brigades that could be deployed separately, but most importantly 

were fully manned in peacetime, and therefore could rotate into a 

conflict and rotate back without requiring that you draw personnel 

from other units, thereby disrupting their readiness. So the Army 

over time, although very slowly, did adapt to changes in the international security environment. 

The new QDR is, based on what senior officials have said, likely 

to address some very different kinds of challenges in the future. 

The discussion has been first of all about not just irregular warfare 

or catastrophic dangers to the homeland, but what people term hybrid threats. That is think of Hezbollah and Hamas using relatively sophisticated weapons like anti-ship cruise missiles or fairly 
32 

accurate missiles to attack Israel. Or in Iraq the insurgents using 

modern shaped charged munitions to attack our armored vehicles. 

That is pretty advanced technology in the hands of what we used 

to look at as the low end of the conflict spectrum. 

Similarly we think that even future near-peer competitors, countries that can match our technological capability to some extent at 

least, wouldn’t limit themselves to fighting us force on force where 

we have advantages. They would use irregular warfare, they would 

use other advanced means to try to exploit our weaknesses. They 

call it high-end asymmetric. That can include cyber warfare, efforts 

to disrupt communications, anti-satellite weaponry, efforts to deny 

access of U.S. military ships or ground-based forces to the region 

through anti-access strategies. They can use some older technologies, but also new means of attacking. 

And the new QDR really appears to be focusing on that based on 

speeches under Secretary of Defense Flournoy and some others 

have made. 

There is a real debate however about the pace at which those 

kinds of threats are going to materialize. Andy Krepinevich of the 

Center for Strategic and Budgetary Assessments, who by the way 

has been invited by DoD to sit on a red team that is reviewing the 

QDR, has been very critical of DoD, he says, for not adjusting rapidly enough to these changes that high-end asymmetric warfare are 

creating. Specifically he has talked about area denial strategies. He 

argues that it will be very difficult in the future for the U.S. to get 

naval forces anywhere close to the littoral areas near a conflict 

zone, and he believes that that implies there should be much less 

investment in short-range tactical air and much more investment 

in longer range systems, and in other technologies like submarines 

that are more difficult to attack that can launch missiles ashore. 

His view is starkly at odds with what Michele Flournoy, the 

Under Secretary of Defense for policy has laid out. In an article in 

the Proceedings of the U.S. Naval Institute she acknowledged that 

over time these kinds of technologies were developing, but she said 

that for many years ahead the United States appears to have a 

margin of security in these kinds of technologies. 

I can’t think of a starker difference of view. Krepinevich has argued that some elements of the U.S. force for projecting power are 

in, in his words, ‘‘precipitous decline,’’ and Secretary Flournoy says, 

‘‘We have a margin of superiority that we can rely on for some 

time.’’ 

My view is we need to face that debate head on and discuss it 

directly, and it ought to be a matter for discussion in the QDR and 

also in the Congress. And these and other asymmetric challenges 

really have profoundly important long term budget impacts. Will 

we reduce investments and things like F-35 in favor of long-range 

strike systems that could be unmanned aerial vehicles that can loiter? What do we need to do to deal with the anti-satellite threats? 

Do we need to develop a whole new generation of satellites that are 

smaller that can be kept in reserve and launched when needed? To 

do that we would need a much larger launch capability as well. 

That could be fairly expensive. In the past we have tended to look 

at these kinds of asymmetric threats as requiring only marginal 

changes in investment. 
33 

My view is that is not necessarily the case. It could require much 

larger changes in investment, particularly if they are developing as 

rapidly as people like Krepinevich and others think. 

With that I would be glad to take your questions. 

[The statement of Stephen Daggett follows:] 

PREPARED STATEMENT OF STEPHEN DAGGETT, SPECIALIST IN DEFENSE POLICY AND

BUDGETS, CONGRESSIONAL RESEARCH SERVICE

Chairman Spratt, Ranking Member Ryan, distinguished Members of the Committee, thank you for your invitation to discuss the cost of current defense plans 

and budget issues facing the Department of Defense. I am Stephen Daggett, Specialist in Defense Policy and Budgets with the Congressional Research Service. 

When I testified before this Committee last February, I discussed factors that have 

driven up the cost of defense substantially over the past several years. In April, 

DOD announced some significant changes in its current plans and additional 

changes may result from the Quadrennial Defense Review that is now underway. 

This statement will address the potential impact of the recent defense changes, additional budget trade-offs that may be necessary in the remainder of the coming decade, and some of the more long-term defense budget and policy issues that may be 

addressed in the current QDR. 

Specifically, the discussion addresses three very broad questions: 

• How have the program decisions that Secretary Gates announced last April affected trends in the cost of defense? 

• What additional trade-offs might the Defense Department face in the future in 

view of projections of substantial federal budget deficits through the next decade?, 

and, 

• In view of experience with earlier defense reviews in 1990 and 1993 and with 

prior QDRs in 1997, 2001, and 2006, is the Defense Department keeping up with 

rapid changes in the international security environment, and what more far-reaching changes in force posture and budgets might it be in order for the QDR to consider? 

FACTORS DRIVING UP THE COST OF DEFENSE

My testimony before the Committee last February began by noting that recent defense budgets, even without including large supplemental appropriations for war 

costs, appear by historical standards to be quite robust. Nonetheless, leaders of each 

of the military services were warning about substantial budget shortfalls. To explain 

the discrepancy, I cited six factors that have driven up the cost of defense substantially in recent years, including 

• Dramatic growth in the cost of military personnel, especially since the end of 

the 1990s (45% growth above inflation between FY1999 and FY2009); 

• Continuing growth of operation and maintenance costs, relative to the size of 

the force, at a pace of two-and-a-half to three percent per year above inflation every 

year since the end of the Korean War; 

• Apparently accelerating growth in the cost of new weapons programs compared 

to costs of earlier generations of systems for similar missions; 

• Inaccurate and apparently worsening estimates of weapons costs at the inception of major development programs and subsequent cost overruns and schedule 

delays; 

• New requirements for the ability to rotate large numbers of ground forces into 

long-lasting stability operations, leading to significant increases in ground force endstrength and substantially higher investments in new ground force equipment for 

force protection, communications, transportation, and other purposes; and 

• Demands for capabilities to cope with an expanded array of security challenges 

ranging from conventional conflict, to irregular warfare, to efforts by future foes to 

disrupt U.S. military power by exploiting vulnerabilities, and to threats of catastrophic attacks on the U.S. homeland. 

In recent years, my testimony concluded, these trends have driven up the cost of 

defense too rapidly even for substantially growing defense budgets to keep up and, 

unless they were reined in, it would be increasingly difficult for the Defense Department to carry on its plans within budgets that most analysts thought likely because 

of constraints imposed by projected federal deficits. 
34 

THE IMPACT OF RECENT CHANGES IN DEFENSE PLANS

Since that Committee hearing in February, the Defense Department has made 

significant changes in long-term defense plans that Secretary Gates announced in 

April. Some changes called for higher spending, particularly for health care and social services for personnel returning from combat and for their families. The Secretary also reaffirmed plans to increase ground force end-strength, with costs being 

absorbed in the base defense budget rather than in supplemental appropriations. 

Many of the changes announced in April, however, particularly the termination of 

several major weapons programs, might very well limit future costs, especially to 

the extent they mark changes in policies that will affect designs of future weapon 

systems. In addition, in May, Congress passed a major defense acquisition reform 

measure, the Weapon Systems Acquisition Reform Act of 2009, P.L. 111-23, which, 

if implemented effectively, might also limit weapons cost growth. 

The changes in major weapons programs that Secretary Gates announced might 

be particularly significant to the extent they provide an impetus to pursue more efficient production practices for systems that were not eliminated. For tactical fighter 

aircraft, the Defense Department has narrowed production to two platforms—various versions of the F/A-18 Navy-Marine fighter and of the multi-service F-35 Joint 

Strike Fighter. In shipbuilding, while there are some uncertainties, the effect of recent decisions may be to allow fairly long and relatively large production runs of 

DDG-51 destroyers, perhaps with some variants; of the Littoral Combat Ship (LCS); 

of new ships based on LPD-17 amphibious ship; and of Virginia-class submarines. 

Even in satellites, the termination of the Transformational Communications Satellite (TSAT) program will entail reliance on improved designs of existing, more 

proven technologies. To the extent the changes result in regular, predictable, and 

robust annual production runs of technologically mature systems with stable designs, both acquisition officials in the government and production teams in industry 

might focus on efficiency measures. Weapon costs might be driven down considerably by such measures as productivity improving investments and production practices; cost saving financial mechanisms including multiyear contracting; and expanded use of competitive sourcing in subcontracting. 

Similarly, in the weapons development process, the termination of programs that 

had experienced significant cost growth and schedule delays—including TSAT, the 

presidential helicopter, and the Combat Search and Rescue (CSAR) helicopter—may 

reflect a determination to ensure that development efforts rely on proven technologies before committing to large development and production investments. The 

Weapons Acquisition Reform Act provides further statutory support for DOD acquisition policies that require achievement of appropriate levels of technological maturity in key elements of development programs before milestone approval for progressively more costly stages of a project. The Act also creates an independent cost analysis directorate. While some of the program terminations remain matters of debate, 

there appears to be a growing consensus on the general principle that development 

should proceed on the basis of sufficient knowledge about the availability and cost 

of key technologies throughout the development process in order to avoid excessive 

technical risk that has contributed to delays and cost increases in the past. 

TRADE-OFFS IN FUTURE DEFENSE BUDGETS

While progress in these areas may, if pursued consistently in the future, help 

ameliorate some of the factors that have been driving the cost of defense so high, 

budget trade-offs remain an issue for the Defense Department, particularly in the 

years following the current Future Years Defense Plan (FYDP), which runs through 

FY2015. A key issue for the QDR may be how to balance potential trade-offs between the size of the force, the pace of weapons modernization, and the size of future defense appropriations, particularly in view of currently projected long-term 

federal budget deficits. 

To date, DOD officials have not said much about how the QDR will address 

intermediate- and longer-term budget issues. Officials have said that, at least for 

initial planning purposes, the QDR assumes that the base defense budget, not including war-related funding, will be essentially flat for the next five years, with 

growth sufficient only to cover inflation—i.e., ‘‘zero real growth.’’ 1 And they have acknowledged that this will require at least modest trade-offs between programs. At 

the end of July, David Ochmanek, a leader of the Pentagon’s QDR integration 

group, told defense reporters that the QDR had already led to a decision to move 

about $60 billion over the FYDP into programs supporting current operations—‘‘the 

wars we are in’’ as Secretary Gates has put it—and that the military services were 

developing lists of cuts in other programs to act as bill payers. 
35 

A shift of $60 billion within the DOD FYDP is by no means unusual. On the contrary, it is well within the range of adjustments that the Defense Department 

makes in every annual budget cycle. But trade-offs in the years beyond the current 

FYDP will have to be much more substantial unless spending turns up at least modestly within the next few years. To illustrate that point, a very simple exercise may 

be useful. Consider, not as a prediction, but only for the sake of analysis, what 

would happen to the allocation of funds within major categories of the defense budget between FY2010 and FY2020 if (1) the overall level of spending is frozen at the 

FY2010 level for the next ten years, (2) military personnel funding grows at the historical rate of the Employment Cost Index (ECI), which increased by 0.7% per year 

above base inflation between FY1981 and FY2005, and (3) DOD operation and 

maintenance accounts are assumed to grow at the historical rate of 2.7% per year 

above inflation.2

Figure 1 shows the allocation of funds between (1) military personnel, (2) operation and maintenance, (3) acquisition (the sum of procurement plus R&D funding), 

and (4) other programs in the Department of Defense base budget, not including 

war-related supplemental funding, in FY2010 compared to FY2020, on those assumptions. The result, as one would expect, is a dramatic reduction in funding for 

weapons acquisition, which declines, in constant FY2010 prices, from $186 billion 

and 35% of the budget in FY2010 to $127 billion and 24% of the budget in FY2020.3

In relative terms, that is a cut of 32% in funding to replace equipment and modernize the force between FY2010 and FY2020 in the base defense budget. 

Source: CRS based on the FY2010 Department of Defense budget request, with growth of 0.7% 

per year in Military Personnel accounts and 2.7% per year in Operation and Maintenance accounts through FY2020. 

While, again, this is not intended as a prediction of likely budget trends, it may 

suggest a need for the Defense Department to discuss intermediate-term budget 

trade-offs in the QDR. CBO and other budget projections over the next ten years 

show potential budget deficits as a percentage of GDP that have, in the past, been 

followed by long-term limits on defense spending.4 The alternatives to a steep reduction in acquisition accounts are (1) a resumption of at least modest real growth in 

the overall defense budget, (2) cuts in the size of the force, or (3) measures to reduce 

operating costs. Each 2% increase in the defense budget above inflation would add 
36 

about $10 billion in funds available for acquisition accounts. A cut of 100,000 active 

duty troops would save $12-15 billion per year in military personnel and in directly 

related operation and maintenance costs. A smaller force would entail limits on U.S. 

military capabilities—one choice might be to reduce requirements for ground forces 

for long-term stability operations. 

The need for difficult budget trade-offs could, of course, be ameliorated to some 

extent by further limiting defense costs. The QDR will certainly address that issue. 

Business process reform is one of five focus areas in the original QDR guidance that 

Secretary Gates issued in April, and one of five QDR issue teams is responsible for 

addressing defense costs. Earlier QDRs also led to efforts to reduce costs by reducing infrastructure, outsource activities, and improving contracting procedures. 

How much DOD can save—and how much it should count on saving—is a matter 

that deserves careful consideration. In the past, the Defense Department has perennially projected that operation and maintenance (O&M) budgets, which, as I noted, 

have grown historically at 2.5 to 3 percent per year above inflation per active duty 

service member, would level off, freeing up funds for weapons investments. 

Throughout the 1990s, however, projected savings in O&M did not materialize, in 

spite of concerted efforts at management reform, and procurement accounts ended 

up being cut from year to year to finance must-pay-bills in the operating accounts. 

In the FY2010-FY2020 budget exercise shown in Figure 1, the assumption was 

that O&M would continue to grow at the historic rate of 2.7% per year above inflation. Given past experience, DOD will have strong incentives in the QDR to assume 

that reforms will slow that rate of growth. But experience also shows that reforms 

generally serve to keep O&M cost growth down to historical levels rather than to 

achieve additional savings. In addition, the FY2010-FY2020 analysis shown above 

assumes much more limited increases in military pay and benefits than Congress 

approved in the years between FY1999 and FY2009. The premise is that service 

members have already won most of the increases in pay and benefits that support 

groups were seeking, so growth may be more modest in the future. That assumption 

may not be correct, however, and the analysis may well underestimate personnel 

costs. Long-term budget trade-offs might be more difficult to the extent personnel 

costs grow faster. 

HAVE QDRS BEEN RADICAL ENOUGH?

As well as discussing budget trade-offs over the next decade or so, the current 

QDR may be an occasion for considering more far-reaching, longer-term changes in 

policy with potentially very substantial effects on budget planning. Perhaps the central issue in debate over earlier QDRs has concerned whether the Defense Department has kept up with the pace of global change and has adjusted defense plans 

accordingly. That issue appears likely to remain a matter of debate over the current 

QDR. 

The current QDR, on which the Defense Department is required to provide a report early next year, is the fourth such review mandated by a provision that Congress originally included in the FY1997 National Defense Authorization Act and 

later made permanent. QDRs in 1997, 2001, and 2006 were preceded by two earlier, 

similarly broad reviews—the ‘‘Base Force’’ analysis that the Joint Chiefs carried out 

under then Chairman Colin Powell in 1990, and the ‘‘Bottom-Up Review’’ conducted 

at the beginning of the Clinton Administration under Secretary of Defense Les 

Aspin in 1993. 

The Base Force analysis and the Bottom-Up Review (BUR) were intended first of 

all to establish a rationale for maintaining strong military capabilities as the Cold 

War came to an end. The BUR, following the Persian Gulf War of 1991, established 

as a basic planning principle a requirement that U.S. military forces should be able 

to prevail in two nearly simultaneous regional conflicts—now termed ‘‘Major Theater Wars’’ (MTWs)—comparable to the war with Iraq. Planners did not neglect 

post-Cold War requirements for capabilities to manage other kinds of operations. 

Rather, the BUR argued that forces able to prevail in two major wars would also 

be able to meet less demanding requirements. 

By the time Congress enacted the original QDR requirement, however, that 

premise was being very widely questioned. Ongoing, long-term U.S. military missions in Bosnia and later in Kosovo, plus enforcement of no-fly zones in Iraq, were 

straining the Army and Air Force, neither of which was organized to sustain longterm rotational deployments abroad. The Army, in particular, was still organized in 

a way that required the mobilization of large numbers of reserves and the reassignment of substantial numbers of active duty troops in order to fill out units selected 

for deployment. The effect was to disrupt Army personnel management across the 
37 

whole force and to degrade the readiness of many non-deployed units in order to 

support even a modest rotational deployment of 5,000 troops to the Balkans. 

The 1997 QDR reflected efforts to assess and later ameliorate some of these 

strains. Among other things, it identified so-called low density-high demand units; 

mandated additions to some of the more highly stressed forces, including military 

police and civil affairs teams; made offsetting reductions in other units; and undertook systematic studies of the burdens of recent and ongoing contingency operations 

on military personnel. It also included a substantially new statement of the missions 

of U.S. military forces that stressed military engagement and other measures to 

make use of military forces in non-conflict situations to improve ties with foreign 

nations and prevent regional conflicts. 

As one means of encouraging a more far-reaching policy reassessment, Congress 

required as part of the 1997 process the appointment of an independent group, 

called the National Defense Panel, to provide input to the QDR and then to prepare 

an alternative assessment. The NDP’s final report emphasized the prospect that future foes would not challenge U.S. conventional military power directly, but would 

instead use asymmetric means to exploit U.S. weaknesses. The panel warned that 

critical U.S. capabilities, particularly the ability to project power far around the 

globe from bases in distant regions and naval forces offshore, would be increasingly 

at risk because of the diffusion of advanced technologies. The NDP recommended 

new programs, including converting ballistic missile submarines to launch cruise 

missiles against targets ashore, and substantial annual investments in experimental 

technologies to cope with rapidly evolving challenges. 

The NDP report is in many ways representative of the discussion, in Congress 

and elsewhere, about the apparent limitations of successive QDRs. Even though the 

1997 QDR, by most accounts, reflected considerable progress in addressing new 

challenges, the NDP report was quite critical of the Defense Department for not adjusting rapidly enough to accelerating changes in the international security environment. Critical as it was, the NDP also received a respectful hearing from senior 

leaders—the authors of the QDR—inside the Pentagon. 

In general, successive QDRs can be seen as progressive steps away from force 

planning that remained wed to weapons and organizations inherited from the Cold 

War and toward a much fuller appreciation of the extraordinarily broad array of 

challenges facing the United States in first half of the 21st Century. The 1997 QDR 

was succeeded by the 2001 QDR, which emphasized the need to build a full range 

of capabilities to cope with often unpredictable dangers. It added to the two-war requirement a mandate to protect the homeland from potentially catastrophic attacks 

and to maintain an effective deterrent presence in four critical regions of the globe.5

The 2006 QDR, the first composed after the attacks of September 11, 2001, included the ‘‘new challenges’’ framework that has since shaped much of the discussion of defense planning. Figure 2, taken directly from the a DOD briefing on the 

2006 QDR, illustrates the premise—which Secretary Gates has pursued since then 

more assiduously—that investments should be shifted from means of engaging in 

traditional, conventional force-on-force conflicts, in which the United States still appears to have a significant margin of superiority, and toward irregular, disruptive 

(i.e., asymmetric attacks on U.S. vulnerabilities), and catastrophic (WMD attacks on 

the homeland) challenges. 
38 

Source: Department of Defense, Briefing Slides on the 2006 Quadrennial Review, February 

3, 2006. 

Based on briefings by senior DOD officials, the current QDR appears likely to 

push the discussion of the international security environment, with implications for 

force planning, somewhat further. Secretary Gates and other officials have, for example, stressed that distinctions between traditional, irregular, and disruptive challenges are eroding. Groups like Hezbollah and Hamas have employed quite sophisticated short-range missiles, including anti-ship missiles, supplied by sponsoring nations. Insurgents in Iraq and Afghanistan have used modern shaped-charge munitions in IEDs to attack armored vehicles. Analysts describe the result as ‘‘hybrid 

warfare,’’ in which non-state groups, considered to operate at the lower end of the 

conflict spectrum, employ quite advanced technology, a merger of irregular warfare 

with advanced means of warfare. 

Officials also emphasize that even relatively sophisticated future enemies, including peer- or near-peer competitors, will almost certainly employ whatever means 

they believe will be effective in a conflict with the United States and its allies, including irregular and disruptive asymmetric attacks and even assaults on the U.S. 

homeland. A focus of the current QDR appears to be on what officials term ‘‘high 

end asymmetric’’ threats, meaning challenges that a technologically sophisticated 

and relatively wealthy opponent might pose in an effort to prevail without having 

to defeat the U.S. on its own terms. High-end asymmetric warfare was another 

focus of the April QDR guidance, and it is the subject of one of the QDR’s issue 

teams. 

In focusing on high-end asymmetric challenges, part of what defense officials are 

thinking may be reflected in recent discussions by Under Secretary of Defense for 

Policy Michele Flournoy, who has stressed the need to safeguard what she and others call ‘‘the global commons,’’ meaning air, sea, space, and cyberspace means of 

transport, intelligence, and communications.6 Threats to the global commons could 

involve the use of some new technologies, including anti-satellite devices (not just 

weapons but jammers) and cyber-attacks. They could also involve aggressive, widescale use by possible future foes of new versions of older technologies. In attacking 

sea lanes, for example, enemies could use high-speed small boats packed with high 

explosives (perhaps with suicide pilots); advanced, very quiet diesel-electric submarines with highly capable munitions; smart sea mines that can be deployed in 

large numbers, hidden, maneuvered, and activated when needed; short- to intermediate-range ballistic missiles with highly accurate and perhaps even maneuverable warheads to attack ships as well as fixed sites; and long-range, stealthy antiship cruise missiles. Some of these technologies, particularly ballistic and cruise 

missiles, could also be used to attack U.S. forward bases in regions of conflict. 
39 

Taken as a whole, discussions of security challenges in successive QDRs appear 

to represent considerable progress over time. The issue, however, is whether the 

progress has been rapid enough, and, more importantly, whether it has led to sufficiently rapid changes in policy. One goal Congress had in requiring quadrennial defense reviews was to push the discussion of post-Cold War force requirements further. QDRs may have helped to some degree in doing so, simply by requiring senior 

DOD leaders to think systematically about long-term issues. At the same time, it 

would be hard to say that QDRs have fully anticipated the evolving nature of future 

threats. On the contrary, they seem in many cases to have lagged behind emerging 

threats. 

Moreover, changes in military force posture appear to have been even slower to 

mature. It took the Army until 2001, just on the verge of subsequent conflicts in 

Afghanistan and Iraq, to begin implementing a new force posture based on more 

deployable, modular brigades that were sufficiently manned in peacetime to be deployed without disrupting personnel movements over the whole of the force. In general, earlier QDRs appear to constitute snapshots of progress in ongoing discussions 

of strategy rather than radical departures from earlier views—an evolutionary process driven by the pressing need to adjust to unexpected events, rather than anything revolutionary. 

This raises what may be the key issue for Congress in assessing the current QDR. 

Will this QDR be another in a line of modest adjustments to global changes, or will 

it more fully anticipate the impact on U.S. security of fast-moving global trends? A 

goal of DOD’s current leadership appears to be, not merely to identify the range of 

challenges facing the nation, but also to establish priorities in addressing them. But 

will this include not only identifying areas that may warrant greater investment, 

but also capabilities that may be becoming obsolete? 

One common criticism of the ‘‘capabilities based’’ analysis of the 2001 and 2006 

QDRs, even as they helped to broaden awareness of the range of threats, is that 

the analytical framework did not help much in allocating resources away from some 

areas and into others. Leaving aside whether such criticism is fair, the current Administration has emphasized the need to analyze specific threats in order to establish priorities. The question that follows is, how boldly will the current QDR address 

the potential need for major changes in forces in view of its assessment of new challenges? 

To give one example of the kinds of more radical changes in force posture that 

the QDR might address, consider the long-standing debate over anti-access/area denial strategies. The issue has been debated at least since the National Defense 

Panel discussed it in 1997. A ‘‘Red Team’’ established as part of the 2006 QDR, and 

headed by Andrew Marshall, director of the Office of Net Assessment, also discussed 

it and recommended some far-reaching changes in force structure, including a cut 

of up to one-third in the number of short-range tactical fighter aircraft and an increase in funding for longer-range strike systems. Now a similar ‘‘Red Team’’ has 

been established for the current QDR, also co-chaired by Marshall, and it includes 

prominent advocates of changes in forces to cope with anti-access/area denial strategies. They include Andrew Krepinevich, who served on earlier panels as well, and 

who has long highlighted the issue, and retired Marine Lieutenant General Paul 

Van Riper, who, in a major war game, called ‘‘Millennium Challenge 2002,’’ directed 

a ‘‘Red Force’’ group that exploited with great effect creative means of disrupting 

U.S. forces in a Persian Gulf-type scenario. 

It is important to note that the Defense Department has not ducked the issue. 

The National Defense Panel and later internal Red Teams were not suppressed or 

dismissed—on the contrary, the Defense Department has appeared to welcome the 

involvement of some forceful critics of some of its policies. After he read 

Krepinevich’s recent book, 7 Deadly Scenarios, Secretary Gates reportedly directed 

the QDR team to incorporate Krepinevich’s examples into its set of planning exercises.7

That said, there appears to be a considerable gulf between the urgency that 

Krepinevich and others attach to the issue and views of senior DOD officials. In a 

recent article in Foreign Affairs, Krepinevich characterized current U.S. means of 

projecting and sustaining power around the globe—a capability now unique to the 

United States and also extremely expensive to maintain—as a ‘‘wasting asset.’’ ‘‘Several events in recent years have demonstrated that traditional means and methods 

of projecting power and accessing the global commons are growing increasingly obsolete,’’ he wrote. Citing General Van Riper’s success in Millennium Challenge, which, 

he says, led to the early loss of half the U.S. ships deployed in a model conflict with 

Iran in the Persian Gulf, Krepinevich concluded: 

Van Riper’s success should have served as a warning: projecting power into an 

area of vital interest to the United States using traditional forces and operational 
40 

concepts will become increasingly difficult. Indeed, these means and methods are at 

great risk of experiencing significant, perhaps even precipitous, declines in value. 

* * * 

In the real world, Iran and other states can buy high-speed, sea-skimming 

ASCMS [anti-ship cruise missiles] in quantity. In confined waters near shore, U.S. 

warships would have little warning time to defend against these weapons. The same 

can be said of high-speed suicide boats packed with explosives, which can hide 

among commercial vessels. Widely available modern sea mines are far more difficult 

to detect than were those plaguing the U.S. fleet during the 1991 Gulf War. Quiet 

diesel submarines operating in noisy waters, such as the Strait of Hormuz, are very 

difficult to detect. Iran’s possession of all of these weapons and vessels suggests that 

the Persian Gulf—the jugular of the world’s oil supply—could become a no-go zone 

for the U.S. Navy.8

China, too, he says, is concentrating on anti-access/area denial capabilities as well 

as the ability to disrupt U.S. freedom of action in space and cyberspace. 

In contrast, Under Secretary Flournoy and co-author Shawn Brimley, acknowledge similar challenges, but come to a starkly different conclusion about the immediacy of the threat: 

* * * barriers to entry for both state and non-state actors to develop and field 

capabilities that can pose challenges to U.S. and allied freedom of action will lower 

substantially over time. The proliferation of knowledge and technology will allow an 

increasing number of state and non-state actors to deploy anti-access capabilities 

and high-end asymmetric technologies that can put allied infrastructure at risk and 

hamper U.S. power projection. 

While these trends are already apparent today, their enumeration should not be 

interpreted to mean that U.S. dominance in, for example, space-based capabilities 

or in blue-water naval power projection is being eroded at a precipitous pace. Far 

from it—America’s military will remain without peer for some time in the ability 

to project and sustain substantial military power from the air and sea over large 

distances. 

These trends are, however, harbingers of a future strategic environment in which 

America’s role as an arbiter or guarantor of stability within the global commons will 

become increasingly complicated and contested. 

What evidence the Defense Department has to support the conclusion that power 

projection capabilities are not ‘‘being eroded at a precipitous pace,’’ is a matter of 

critical importance. This judgment appears to be at odds, to some degree at least, 

with the conclusions of the 2006 QDR Red Team, as well as with the views of 

Krepinevich and other well-regarded independent analysts. A measure of the value 

of the QDR may be how directly and effectively it addresses this and similar issues 

that raise questions about the pace at which the Defense Department is adjusting 

to changes in the international security environment. 

The amount of new investment that may be needed to cope with asymmetric 

threats may very well be substantial. If area denial strategies are effective in forcing shorter-range U.S. forces away from regions of conflict, for example, investments 

in longer-range air- or even space-based strike systems might be needed, particularly for use in the early stages of a conflict. The task of striking against mobile 

ballistic and cruise missile launchers remains challenging, and much larger investments in intelligence, surveillance, and reconnaissance systems for the mission, as 

well as in long-range and loitering strike systems, might be required. One alternative may be a substantial increase in submarines and submarine launched weapons. Defenses against ballistic and cruise missiles might also be required in very 

large numbers. Cost exchange ratios may not favor existing sea- or land-based missile defense systems, and new investments in air-launched anti-missile systems may 

be needed.9

Other asymmetric threats could also require expensive measures in response. Defense against anti-satellite systems might require not only measures to protect current generations of large satellites, but, as many have proposed, the development 

of smaller satellites for key missions that could be launched in substantial numbers 

in the run up to a conflict. This might also require large investments in launch systems. 

The Cold War was punctuated by occasional, unexpected international crises, but, 

in retrospect defense planning was characterized by a remarkable degree of stability. The post-Cold War era, in contrast, appears to be defined both by a succession of unpredictable challenges and by the accelerating pace of global change. Experience with earlier QDRs suggests that the Defense Department may sometimes be 

slow to adjust to new challenges, and that institutional inertia may make senior 

leaders reluctant to pursue far-reaching changes in policy. The central issue for this 

and future QDRs may be how effective they are in turning investments that will 
41 

determine U.S. military capabilities twenty years and more in the future, in the 

right direction. 

ENDNOTES

1 In questions and answers following a presentation at the Center for Strategic and International Studies (CSIS) on April 29, 2009, Under Secretary of Defense Miche*le Flournoy said 

that QDR budget planning was focused strictly on the FYDP—audio and video recordings are 

available on line at CSIS, though not a transcript. Also see David Ochmanek, Deputy Assistant 

Secretary of Defense for Force Planning, Interview with the Defense Writers Group, July 28, 

2009, of which a transcript is available on line from Air Force Magazine. 2The Employment Cost Index is a Bureau of Labor Statistics measure of the average change 

of pay and benefits in the overall economy. The annual real growth in DOD O&M accounts is 

a CRS calculation that measures the change per active duty service member in O&M funding 

excluding funding of overseas contingency operations. 3This is analysis is based on a discussion with Hugh Brady of the Raytheon Corporation of 

a forthcoming defense industry 10 year budget projection under the auspices of TechAmerica. 4 Congress passed the original Gramm-Rudman-Hollings deficit control act in November 1985 

after the federal budget deficit exceeded 6% of GDP in FY1983. Defense spending subsequently 

declined in real terms every year until FY1999, when the federal budget ran a surplus. 5The 2001 QDR articulated what it called the 1-4-2-1 force planning construct, which called 

for forces to (1) protect the homeland, (4) deter aggression in Europe, Northeast Asia, the East 

Asian littoral, and Southwest Asia and the Middle East, (2) simultaneously halt attacks in two 

regions, and (1) win decisively in one major conflict. 6Michele Flournoy and Shawn Brimley, ‘‘The Contested Commons,’’ Proceedings of the U.S. 

Naval Institute, Vol 135, No. 7, July 2009. 7 Andrew F. Krepinevich, 7 Deadly Scenarios (New York: Bantam Books, 2009). Christopher 

J. Castelli, ‘‘QDR Shakes Up Planning Scenarios for Future Military Missions,’’ Inside the Pentagon, May 28, 2009. 8 Andrew F. Krepinevich, ‘‘The Pentagon’s Wasting Assets,’’ Foreign Affairs, JulyAugust, 2009, 

Vol. 88, Issue 4. 9There has been some discussion of using upgrades of Sparrow or AMRAAM air-to-air missiles for missile defense. 

Chairman SPRATT. Thank you both for excellent testimony in a 

fairly short period of time. A good sweep of not just where we are, 

but where we seem to be going and what some of our options are. 

Would you just for the record and for elaboration give us an idea 

of what has happened in the acquisition programs? What has been 

the rate of inflation, the rate of cost growth over the last 10, 15 

years? Either one of you or both. 

Mr. DAGGETT. Yeah, let me say one thing about—Matt, why don’t 

you go ahead first. 

Mr. GOLDBERG. We have seen programs that coming out of development into production are 20, 25—ultimately 20, 25, 30 percent 

more expensive to actually build than what was predicted coming 

out of development, and those kind of numbers have been with us 

for a long time. There hasn’t really been much change or progress. 

Mr. DAGGETT. Yeah. Actually when I was here last February I 

provided a chart, and actually I did provide it if we can find it, 

which was just a recapitalization rates of major systems. And one 

of the leaders of the business projection units at the Boeing Corporation, Cecil Black did this, and I have just adopted it a little bit. 

And what he did was look at production rates of major weapons 

programs in 1985 compared to production of similar systems in 

2008. Starting from the premise that in constant 2008 dollars we 

were actually spending about the same amount in acquisition. 

There was about $200 billion in procurement and in R&D. Yeah, 

here is the chart. 

In both years. So with $200 billion in money for acquisition how 

many of different kinds of various systems could we buy in ’85 as 

opposed to 2008? And here is what he found. For tactical fighters 

in 1985 we bought 338 new tactical fighters, 56 in 2008. In ships 

we bought 23 new ships in 1985, 7 in 2008. 

Chairman SPRATT. Is this apples to apples? 
42 

Mr. DAGGETT. Yeah, well that is the point. They are ships for 

similar missions, yeah, but they have become much more expensive 

individually. And because they have become that much more expensive individually we can afford only many fewer of them. 

Chairman SPRATT. Yeah. 

Mr. DAGGETT. I mean it does address your point in general, but 

that is the key point, that the intergenerational cost growth between major systems has accelerated so much that we are finding 

it very difficult to replace existing equipment on a one-for-one basis 

given budget constraints. 

In fighter aircraft the main low-end fighter in 1985 was the F16, which at the time cost about $16 million a copy. The F-35 will 

cost about $83 million a copy. If you adjust for inflation it is about 

24 million a piece for the F-16 versus 83 for the F-35, but that has 

been the pace of intergenerational cost growth, and you can’t sustain that over time. You have to do something to rein it in. And 

I think the changes that Secretary Gates announced in April, many 

of those changes appear to be moving in that direction. Not going 

ahead with DDG-1000 as a basic whole design for surface combatants, but instead DDG-51, which is a much smaller and presumably less expensive hull, relying more on Littoral Combat Ship for 

many missions rather than larger destroyers. 

Chairman SPRATT. One last question for both of you and then I 

will let others have an opportunity. 

Listening to the various forces that impinge upon the defense 

budgets and determine how much we spend and how we spend it 

remind you of what a complex determination it is, whether it is an 

adequate defense. Do you think it is helpful to speak of defense 

adequacy in terms of percentages of GDP? Three percent, four percent? Is that useful or misleading and unuseful. 

Mr. GOLDBERG. I would say from our point of view it is probably 

not extremely useful. And I would say a better approach than saying well we can afford to spend three or four percent of our economy on defense would be more from the bottom up as to say what 

the QDR is attempting to do, we have yet to see what success they 

will have, is to ask what are the threats, what do we have in the 

inventory, and what do we need to buy to meet those threats? And 

whatever percentage that turns out to be I would rather build it 

up from the bottom than to say that we should flat line the defense 

budget at some percentage of GDP. 

With all of the other pressures on the federal budget, I am sure 

you are aware, Mr. Chairman, health care and other entitlement 

programs, it is almost inevitable there is going to be a squeeze on 

defense, and so I think the better approach would probably be to 

figure out what do we need and how much would it cost, rather 

than starting off by saying we need to maintain this much top line. 

Mr. DAGGETT. Yeah, my view is that talking about defense is 

four percent of GDP. It is perfectly reasonable to use that as a way 

of arguing that if we choose to do so we can afford it, that it is a 

measure of the impact of defense spending on the economy. And to 

say that it is four percent of GDP says that relative to what it has 

been in the past is less of a burden in that sense. So it is perfectly 

legitimate as a measure of the kind of economic burden of defense 

spending. 
43 

What it misses is the overall budget environment, and the budget environment has changed dramatically as well. Federal spending 

has stayed stable at about 20 percent of GDP going back the last 

40 almost 50 years. What has happened is major entitlement programs have climbed dramatically as a share of GDP and as a share 

of the budget while defense and other discretionary programs have 

declined. 

So you know, while it is reasonable to look at defense as a share 

of the economy you also need to look at defense as a share of the 

overall budget. If you want to increase the budget above 20 percent 

then there is room for a bigger increase in defense, but you need 

to take the budget picture into account as well. 

And one other point. You know, ultimately Matt’s point is the 

correct one. I mean, in defense the starting point has to be what 

do you want to accomplish in the international environment and 

what kind of military forces do you need to accomplish that? And 

within limited resources how can you best do that? And that is 

quite a part from the level of defense spending as a share of GDP. 

We need to be looking at what China is doing in military spending more than we need to be looking at what is happening to our 

spending as a share of GDP. And in dealing with China we also 

need to take account of the fact that within 40 years China is going 

to have as large a GDP as we do. They will be the largest economy 

in the world. So the way in which we address how China is evolving militarily has to take account of this dramatic change in relative financial circumstances over time as well. 

Chairman SPRATT. Thank you both. Mr. Ryan. 

Mr. RYAN. Thank you, Mr. Chairman. Mr. Goldberg, this probably is a best question for you. How much of operations in Iraq and 

Afghanistan contributed to the deficit this year? 

Mr. GOLDBERG. The number aren’t quite in, but it appears that 

operations in Iraq and Afghanistan ran about 155 billion in the 

year that we just completed in 2009. 

Mr. RYAN. Can you bring up Chart 9? 
44 

Mr. RYAN. The point I guess behind my question is, what we are 

hearing more often these days is that, you know, if it weren’t for 

the war we wouldn’t have these big budget deficits. The blue graph 

shows you the war spending and the red shows you the deficits. So 

we are seeing that war spending, which peaked I think in 2008, is 

really actually quite a small fraction of our deficit. 

Do we make a distinction as to what is deficit finance and what 

is not deficit finance when it comes to federal spending in a deficit 

climate? 

Mr. GOLDBERG. At CBO we do not, and we are reluctant to do 

that because it is very difficult to say that this particular dollar 

that I am going to spend on defense, whether that is a dollar that 

I raised through taxes or whether that is a dollar for which I had 

in a float bond, so we prefer not to make that distinction. 

Mr. RYAN. Yeah. So I think it is important to put these conversations in perspective as to their impact on our fiscal situation and 

our deficits. 

Your missile defense line was very interesting to me, and I am 

not an armed services guy so you need to break it down for me. 

Looking at the decision that was made to withdraw our systems 

out of the Czech Republic and Poland, what is the cost difference 

between the current plan for missile defense under the various scenarios you described and the cost trajection we were on with the 

land-based system? And what are the costs associated with discontinuing the land-based system? I assume there are wind down 

costs, there are storage, you know, costs and other things. What 

are those costs associated with this decision? 

Mr. GOLDBERG. There are costs. All of the numbers are a little 

preliminary in that we don’t really know the concept yet that the 

Administration is going to use, but I can give you a few of the numbers. Eliminating the sites in the Czech Republic and in Poland we 
45 

would save 1.5 billion, by not having the radar in the Czech Republic and the interceptors in Poland, 1.5 billion. 

Chairman SPRATT. Is that with ten or over five or over—— 

Mr. GOLDBERG. That is the total cost over the ten years, 1.5 billion. 

Mr. RYAN. Okay. 

Mr. GOLDBERG. There were lost of small costs. The biggest element that you put back in is the cost for the ships, and the cost 

for the ships, as I have indicated, they are—— 

Mr. RYAN. It is 19- to 6 billion? You said the LCS type ships 

would be 6 billion, if we do new ships they would be about 19-? 

Mr. GOLDBERG. Yes. If we do new Aegis destroyers they would 

be 19-, if we do new LCS specially modified for this mission it 

would about 6 billion. 

The other option is to take existing ships and just convert them, 

upgrade them so that they could perform this mission, and that 

would be about 300 million in total for the nine ships. Two hundred 

million has already been requested for six ships. 

Mr. RYAN. And is that assuming we don’t replace those existing 

ships because we are changing their missions? 

Mr. GOLDBERG. We would not replace them, that is correct. 

Mr. RYAN. Okay. 

Mr. GOLDBERG. That is assuming that they would be dedicated 

to this mission and therefore not be available for other missions. 

Mr. RYAN. Are there termination costs associated with this? Any 

contract termination costs associated with this decision? 

Mr. GOLDBERG. I am not aware of any. I believe the 1.5 billion 

that I gave you earlier was the complete—— 

Mr. RYAN. Is the complete cost? 

Mr. GOLDBERG. Is the complete cost. There are a few other costs, 

and it is hard to answer this question, because the Navy was buying the standard missiles anyway, and they may continue to buy 

just as many standard missiles regardless of how this option plays 

out, so it is hard to say that we would buy more fewer standard 

missiles because they would probably be in the inventory anyway. 

Mr. RYAN. Okay. So I am trying to get a sense of just how this 

technology is to be deployed and what its long-term costs are. So 

ten year we have got 1.5 billion savings for discontinuing the landbased system. 

Mr. GOLDBERG. Correct. 

Mr. RYAN. Depending on how we deploy from a sea base system—— 

Mr. GOLDBERG. Correct. 

Mr. RYAN [continuing]. It is anywhere from 300 million up to 19 

billion dollars? 

Mr. GOLDBERG. Correct. Now the one other—— 

Mr. RYAN. Yeah. 

Mr. GOLDBERG. If I may. The one other big cost that I can offer 

you, which we have estimated, would be for the land-based version. 

Because there are four phases of the Administration plan, some of 

which involve sea basing on the Aegis ships and some which involve land-based. So if I could talk about the land-based piece—— 

Mr. RYAN. Sure. 
46 

Mr. GOLDBERG [continuing]. Because I have some numbers. We 

estimate that to develop the land-based version of the SM-3, the 

standard missile for this purpose, would take 400 million in R&D, 

and then for every additional site it would be another 700 million. 

And so 400 to develop it and 700 million for site for land-based. 

Mr. RYAN. Okay. And how many sites were being contemplated 

in the full build out? 

Mr. GOLDBERG. What did we have? I think two is the current. 

Mr. RYAN. Okay. 

Mr. GOLDBERG. Two is the current number. 

Mr. RYAN. All right. Mr. Daggett, I have got a question for you. 

Give us a sense of health care. You know, we focus so much on our 

domestic spending liabilities with respect to our entitlement programs on Medicare, Medicaid, you know, the demographics, the 

health inflation being what it is. Give us a sense of the crowd out 

of defense spending with respect to TRICARE. And I assume you 

have the same kind of fiscal pressures. We have seen these numbers before; I think you have testified on that. 

Mr. DAGGETT. Yeah. 

Mr. RYAN. Give us a sense of the crowd out with respect to the 

health care on legacy cost and DoD. 

Mr. DAGGETT. In Fiscal Year 2010 budget total health care costs 

include costs in the operation and maintenance accounts for care 

of uniform personnel and their dependents through TRICARE. If 

you include military personnel and if you include accrual payments 

that DoD makes for future health care benefits for current employees it is about 45 billion dollars this year for health care costs. 

Mr. RYAN. And that is a percentage of the overall DoD budget 

of what? 

Mr. DAGGETT. Within of about $534 billion, so it is about nine 

percent of the budget. 

Mr. RYAN. Okay. 

Mr. DAGGETT. The projection is that that will increase within five 

years to about $64 billion. So you know, that is in constant 2010 

dollars. So it is about five percent per year growth in line with 

growth of health care costs in the overall civilian sector. So another, you know, almost $20 billion of additional expenses just in 

a five-year period. 

So it is, yes, health care costs are a major factor that DoD is concerned about. It is a major factor that is driving up the cost of operation and maintenance by 2.7 percent per year, and it is a real 

matter of concern for DoD. 

Mr. RYAN. All right, thank you. 

Chairman SPRATT. Mr. Doggett. 

Mr. DOGGETT. Thank you both for your testimony. My questions 

concern Afghanistan, and I will address them to Mr. Daggett. 

During the long deceit and denial days of the Bush, Cheney, 

Rumsfeld’s Administration it was almost impossible to determine 

or estimate the cost of our go it alone invasion of Iraq. It seemed 

as if they had a grand don’t ask don’t tell policy whenever we 

sought to get the facts about what American taxpayers were being 

asked to commit to there. 

As some people now are calling for expanding the number of 

young Americans who will be asked to face the harsh realities of 
47 

Afghanistan, I want to be sure that we replace deceit and denial 

and don’t ask don’t tell with as accurate of facts as we possibly can, 

and certainly so that this Committee can fulfill its responsibilities 

in budgeting. 

First let me ask Mr. Daggett. Just as it refused to break out the 

cost of Iraq, the pentagon, as I understand the way they present 

their figures on the cost of Afghanistan, they have intermingled 

them with the cost of operations in Philippines and the Horn of Africa have they not? 

Mr. DAGGETT. Yeah, that is true. From the beginning DoD has 

identified costs of what they call Operation Enduring Freedom. 

Mr. DOGGETT. Yes, sir. 

Mr. DAGGETT. And that includes Afghanistan and—— 

Mr. DOGGETT. Well whether or not that is an appropriate label 

for what they are doing it certainly is possible if they want to provide the American people with the information to break out separately the cost for Afghanistan. 

Mr. DAGGETT. Yes, absolutely. 

Mr. DOGGETT. And let me focus your attention on the specific 

cost as best you can determine of what we are committing to each 

time we send one additional service member to Afghanistan, is it 

correct that the best estimate we have is one soldier, one year in 

Afghanistan, one million American dollars? 

Mr. DAGGETT. That is about right. 

Mr. DOGGETT. All right. 

Mr. DAGGETT. My colleague, Amy Belasco, has actually done 

numbers on this extensively, as has CBO by the way. 

Mr. DOGGETT. And from your review of the literature, and I understand that is all you have to rely on, is it also correct that the 

cost of maintaining one Afghan soldier one year in Afghanistan is 

about $12,000? 

Mr. DAGGETT. We have seen that just from press accounts. That 

that is a DoD estimate, yes. 

Mr. DOGGETT. Twelve thousand versus one million. 

Mr. DAGGETT. Yes, sir. 

Mr. DOGGETT. Let me ask you. With reference to one of the problems we had with the Bush, Cheney, Rumsfeld camouflage of the 

figures from the American people was that they would announce 

one set of troop figures when in fact they were actually committing 

us to much larger set. And I was troubled yesterday to see on the 

front page of the Washington Post, support troops willing U.S. force 

in Afghanistan, that while we had had an announcement that we 

were expanding the number of troops there in the spring by 21,000. 

In fact when you count the support troops that are being added 

there, 21 becomes the new 34, and we actually have 34,000 more 

troops going there. Is that correct? 

Mr. DAGGETT. Yes, sir. 

Mr. DOGGETT. And in calculating the cost, a million dollars, one 

soldier, one year you have to include the support troops to give people an accurate indication don’t you? 

Mr. DAGGETT. Yes, right. 

Mr. DOGGETT. Now anyone who is advocating, again, asking you 

from your review of the literature, because I know you follow this, 

are you aware of anyone who is advocating more troops for Afghan-
48 

istan now that has suggested a time line that they can stay for less 

than a decade? Have you heard of anyone out there? 

Mr. DAGGETT. No, I have not heard any particular time line. 

Mr. DOGGETT. Okay. So when we talk about one million per soldier per year we are not just talking about one year, and certainly 

in your estimates you don’t look to just one year do you? 

Mr. DAGGETT. No, we don’t. 

Mr. DOGGETT. Let me ask you also about what, and it is a 

strange term to me, but it is the term I heard from the pentagon, 

the so-called monthly burn rate. How much money is being burned 

each month. 

Mr. DAGGETT. Right. 

Mr. DOGGETT. Is the monthly burn rate in Afghanistan now 

without all these additional troops about 3.6 billion per month? 

Mr. DAGGETT. Through the first seven months of Fiscal Year 

2009 the average monthly burn rate is $3.6 billion per month, yes. 

Mr. DOGGETT. And if we deploy an additional 50,000 troops, including support personnel to Afghanistan, will the burn rate in Afghanistan be equal or about equal to the burn rate we currently 

have in Iraq? 

Mr. DAGGETT. Yeah, almost precisely. The $3.6 billion per month 

supports an average troop level of about 51,000 in Afghanistan. If 

you added another 50,000 to that that would double it which would 

bring the burn rate to 7.2 billion per month. The burn rate now in 

Iraq is about 7.3 billion per month. 

Mr. DOGGETT. And you referenced your colleague, Amy Belasco, 

who has helped this Committee in the past in her objective studies. 

Has she analyzed the Defense Finance and Accounting data, the 

DFAS data to show that actually even what the Washington Post 

reported yesterday understates the true cost of the war in Afghanistan because there are many other support troops that are actually, 

when you look at those records, are actually supporting Afghanistan? 

Mr. DAGGETT. Well it understates the number of troops, it 

doesn’t necessarily revise the cost figures. 

Mr. DOGGETT. I see. 

Mr. DAGGETT. The cost figures are just supporting a much larger 

number of support troops in the region. 

Mr. DOGGETT. That may not actually be in country. 

Mr. DAGGETT. Right, right. 

Mr. DOGGETT. Well thank you very much. Thank you, Mr. Chairman. This is a tremendous cost in addition of course to the cost in 

blood and sacrifice the military families that we must consider as 

we evaluate our alternatives in Afghanistan. 

Chairman SPRATT. Thank you, Mr. Doggett. Ms. Lummis. 

Ms. LUMMIS. Thank you, Mr. Chairman. 

Mr. Daggett, President Obama has established this joint understanding with Russia to work towards further reductions in our 

strategic nuclear arms by renewing START. This is a concern to me 

because F.E. Warren Air Force Base is in my district of Wyoming 

and we oversee the Nation’s ICBM force. And I know that there are 

strategic factors that play into a nuclear force reduction decision. 

What can you tell me about the comparative cost per warhead de-
49 

livery vehicle in our ICBM forces as opposed to a submarine 

launched missile bomber? 

Mr. DAGGETT. We did a study last spring for Senator Conrad 

that addressed specifically that question. And what we did was 

look at not only the missile force, Minuteman III ICBMs versus 

Trident 2 submarine launched missiles, but also looked at the 

bomber force, and what we found was that the cost per warhead 

depends on warhead loadings, and they can be quite variable. So 

that is the big variable factor in this. 

Ms. LUMMIS. And excuse me for interrupting, but I am really 

more interested in the delivery system. 

Mr. DAGGETT. Yeah. 

Ms. LUMMIS. The delivery vehicle rather than the warheads, because I know you can load multiple warheads on one delivery vehicle. 

Mr. DAGGETT. Yes, you can. Well what we found was that each 

Minuteman III missile costs about $2.9 million per year in acquisition and operating costs. Each Trident 2 missile costs about $10.5 

million per year, but again, if you look at warhead costs that evens 

out because the Tridents deploy somewhat more warheads than the 

Minuteman do. 

Ms. LUMMIS. Well and I recognize the role of bombers and submarines in our nuclear posture, but the ICBM force possesses 

unique characteristics, the land deterrents and stability to ourselves and other nuclear powers around the world. The silo locations are publicly known, yet because they are so dispersed they 

make a preemptive or disarming attack almost impossible in today’s world. So our ICBM forces contributed to global stability for 

decades, and I have been visiting with Air Force officials and they 

confirm that they remain vital to our national security. 

And so I just wanted to point out that as between the two warhead delivery platforms that we get a lot of bang for our buck without, you know, butchering that term. 

My next question, Mr. Daggett is also for you. If you look at the 

larger defense budget. Your testimony mentioned that the Administration’s current defense plan differs significantly from the needs 

articulated by the Joint Chiefs of Staff last December in their own 

defense plan. For 2010 alone the Obama Administration has requested a 2.5 percent increase in the defense funding while the 

Joint Chiefs called for a 12 percent increase. 

Do you know what underlying defense policy differences account 

for this discrepancy, 2.5 versus 12 percent? 

Mr. DAGGETT. No, I didn’t do those numbers. I did not look at 

specifically the difference between those earlier plans. 

I do know that there was some discussion early in the year of 

a request that DoD presented to the Office of Management and 

Budget for I think it was a $57 billion increase in the top line, and 

that may be what that is referring to. That top line increase 

though was in large part involved taking into the base budget costs 

that earlier had been in the supplementals. About $30 billion of 

that 57 billion additional amount, as I understand it, was simply 

to take in house into the base budget costs of Iraq and Afghanistan, and OMB did not sign off on that. So there was a much 

smaller real additional increase in the top line. 
50 

Some of the proposals did involve increases in Air Force and 

Navy acquisition accounts. Biggest increases in Navy acquisition 

accounts on the order of $5-$6 billion a year I think. I don’t know 

precisely what those changes were for. 

Ms. LUMMIS. Okay, thank you. Mr. Goldberg, you mentioned in 

your testimony that the Obama Administration has not submitted 

the customary FYDP for 2010? 

Mr. GOLDBERG. Yes. 

Ms. LUMMIS. And that you had to rely on press releases and 

briefing papers in addition to the 2010 budget request by the last 

Administration’s FYDP, so I have a two pronged question. 

Has the Administration provided justification for not submitting 

a FYDP? And has not having a FYDP posed extra challenges to 

your agency in formulating long-term projections? 

Mr. GOLDBERG. Yes, ma’am. The Administration justified not 

submitting the FYDP because it was a new Administration. They 

came in within a month or two of the inauguration they had to 

present a budget and there just wasn’t enough time to present 

more detail than beyond the 2010 single budget year. 

Has it posed challenges to us? Absolutely. Because ordinarily we 

have five years or six years of at least a plan. There were out year 

funding numbers in there that of course won’t be enacted until future sessions of Congress. So they are placed in their plan, they are 

not actual commitments by anyone, but nonetheless it gives us a 

good idea where the Department thinks they are going, where they 

would like to go. And so our projection was much more difficult this 

year by not having that. 

If I could also add, there is one other thing that was missing, is 

called the Selected Acquisition Reports, the SAR, the SARs, which 

are produced periodically, but the full reports come out at the end 

of every calendar year, every December. December of ’07 was the 

last time the Department produced SARs. There were no December 

’08 SARs. 

What they do is they give cost schedule technical challenges basically every major acquisition program. There would be one for the 

FCS, there would be one for the joint strike fighter, et cetera at 

that level, and having that information every year refreshes our 

knowledge of those particular programs, and that again was not 

submitted this year and has been a hindrance. 

Ms. LUMMIS. So when you haven’t had SARs for that long how 

do you make those projections? And what is the justification for 

going since ’07 without SARs? 

Mr. GOLDBERG. Actually, I would suggest, if I could defer that 

question for your session next week with the DoD comptroller. I 

presume it would be the same justification. So many things were 

changed in the April announcements by Secretary Gates and the 

subsequent budget submissions, a lot of programs had to recalibrate and that information is just not yet reflected in a fresh set 

of SARs. 

Ms. LUMMIS. Okay. I know that I am asking the wrong person, 

but the SARs weren’t even coming from the previous Administration it sounds like. Excuse me, Mr. Chairman, my time is up. 

Chairman SPRATT. Just for clarification. Not having a FYDP in 

transition year is pretty standard procedure. 
51 

Ms. LUMMIS. Okay. 

Chairman SPRATT. 2001 the Bush Administration didn’t have 

one. And frankly Cheney admitted in late June that one reason he 

dragged his feet in presenting a FYDP, a budget, to pull up budget 

for that year the President asked him to do so until he could get 

his tax cuts passed. 

Ms. LUMMIS. Until he could get his tax cuts? 

Chairman SPRATT. Tax cuts passed. 

Ms. LUMMIS. Okay. 

Chairman SPRATT. Bush didn’t have one in ’01, Clinton didn’t 

have one in ’93. It is not uncommon, because they would be adopting somebody else’s budget. They would rather put in place their 

own full up budget and that is part of the reason for the delay. 

Ms. LUMMIS. Okay. Thank you, Mr. Chairman. And why would 

the SARs, these—— 

Chairman SPRATT. Selected Acquisition Reports? 

Ms. LUMMIS. Yeah. Why would they not come in ’08 and ’09? I 

mean those would have been prepared by the previous Administration. 

Chairman SPRATT. Well SARs should come every year. 

Mr. GOLDBERG. If I could, Mr. Chairman. The SARs would be as 

of December ’08, but would be released perhaps a month or two 

later and concurrent with the budget and they were not this year. 

Chairman SPRATT. Well they come annually. 

Mr. GOLDBERG. Yeah, they are quarterly SARs, but the ones that 

are meaningful, the annual ones, and their information as of December and they might typically be released a month or two later. 

So the December ’08 SAR would have been released early this calendar year. Should have been and wasn’t. 

Ms. LUMMIS. So would that have been held back by this Administration, or prepared by the last Administration and then this Administration said whoa up, we don’t know if we agree with that? 

Is that—— 

Mr. GOLDBERG. I believe that is right. I believe that the current 

DoD under secretary comptroller—— 

Chairman SPRATT. Well I tell you what, we are going to have Mr. 

Hale as a witness, and you can—— 

Ms. LUMMIS. Sorry, Mr. Chairman. 

Mr. GOLDBERG. I believe it is Mr. Hale’s—— 

Ms. LUMMIS. Okay. Thank you. 

Mr. GOLDBERG [continuing]. Province there. 

Chairman SPRATT. Mr. Etheridge. 

Mr. ETHERIDGE. Thank you, Mr. Chairman, and let me thank 

you for this hearing. Let me thank both of you gentlemen for being 

here today. 

My question is going to be a little different because I have a 

privilege of representing two very active bases. Fort Bragg in North 

Carolina and the Pope Air Force Base that is adjacent that does 

the lift. 

So my questions are this, because they are critical areas as it relates to what they do, wherever they may be sent. And in both of 

your testimonies you list factors that are driving up the cost of our 

national defense. In each case the majority of the factors are related to increase in weapons cost. Mr. Daggett had four of six, I be-
52 

lieve that is correct, and Dr. Goldberg had three of four. And as 

I said, as it relates to the areas I represent, as well as a significant 

number of guard and reservists who now find themselves serving 

in various places around the world, I am very concerned about 

being able to meet the needs of those men and women when we ask 

them to go that they have the resources. 

So my question is, what constraints will our defense budget face 

as we thrive to continue to meet the obligation of those who are 

protecting our Nation? You talked about the increase in costs, but 

what are those constraints? 

And second, let me move to the second part of that, and hopefully 

both of you can take a shot at that. The BRAC process has also 

contributed to some of the increased costs in operation and support, 

and there continues to be a significant need tied to those BRAC operations, specifically at Fort Bragg and other places where you 

have major movements into housing, schools, infrastructure needs. 

And my question is what do you think the long-term impact of 

BRAC will be on the defense budget, and how do we make sure 

that sufficient funds are there as we are looking to increasing costs 

as these bases are charged like Fort Bragg to meet their ever increasing roles and responsibilities in our national defense? Whoever wants to start first. 

Mr. GOLDBERG. If I could respond to you first, Mr. Etheridge. 

First thing about the constraints on our personnel, I am not 

speaking for the Defense Department, but what we have all heard 

is that it is a big concern for them. And one of the concerns is dwell 

time so that the soldiers coming back to places like Fort Bragg 

have a year at home, and another concern is the stop loss, extending folks deployments when their contracts are over. And in some 

statements, again, I don’t represent Secretary Gates of course, but 

in some statements he made in April, Secretary Gates expressed 

concern about a desire to end stop loss and a desire to get out of 

dwell time, and for that reason he also talked about temporarily increasing the Army’s in-strength by another 22,000, I believe, 

22,000 people in Fiscal Years 2010, 2011, and 2012. 

So the Secretary’s statement was that in Fiscal 2010 that money 

was supposed to be taken out, he wasn’t asking for any additional 

funding to support those folks, and it remains to be seen how that 

would be funded in 2011 and 2012. 

So an issue that will then come before the Congress is in order 

to keep those 22,000 troops in the Army for the purposes of fully 

populating units so that the deployment soldiers get dwell time and 

to avoid stop loss. The trade off we face is are we willing to fund 

those 22,000 troops? I think that is one of the biggest issues. 

Mr. ETHERIDGE. Yeah. Mr. Daggett? 

Mr. DAGGETT. Yeah, let me echo that on personnel. The big question on personnel is just how the pace of operations is affecting individuals and their families. And a lot of what DoD has been doing 

has been aimed at ameliorating that problem both in the short 

term and the long term. The increases in the size of the Army and 

the Marine Corps in particular were designed to fill out deployable 

units so that it would be less disruptive on other units when you 

deploy one unit forward. They have actually found it is more difficult even than they thought. 
53 

So the most recent decision in April was to reduce the number 

of combat brigades in the active duty force from 48 down to 45 so 

they could all be fully manned and/or be ready for deployment. 

That is a difficult problem. 

Mr. ETHERIDGE. But in that whole process we are actually using 

our guard and reservists at a much more rapid rate and they are 

becoming part of that same force. 

Mr. DAGGETT. Yeah. Well they are now becoming part of the rotation base, yes. 

Mr. ETHERIDGE. Yeah. 

Mr. DAGGETT. And to the extent that we maintain the current 

level of deployments abroad in Iraq and Afghanistan it is going to 

continue to be a strain on the reserves just because the active duty 

units can’t do it all. 

So I think you are right, that strain can only be ameliorated in 

the long term by reducing the forward deployment, but reducing 

deployments to Iraq and Afghanistan. We are in process in that in 

Iraq. It will be offset to some degree by increases presumably in 

Afghanistan if there is a decision to go in that direction, but I don’t 

think anybody foresees deployments in Afghanistan equaling the 

level in Iraq. So the situation should get somewhat better over 

time, but I mean, that is the real pressing issue for DoD. 

What we have seen lately by the way is that you know DoD is 

always tracking very closely retention rates and accession rates of 

new personnel, and they have both been doing pretty well lately. 

Now part of that is the economy. When the economy is bad being 

in the military and signing up looks better. But I think part of it 

is also that people are looking—military families on retention rates 

in particular—military families are looking ahead to things easing 

up a bit. If it doesn’t, if it gets worse then we could face a real 

crunch, yeah. And we look very closely at that too. It has been a 

real matter concern since 2005. 

Let me say that the Army by the way when we looked at the retention recruitment rates in 2005 we were all very concerned that 

the Army was going to have a bad problem with it, and they took 

a number of steps to try to handle it, including you know, accelerating some changes in the force structure, including dramatic increases in re-enlistment bonuses and things of that sort, and to 

some degree reducing requirements for new personnel. And there 

was a price to pay, and that the quality of personnel declined to 

some extent, but they ended up meeting their target. 

So the Army did its thing, and you know, by every account deserves immense credit for the way in which they were able to do 

it. But can they manage that over the long term? It is still a pressing concern, yeah. 

You commented on base realignment and closure as well. Let me 

say one thing about that. You know base realignment and closure 

funding are provided out of a separate account in the military construction budget. So presumably that is a given amount, and it is 

supposed to be provided on a regular basis to carry on the activities 

that are identified with base closure. 

This last round of base closures had a very high investment cost 

associated with it, and part of it was it was done not just for reasons of efficiency, but also for security reasons and things of that 
54 

sort. So the cost associated with this round make me question 

whether in the long run the savings will offset what the investments had been. 

In the past the evidence is pretty clear that in the very long run 

at least, we don’t have precise measures, but the ultimate operating costs have exceeded the initial investment costs, so we have 

gained something by base closure rounds. This last round was relatively expensive though. I am not sure what the outcome of that 

will be. 

Mr. ETHERIDGE. And we are not through yet. Thank you, Mr. 

Chairman. 

Chairman SPRATT. Mr. Edwards. 

Mr. EDWARDS. Thank you, Mr. Chairman. 

Let me first make an observation as we are talking about defense 

and budgeting. A number of my Republican colleagues in the 

House back in 2001 and through the Bush Administration were the 

architects, some on this Committee, the architects have frankly 

taken the largest surplus in American history and turned it into 

the largest deficit in American history. 

Then with the new Democratic President I have heard a lot of 

focus on reducing the deficit, and yet some of these same Republican colleagues have criticized the democratic health care proposals because they are too expensive and also because they reduced spending for Medicare. 

Mr. Ryan said earlier that it is important to put things in perspective in talking about the cost to the Iraq and Afghanistan war. 

It is a fair comment to make. 

I would just add to that perspective that that $155 billion a year, 

as I understand it, is almost twice the annual cost of the health 

care plan passed out of Senate Committee yesterday intending to 

provide health care for the vast majority of Americans, so I would 

put that perspective to it. 

I think what surprises me is not that a number of our Republicans colleagues would support General McCrystal’s increase in 

troops and Afghanistan, ultimately I believe that defense decisions 

must be made based on the importance of the mission, and I agree 

with Mr. Ryan that our national defense is our number one priority. 

What surprises me though is that the Republicans have raised 

questions about million dollar expenditures here and there, seemed 

to have not asked too many questions. I certainly haven’t read 

about it, about the cost of General McCrystal’s proposal for increasing the number of troops in Afghanistan by 40,000. That seems 

completely inconsistent with their new found focus on trying to reduce the deficit that in my opinion many of them helped create 

with their irresponsible budgets of tax cuts during a time of war 

and defense build up. 

I would like to go to you, Dr. Goldberg, on this issue and follow 

up on some of the questions that Mr. Doggett was asking of Mr. 

Daggett. 

Has the CBO analyzed what the additional costs would be in defense spending of following General McCrystal’s proposals of adding 40,000 troops to Afghanistan? 

Mr. GOLDBERG. We have not been requested to do that analysis. 
55 

Mr. EDWARDS. You have not been requested. Now, Mr. Chairman, I hope perhaps as Budget Committee Chairman and perhaps 

in conjunction with Mr. Ryan that that would be a fact basis that 

I think would be very, very important for the Congress to take a 

look at. 

So have you personally analyzed in any way some of the other 

estimates that for every soldier or service men or woman we have 

in Afghanistan that it costs about a million dollars? 

Mr. GOLDBERG. What I would have to say is that since most of 

our focus has been on Iraq, since Iraq has been the bigger operation until now, we have not distinguished the cost per servicemember between the two theaters. If we were to receive a request 

to look specifically at Afghanistan we would attempt to make these 

distinctions and find it. 

Mr. EDWARDS. Okay. Okay. Then Mr. Daggett, I may go to you, 

and I hope we will put in a request to CBO to analyze it. While 

it is not necessarily the final determining factor on whether we add 

troops in Afghanistan, for anyone who is serious about the deficit 

certainly it is a factor we ought to consider. 

Mr. Daggett, you said that if we doubled the number of troops 

in Afghanistan that would come to about $7.2 billion a month; is 

that correct? 

Mr. DAGGETT. That is a good back of the envelope calculation, 

nothing more than that. 

Mr. EDWARDS. So that is about $86.4 billion a year according to 

my envelope math here. To put that in perspective, I believe that 

is more than the proposed cost of the Senate health care plan that 

passed out of the Senate Finance Committee yesterday. 

Let me ask you this. If you estimate $1 million per service man 

or woman in Afghanistan, I think you referenced another person’s 

study to that, and if you had 68,000 troops today and added another 40,000 that would be say approximately 108,000 troops. If 

you used $1 million per service man or woman that would actually 

be $108 billion a year. 

Mr. DAGGETT. Right. 

Mr. EDWARDS. Could you explain the difference between the 86 

billion the 108 billion dollars? 

Mr. DAGGETT. Fiscal Year 2009 versus Fiscal Year 2010. The 

burn rate of 3.6 billion per month is the Fiscal Year 2009 average 

through July. We have just passed the Fiscal Year 2010 budget 

which includes about—or we are just in the process of passing it— 

includes about $130 billion for contingency operations, of which 

about $68 billion is for Iraq in 2010. That is for a troop level of 

about 68,000. So $1 million per troop. 

So if you use that as the basis for saying if you add 40,000 troops 

you would be up to 108,000. If the cost per troop remains the same 

I am not sure it is safe to assume that. You have got a lot of the 

infrastructure already in place. It could go over that. 

Mr. EDWARDS. But it could be over $1 billion or trillion dollars 

over a decade. Thank you. 

Mr. DAGGETT. Sure, I would say that is the upper limit. 

Mr. EDWARDS. Okay, thank you, Mr. Daggett. Thank you, Mr. 

Chairman. 

Chairman SPRATT. Mr. Scott. 
56 

Mr. SCOTT. Thank you, Mr. Daggett, I would just follow up on 

that. You are using the million dollars per troop and that is what 

you call the burn rate. What portion of the cost of the troop is not 

spent this year? That is to say you have got disability, you have 

got mental health, you have got equipment to be replaced and everything else, what portion of the total kind of life cycle costs would 

be added to the million a year? 

Mr. DAGGETT. Your point is a good one. The costs that we talk 

about are the incremental costs of the operation. Incremental now 

being broadly defined, but it is still the cost of deploying a troop 

to Afghanistan over and above the cost of keeping the same service 

member in Fort Hood or whatever. And that is a limited part of 

the total cost of the service member over the total whole, you know, 

lifetime of a service member. So there are follow on costs for Veterans Administration benefits and so on. 

Some of those are incorporated. Because a service member pay 

and benefits include contributions to the military retirement fund 

for retirement costs and for these days concurrent receipt of military retired pay and VA disability benefits, right? So some of those 

long-term costs are included in the current pay of personnel. We 

do it on an accrual basis. We pay now. The actuarially determined 

future costs of current personnel, right? But to some extent they 

are not captured. The Veterans Administration budget, which provides medical care for veterans after their service is completed, is 

not covered by that, and that will be an additional expense. I don’t 

have good numbers on that. 

Mr. SCOTT. I mean is it half, one-tenth? I mean, any idea? 

Mr. DAGGETT. Well the VA budget this year is about $80 billion 

compared to a defense budget of what, 530 billion, so that is what 

about not 20 percent, 16 percent, something like that, 16 percent 

of the budget. That may be a fair calculation. 

Mr. SCOTT. And what about equipment reconstitution? 

Mr. DAGGETT. Yeah. 

Mr. SCOTT. They are wearing out equipment? 

Mr. DAGGETT. Yeah. The figure $68 billion is the estimated cost 

in Fiscal Year 2010. That includes funding for equipment, including for reset and other purposes. That does include an investment 

piece of it, not just the operating costs. 

Mr. SCOTT. In terms of cost per troop the gentleman from Texas, 

Mr. Doggett, mentioned the cost for an Afghanistan troop being essentially de minimis compared to an American troop. 

Mr. DAGGETT. Yeah. 

Mr. SCOTT. And talked about other support staff. What is the 

economic impact on contracting out rather than using troops? I 

know when we used contracting out when I was in the National 

Guard you thought you were talking about KP so you didn’t have 

to peel potatoes. 

Mr. DAGGETT. Right. 

Mr. SCOTT. But they are actually doing what are essentially military functions now. What is the budget impact of contracting out, 

particularly when you are contracting out to sole source providers 

without much limitation on what they are charging? 
57 

Mr. DAGGETT. Yeah. There are as many contractors in Afghanistan working for the United States now as there are service members or more. It is part of the cost. 

When we talk of the cost of $1 million per troop that incorporates 

the cost of support activities, including contractors who do food 

services and transportation and to some degree security and so on. 

Although many of them receive lower pay than military personnel 

members. 

Mr. SCOTT. And some receive higher pay. 

Mr. DAGGETT. A few do for security. When it is a U.S. personnel 

for security activities and things of that sort, yes, but actually the 

bulk of most contractors in Afghanistan are third-country nationals, are neither U.S. nor Afghans, they are from places like the 

Philippines or the Persian Gulf countries and so on. 

You know, the net effect of contracting out service activities is a 

matter of some debate, because it is been a very high cost. The 

premise is it is cheaper to contract out on a temporary basis even 

if you pay a premium for it than it is to maintain in the force the 

permanent structure that would be necessary to carry out those operations. 

Mr. SCOTT. Which goes back to the first question I asked. 

Mr. DAGGETT. Yeah. Which is how much more are the costs? 

Yeah. 

Mr. SCOTT. When you said asymmetrical challenge, were you 

talking about the use of 100,000 troops in Afghanistan to chase 

after 100 Al Qaeda members? 

Mr. DAGGETT. Irregular warfare is one means of asymmetric conflict, yes. You know, what Hezbollah does in Israel is an example 

of asymmetric warfare. They are using less technologically sophisticated means than the Israelis have, but to pose a real military 

challenge. So I think it is incorporated, yeah. And any future foe, 

Iran, would use all of the means at their disposal in a conflict with 

the United States, including those kinds of irregular activities; use 

of terrorist attacks, yes. 

Chairman SPRATT. Are there any other questions? Mr. Yarmuth. 

Mr. YARMUTH. Thank you, Mr. Chairman. I think we are obsessed with this line of questioning, but I want to pursue it just 

a little bit further. 

Apparently looking at the data, the actual O&M for an individual, an American troop is something like a little over $100,000 

a year; is that correct? 

Mr. DAGGETT. A pay plus directly related O&M. 

Mr. YARMUTH. Benefits. 

Mr. DAGGETT. It is actually more like 120or 130,000. 

Mr. YARMUTH. Okay, 120-, 130-. And then we are talking about 

$1 million cost per year in the field. 

Mr. DAGGETT. Right. 

Mr. YARMUTH. We have kind of talked around it. What are the 

components that take 120,000 person to a million dollar person? 

Mr. DAGGETT. If you want to take a cut at that I would be happy 

to have you do it, but it is hard to get there admittedly. 

My colleague, Amy Belasco, in particular has taken a very close 

look at that, and it incorporates acquisition, it incorporates investment accounts. We are buying very large numbers of MRAPs, in-
58 

vesting a lot in IED defense and things of that sort, large acquisition of new systems for UAVs for intelligence and reconnaissance 

activities and things of that sort; all of that is included. 

The operating costs include though, you know, the cost of deploying forces in a war zone that is very difficult to get to, so it has 

very high transportation costs, and of hiring contractors who are 

expensive as well to carry out support activities. 

That said, you know, if you compare costs in Iraq and Afghanistan recently to costs of earlier operations in Bosnia and Kosovo or 

Haiti or Somalia before there, it is just vastly more expensive now 

than it has been in the past. 

Mr. YARMUTH. Uh-huh. 

Mr. DAGGETT. It has jumped up not quite expediently, but almost. And I think that is to be explained. That is a matter of ongoing discussion, yeah. 

Mr. YARMUTH. So is there ever a point in which there is an economy of scale? You know, if there were a million troops would it still 

be $1 million a person? 

Mr. DAGGETT. No, there has to be an economy of scale, and I 

think if there is an increase of 40,000 troops in Afghanistan that 

would begin to show up. It costs a certain amount just to have the 

infrastructure—support infrastructure established in the region, 

build the bases, have the transport facilities elsewhere. It is not 

just in Afghanistan, it is elsewhere, and we have made a big investment already in doing that. 

Mr. YARMUTH. Dr. Goldberg, would you want to comment on 

that? 

Mr. GOLDBERG. I could just amplify, I don’t fundamentally disagree with anything that Steve has said. But when you think about 

the O&M costs per soldier in the theater, which I think was the 

thrust of your question, there is transportation to and from the theater, there is all the fuel, there is—you know we drive tanks—well 

we don’t have tanks there, but you know we drive armored vehicles 

many more times the mileage in theater than we would in home 

station. And not only that, but the conditions are much worse; the 

sand. And we fly helicopters a lot more than we would during 

peacetime. There is the cost for providing fuel, water, food, a lot of 

which is shipped in. The transportation is contractors who do that 

kind of work. And then there is a lot of costs when the equipment 

gets sent back home and it has been beaten up from all that use 

and it has to go to the depots and get refurbished. That is also an 

O&M funded activity. It is really a lot of things. 

Mr. YARMUTH. So it really doesn’t matter where that troop comes 

from, if it is a new enlistee, new trainee going to Afghanistan, Iraq, 

or shifted from another theater, it is still going to be the same essential cost. 

Mr. GOLDBERG. The cost of the soldier is actually the smaller 

part of it. 

Mr. YARMUTH. Uh-huh. 

Mr. GOLDBERG. And in fact the basis salaries are already in the 

regular budget. The only part that you would see, formally is supplemental and what is called the OCO, the Overseas Contingency 

Operation, explicit budget would be the special pays for serving in 

the combat theater and the activation costs for reservists would 
59 

otherwise be home. The base pay is already provided. So all you 

are seeing in the contingency costs are the extra pays, but you are 

seeing this huge chunk of operations and maintenance costs for 

these types of things we have been describing, including sending 

equipment back home for up to a two-year lag process to repair it 

or replenish it. 

Mr. YARMUTH. I am going to try to ask a quick question with the 

40 seconds, you may not be able to get at this. 

But with the projected increase we have experienced already, the 

increase in health care cost for military back here and so forth and 

the projected increase, the $64 billion you said in another five 

years, if we adopt health care reform, have you taken a look at the 

health care reform proposals to see if in fact they are successful in 

bending the health care cost curve that it could have a beneficial 

impact, a positive impact on military health care expenditures? 

Mr. GOLDBERG. It could, but it is not automatic. If the Chairman 

would let go over a minute or two I would like to answer. 

You could look at the supply side, the providers of health care 

and their incentives and you can look at the demand side, how 

much care people demand. One of the big initiatives on the supply 

side is what if you had health information technology, electronic 

medical records? DoD already has health information technologies. 

It is probably not as good as what the VA has, but the problem is 

that for that to really work and save costs it has to be interoperable nationwide. 

So you have to realize that a lot of service members get part of 

their care through TRICARE, a retired service member will get 

part of the care through TRICARE and part through the private 

plan provided by his or her civilian provider. Can they exchange 

data electronically? If that can happen that will help bend the 

curve. If not it is much harder. And this is a problem that is endemic to big health care reform for the whole country as well, not 

just having electronic records, but making it interoperable so one 

provider can view the other. 

On the demand side the issue there is giving us as consumers 

incentives to economize on our health care. Not to go to the doctor 

every time for a minor problem that maybe would get better on its 

own. It has been difficult to DoD to manage. And one reason the 

TRICARE costs have grown so rapidly, as Steve pointed out, is that 

many of the fees that the military beneficiaries retires pay have 

been frozen. For three years in a row DoD requested fee increases 

that the Congress shot down. It is very hard to get folks to control 

utilization when they don’t face co-payments. 

Chairman SPRATT. To our two witnesses, Mr. Daggett, Mr. Goldberg, thank you very much in deed for excellent presentations and 

for your painstaking replies to everyone’s questions. We very much 

appreciate it and we will be calling upon you again in the forthcoming future I am sure as these numbers develop. 

Mr. Ryan, do you have anything? 

Thank you again, and this adjourns the hearing. 

[Questions submitted by Mr. Aderholt and their responses follow:] 
60 

RESPONSES TO CONGRESSMAN ADERHOLT’S QUESTIONS

FOR THE RECORD FROM MR. GOLDBERG

QUESTION

1. Why, in your view, do the costs of weapon systems nearly always outpace the 

estimates for them? What are the major factors that contribute to that pattern? 

RESPONSE

One factor in cost growth is that the system’s requirements are not yet locked 

down at the time the initial procurement estimate is made. So-called ‘‘requirements 

creep’’ can lead to costs that increase faster than the program office’s projections. 

In turn, additional requirements may lead to increases in volume or weight that are 

difficult to accommodate in a platform’s initial design. The classic example of weight 

growth and its consequences occurs in fighter aircraft, necessitating either: (a) a 

degradation in performance characteristics such as range or maximum speed, (b) 

larger (more expensive) engines to compensate for the higher weight, or (c) a systems engineering effort to moderate the increase in weight. 

QUESTIONS

2. In your testimony, you discuss the costs of the Administration’s new plan for 

ground-based missile defense systems in Eastern Europe? How much does this new 

plan cost compared to the plan proposed by the Bush Administration? 

3. We have to either build new ships or reassign ships from current, important 

missions in order for them to be stationed as missile defense ships in this region. 

What would be the cost of those ships and the personnel who man them? 

RESPONSES

Combined response to questions 2 and 3: 

In April 2009, Secretary of Defense Gates announced plans to freeze the current 

number of ground-based interceptors in Alaska as part of the ground-based midcourse missile-defense (GMD) system that is intended to defend the United States 

against limited ballistic missile attacks from North Korea or Iran. The plan would 

continue funding research and development to improve the nation’s ability to defend 

against long-range ballistic missiles. Secretary Gates also announced plans to upgrade six U.S. Navy Aegis warships to perform the ballistic missile defense mission 

at a total cost of $200 million. Moreover, on September 17, 2009, President Obama 

announced his cancellation of the previous Administration’s plans to field a highresolution tracking radar in the Czech Republic and to deploy 10 ground-based interceptor missiles in permanent silos in Poland. In its place, the President proposed 

a four-phase plan. Phase One would rely on Block IA of the SM-3 missile, which 

would be deployed on existing Aegis warships; Phase One would also base an AN/ 

TPY-2 radar in Europe to provide early detection and tracking of ballistic missiles 

if launched toward the United States. Phase Two would entail both sea- and landbased deployment of a more-capable Block IB version of the SM-3 missile. Phases 

Three and Four would involve Block IIA and Block IIB missiles that are still under 

development. 

The budget implications of the new plan for missile defense in Europe are the net 

sum of the costs avoided by not fielding the original system and the costs incurred 

by fielding the SM-3 based defenses instead. Note that cost estimates are preliminary because the Administration has not yet fully formulated and announced its 

new plan. 

CBO estimates that about $1.5 billion in costs would be avoided by not fielding 

two-stage interceptors in Poland and by not fielding the European Midcourse Radar 

in the Czech Republic. 

The costs associated with fielding SM-3 based defenses in Europe would depend 

on how the plan was implemented. The biggest variable in the cost is whether or 

not new ships would be purchased to operate at fixed stations in Europe. Maintaining continuous coverage in three locations would require a total of nine ships (for 

each ship deployed, another would be undergoing maintenance and a third would 

be in use for training). If the Navy were to procure nine Arleigh Burke-class destroyers for the mission, the total cost would be about $19 billion. However, it could 

be possible to perform that mission with less costly ships. For example, littoral combat ships cost about $560 million each; a specially developed Aegis module consisting of a version of the SPY-1 radar and vertical launch system cells would add 

about $90 million per ship, CBO estimates. The total cost for nine such ships would 

be about $6 billion. 
61 

Rather than building new ships dedicated to the missile defense mission, and consistent with the Secretary of Defense’s announcement in April 2009, the Navy could 

upgrade existing warships (or proposed warships that would have been built to perform other missions) to provide missile defense. The fiscal year 2010 request for 

$200 million to convert six warships may be viewed as a first installment in pursuing the latter approach; the total cost for nine ships would be about $300 million. 

In that case, however, the Navy would forgo the possibility of deploying those ships 

to other locations in the world where they could perform other missions. 

QUESTIONS FOR BOTH WITNESSES

1. How much is the delayed procurement process of the new Air Force Tanker 

costing the taxpayer? How much is the extended procurement process costing? How 

much more will U.S. taxpayers pay to maintain the existing tanker fleet? 

RESPONSE

The delays in the tanker replacement program have resulted in lower near-term 

costs for the Air Force. The Air Force has already retired nearly all of its KC-135E 

aircraft, the most expensive-to-operate version of the KC-135 remaining in the force. 

Based on data from 2008, CBO estimates the full-year cost in 2009 to operate the 

KC-135Rs that remain in the tanker fleet at over $3 billion. At a production rate 

of 15 KC-X aircraft per year—as was indicated in the FY2009 budget request, prior 

to GAO upholding Boeing’s protest of the contract award to the Northrop Grumman 

team—procurement of new tankers alone would cost about $3 billion per year. That 

cost would be added to the operations costs for those new aircraft as well as for the 

KC-135Rs that are yet to be replaced. Even without delays in the replacement tanker program, the KC-135Rs would continue to be the most numerous tanker for many 

years to come, and the Air Force would continue to incur the cost to operate those 

that remain. 

The extent to which delays in the tanker replacement program will result in different total costs over the entire program is uncertain. It will depend on several factors including how costly the new tanker turns out to be, how many tankers will 

be needed to support an aviation force whose size and composition may change in 

the future, how busy the tanker fleet will be supporting operations, how the cost 

to operate the KC-135Rs will change over time as those aircraft continue to age, and 

how the cost to operate the new tankers will compare to the cost to operate the KC135Rs. 

QUESTIONS

2. You cited the underestimates, miscalculations and delays as reasons for the increased cost in the procurement process? What changes are being made in the procurement of new military equipment to ensure such a delay does not happen again? 

What had DoD learned from the USAF Tanker procurement debacle? 

3. What cost-saving measures, if any, are currently being utilized by DoD to 

counter these ballooning costs? 

COMBINED RESPONSE TO QUESTIONS 2 AND 3

Public Law 111-23, the Weapon Systems Acquisition Reform Act of 2009, enacted 

some changes that may help contain cost growth and ensure that initial cost estimates are reasonable and planned schedules are feasible. One important change 

was the redesignation of the Director, Program Analysis and Evaluation (PA&E) as 

the Director of Cost Assessment and Program Evaluation (CAPE). The law contains 

provisions to strengthen and clarify the roles and missions of that office. In addition, 

by imposing a requirement for CAPE to report annually to the Congressional defense committees, the law provides a mechanism for closer Congressional oversight 

of acquisition programs. However, it is too soon to tell how effective the law will 

turn out to be. The new tanker competition may provide one of the first tests of 

these changes. Although current plans call for the Air Force to manage the program, 

active oversight by offices such as CAPE should be expected. 

QUESTION

4. Currently, one bidder for the tanker has the pricing data from the other bidder 

(from the first round of bidding), but the other bidder does not have the pricing data 

from the first company. Do you know of any other major procurements in the past 

twenty years in which this was the case? 
62 

RESPONSE

CBO is not aware of any other major procurement in the past twenty years in 

which one bidder had the pricing data for the other bidder, as is currently the case 

in the tanker program. 

QUESTION

5. While the base budget does not directly fund the wars in Iraq and Afghanistan, 

how will the President’s request of a 2.5 percent increase in defense spending indirectly affect our troops in those two countries as compared to the 12 percent increase suggested increase from the Joint Chiefs? 

RESPONSE

There would likely be little difference to our troops deployed to Iraq and Afghanistan whether the increase in regular defense spending were 2.5 percent or 12 percent. The costs of overseas contingency operations are funded separately from the 

regular defense budget. One possible indirect effect of higher regular defense spending would be if the military services (principally the Army) increased end strength 

so that soldiers would have more ‘‘dwell time’’ in the U.S. to recover between deployments. However, Secretary of Defense Gates has already announced a temporary increase in active Army end strength from 547,000 to 569,000 through fiscal year 

2012, to be funded (at least through 2010) in the regular defense budget without 

requesting any additional budget authority. Additional funding is apparently not 

necessary to increase dwell time. 

RESPONSES TO CONGRESSMAN ADERHOLT’S QUESTIONS

FOR THE RECORD FROM MR. DAGGETT

QUESTION

You cite the ‘‘inaccurate and apparently worsening estimates of weapons costs’’ 

and ‘‘schedule delays’’ as a reason for the increased cost of defense. Can you please 

give a few examples of such poor estimates and delays? What is the Pentagon doing 

to correct these problems? 

RESPONSE

For the past several years, the Government Accountability Office has prepared 

annual assessments of the status of Defense Department Major Defense Acquisition 

Programs (MDAPs), based on DOD Selected Acquisition Reports.1 The following 

table summarizes GAO’s findings in its two most recent reports: 

GAO ANALYSIS OF DOD MAJOR DEFENSE ACQUISITION PROGRAM PORTFOLIOS 

[Fiscal Year 2009 Dollars] 

Portfolio status Fiscal year 2000 

portfolio* 

Fiscal year 2003 

portfolio 

Fiscal year 2007 

portfolio 

Fiscal year 2008 

portfolio 

Number of programs ...................................... 75 77 95 96 

Total planned commitments .......................... $807 billion* $1.2 trillion $1.6 trillion $1.6 trillion 

Commitments outstanding ............................ $388 billion* $724 billion $875 billion $786 billion 

Change to total research and development 

costs from first estimate .......................... 27 percent 37 percent 40 percent 42 percent 

Change in total acquisition cost from first 

estimate ..................................................... 6 percent 19 percent 26 percent 25 percent 

Estimated total acquisition cost growth ....... $43 billion* $183 billion $301 billion $296 billion 

Share of programs with 25 percent or more 

increase in program acquisition unit cost 37 percent 41 percent 44 percent 42 percent 

Average delay in delivering initial capabilities ............................................................. 16 months 18 months 21 months 22 months 

Source: Data for FY2003, FY2007 and FY2008 portfolios from Government Accountability Office, Defense Acquisitions: Assessment of Selected Weapon Programs, GAO Report GAO-09-326SP, March 30, 2009. Data for FY2000 portfolio from Government Accountability Office, Defense Acquisitions: Assessment of Selected Weapon Programs, GAO Report GAO-08-467SP, March 31, 2008. 

*Note: GAO provided figures for the FY2003, FY2007, and FY2008 portfolios in FY2009 prices. CRS updated GAO’s figures for the FY2000 portfolio from FY2008 constant dollars to FY2009 constant dollars using Department of Defense inflation indices. 

Some key conclusions are that: 
63 

• The cost of defense programs in DOD’s FY2008 long-term acquisition plan grew 

on average by 25 percent over initial estimates, whereas the cost of programs in the 

FY2000 plan had grown by an average of 6 percent; 

• 42 percent of programs in the FY2008 plan grew by more than 25 percent over 

initial estimates, and 37 percent of programs in the FY2000 plan had grown by 

more than 25 percent; 

• The average delay, compared to the originally planned schedule, in achieving 

initial capabilities was 22 months for programs in the FY2008 acquisition plan and 

16 months for programs in the FY2000 plan; 

• The cumulative increase in the total cost of programs in the FY2008 plan 

amounted to $296 billion, in constant FY2009 prices, while the cumulative increase 

in the FY2000 plan amounted to $43 billion. 

This is the basis for concluding that inaccurate and apparently worsening weapons cost estimates are a significant independent factor driving up the cost of defense. 

Examples of substantial cost growth and schedule delays include several of the 

most expensive and high profile programs in each of the military services. As discussed in GAO’s March 2009 report, these include: 

• F-35 Joint Strike Fighter: The F-35 is currently projected to be the largest U.S. 

defense acquisition program ever. The total acquisition cost of the program has 

grown from an initial estimate, in October 2001, of $206.4 billion in constant 

FY2009 prices, to an estimate in September 2008 of $244.8 billion, an increase of 

18.6 percent. In the mean time, the quantity to be procured declined from 2,866 aircraft to 2,456. As a result, the program unit acquisition cost climbed from an initial 

estimate of $72.0 million per aircraft to $99.7 million, again in FY2009 prices, an 

increase of 38.4 percent. As to schedule delays, as of December 2007, the projected 

Initial Operational Capability of the Marine Corps version of the program had 

slipped from April 2010 to March 2012, of the Air Force version from June 2011 

to March 2013, and of the Navy version from April 2012 to March 2015. Cost growth 

and schedule delays appear to be continuing. In April 2009, Secretary Gates announced a decision to accelerate production of F-35s. Just a few months later, however, that plan appears to have slipped.2 In the mean time, independent estimates 

have projected additional increases in development costs of $15 billion or more, and 

the Defense Department is reviewing the status of the program.3 DOD remains committed to the aircraft, and with F-22 procurement limited, the F-35 is the only fifth 

generation fighter that the United States plans to procure in large numbers. The 

growth in program costs, however, illustrates the trends that have made even a very 

substantial defense budget seem tight. 

• Littoral Combat Ship: The LCS is a relatively small surface combatant, with 

comparatively high speed and maneuverability, designed to operate close to shore, 

and intended to be outfitted with specialized modules for a range of missions. Shortly after the inception of the program the Navy revised its requirements, and the 

projected cost has climbed substantially. The initial cost estimate, in May 2004, was 

$328 million per ship in FY2009 prices (though the estimate covered only the first 

4 vessels). The latest official updated cost estimate, as of July 2008, is $560 million 

per ship (based on 7 vessels), an increase of 70 percent. Specialists at the Center 

for Naval Analyses, the Congressional Budget Office, CRS, and elsewhere have commented that the initial cost estimates were far too optimistic—based on comparisons 

with costs of similar-sized foreign ships—even before the Navy added to requirements.4

• Army Future Combat System: The ground combat vehicle portion of the Army’s 

FCS program was terminated in April 2009, though the Army was directed to pursue an alternative armored ground vehicle program that has yet to be fully defined. 

The overall Army FCS program encompassed 14 major systems and a number of 

support programs integrated into an overall system-of-systems design. The program 

intended to equip fifteen Army brigades with the full package of FCS components. 

The initial estimate, as of May 2003, was for a total program acquisition cost of 

$89.8 billion. As of December 2007, the estimated cost had grown to $129.7 billion, 

an increase of 45%. The planned deployment of the system had been stretched from 

an initial estimate of 8 years to more than 12 years. 

Why the Defense Department underestimates program costs, and what to do 

about it, has been a matter of more or less constant discussion for the past fifty 

years or more. The problem can be attributed to many factors. The most significant, 

by most accounts, is simply that there are strong incentives for program advocates 

in each of the military services—and in defense industry—to gain support for new 

programs by overstating performance and by understating cost, schedule, and technological risks.5
64 

Over the years, DOD leaders have implemented changes in acquisition procedures 

and created new organizational structures in an effort to control the problem by 

strengthening centralized oversight. Congress has occasionally enacted measures to 

reinforce such efforts. • In 1962, Secretary of Defense McNamara established the Systems Analysis Office, which has since evolved into the Office of Program Analysis and Evaluation, 

with a mandate, in part, to oversee estimates of acquisition costs. • In 1972, Secretary of Defense Laird established a separate organization, the 

Cost Analysis Improvement Group (CAIG), specifically assigned to oversee cost estimation procedures and to review service cost estimates. • In 1983, Congress enacted measures to require independent cost estimates at 

key acquisition milestones. • And in 1992, the Defense Department expanded the CAIG, gave it the task of 

preparing independent cost estimates, and clarified its other responsibilities.6

Without these procedures, DOD’s performance in accurately estimating costs 

might have been worse than it has been. Still, the process reforms and organizational changes that DOD has implemented do not appear to have corrected the problem and, in recent years, as GAO’s reports have shown, cost estimates and schedule 

projections appear to have gotten worse, not better. 

Most recently, the Defense Department and the Congress have undertaken yet additional measures that are intended to improve the cost and schedule estimation 

process. In a few cases, the Defense Department has established independent 

teams—called ‘‘Joint Estimating Teams’’—to review cost and schedule projections for 

specific programs, to provide independent cost estimates, and to propose measures 

to limit cost growth. JETs have been established, for example, to review F-22 and 

F-35 development, and, in both cases, the teams identified likely sources of additional cost growth. In addition, toward the end of the last Administration, DOD 

made a number of changes in defense acquisition regulations intended to correct 

some of the problems that appear to have contributed to cost growth.7 Among other 

things, the new regulations require reviews of engineering development plans early 

in the acquisition process and establish Configuration Steering Boards to review 

proposed technical changes in ongoing development projects with a view toward restricting unnecessary or overly expensive additions to requirements. In its March 

2009 report on major acquisition programs, GAO endorsed these changes, saying, 

In December 2008, DOD revised its policy for major defense acquisition programs 

to place more emphasis on acquiring knowledge about requirements, technology, 

and design before programs start and maintaining discipline once they begin. The 

policy recommends holding early systems engineering reviews; includes a requirement for early prototyping; and establishes review boards to monitor requirements 

changes—all positive steps. 

None of these changes appear directly to address the key underlying problem, 

which is the strong incentives for the military services to promote unrealistic cost 

estimates in order to gain support for new programs. Congress, however, focused on 

that issue in the Weapon System Acquisition Reform Act of 2009, P.L. 111-23, that 

was enacted in May 2009. Section 101 of the statute establishes a Director of Cost 

Assessment and Program Evaluation, to be appointed by the President and approved by the Senate, reporting directly and ‘‘without obtaining the approval or concurrence of any other official within the Department of Defense’’ to the Secretary 

of Defense. The Director’s responsibilities include overseeing ‘‘cost evaluation and 

cost analysis for acquisition programs.’’ The intent, as the conference report explained, is ‘‘to ensure that cost estimates for major defense acquisition programs 

* * * are fair, reliable, and unbiased.’’ 

The establishment of a new directorate and the December 2008 changes in acquisition procedures have yet to be fully tested, but clearly reflect an effort, both in 

DOD and in Congress, to improve cost and schedule performance in developing 

major weapons programs. 

QUESTION

You said the Joint Chiefs envision 4 percent of GDP for the DoD base budget. 

How does this compare with other countries? Given the fact that many countries, 

including China, spend a larger percentage of their GDP on Defense, is it reasonable 

for the U.S. to spend only 4 percent of GDP on the DoD base budget? 

RESPONSE

Though he has not made similar statements recently, Admiral Mullen, the Chairman of the Joint Chiefs, has, as recently as January of 2009, argued that the defense budget should be maintained at about 4 percent of GDP, saying that such a 
65 

level is economically sustainable, since the defense budget has been much larger, 

as a share of GDP, in the past. None of Admiral Mullen’s statements on the matter 

have been entirely clear about the extent to which the 4 percent level might include 

some amount for ongoing costs of military operations in Afghanistan, Iraq, and elsewhere in the future, or whether the 4 percent level should apply only to the base 

defense budget. If applied only to the base defense budget, a 4 percent of GDP level 

of spending would imply quite substantial increases compared either to the outgoing 

Administration’s long-term defense plan or to tentative plans in the current Administration. 

In any case, Admiral Mullen’s purpose in repeating such remarks did not appear 

to be to appeal for a specific level of funding, so much as to argue that the nation 

can afford enough of an investment in defense to meet current military requirements without imposing a significant strain on the economy. On that point, Admiral 

Mullen’s comments appear unobjectionable. Defense spending as a share of GDP 

has, as the Chairman pointed out, declined steadily over time as a share of the economy, though not because defense spending has fallen, but because the economy has 

grown. As a result, there is no good reason to think that somewhat higher defense 

spending would, in itself, be economically damaging. 

The economic effects of higher defense spending, however, depend on other factors—in particular, on how an increase would be financed. Many economists warn 

that currently projected long-term federal budget deficits cannot be sustained indefinitely without, at some point, driving up the cost of borrowing, particularly from 

overseas sources. If higher defense spending is financed, therefore, without either 

greater revenues or offsetting cuts in other federal expenditures, then defense increases could contribute, if only marginally, to economically unhealthy and 

unsustainable trends. 

As to how U.S. defense spending, in absolute terms and as a share of GDP, compares to spending by foreign nations, the following table, drawn from data compiled 

by the Stockholm International Peace Research Institute, shows military expenditures in U.S. dollars in calendar year 2008 and as a percentage of GDP in calendar 

year 2007.8 The totals are shown ranked by spending and by percentage of GDP. 

SIPRI ESTIMATES OF THE TOP 25 NATIONS IN MILITARY EXPENDITURES RANKED BY SPENDING IN 

U.S. DOLLARS AND BY DEFENSE % GDP, 2007 AND 2008 

[Ranked by Expenditures; Ranked by Military Spending as % GDP] 

Nation $ in millions, 2008 % GDP, 2007 

United States ........................................................................................................................... 607,263 4.0 

China ....................................................................................................................................... 84,900 2.0 

France ...................................................................................................................................... 65,675 2.3 

United Kingdom ....................................................................................................................... 65,265 2.4 

Russia ...................................................................................................................................... 58,600 3.5 

Germany ................................................................................................................................... 46,759 1.3 

Japan ....................................................................................................................................... 46,296 0.9 

Italy .......................................................................................................................................... 40,587 1.8 

Saudi Arabia ............................................................................................................................ 38,223 9.3 

India ......................................................................................................................................... 30,030 2.5 

Korea, South ............................................................................................................................ 24,172 2.6 

Brazil ........................................................................................................................................ 23,302 1.5 

Canada .................................................................................................................................... 19,290 1.2 

Spain ........................................................................................................................................ 19,196 1.2 

Australia .................................................................................................................................. 18,399 1.9 

Israel ........................................................................................................................................ 16,194 8.6 

Turkey ....................................................................................................................................... 15,810 2.1 

Greece ...................................................................................................................................... 12,627 3.3 

Netherlands .............................................................................................................................. 12,228 1.5 

Poland ...................................................................................................................................... 10,741 2.0 

Taiwan ..................................................................................................................................... 10,331 2.0 

Iran .......................................................................................................................................... 9,174 2.9 

Colombia .................................................................................................................................. 9,076 4.0 

Syria ......................................................................................................................................... 7,735 4.4 

Singapore ................................................................................................................................. 7,507 4.1 

Source: Stockholm International Peace Research Institute, SIPRI Yearbook 2009, (Stockholm: SIPRI, 2009). 

Notes: Data are not available for some nations that might rank in the top 25, including North Korea and Iraq. Figures for China, Russia, 

Italy, Turkey, Greece, and Israel are SIPRI estimates rather than official reported amounts. 
66 

While some other countries, mainly in the Middle East, devote a greater share 

of GDP to defense, the U.S. level, which was at about 4% of GDP in 2007, is larger 

than most, and higher than that of China or Russia. Moreover, in absolute terms, 

U.S. military spending is far higher than that of any other nation. According to 

SIPRI estimates, in 2008, U.S. military expenditures were about 45% of the world 

total.9

Neither Admiral Mullen, nor others who have advocated 4% or more of U.S. GDP 

for defense, appear to be arguing that such an amount is a measure of what U.S. 

military strategy requires. Rather, they appear to be arguing that such an amount 

is affordable in economic terms. The key questions for U.S. policymakers have to 

do with the strategy necessary to ensure U.S. security; the size, composition, and 

technological capabilities of military forces that are needed to carry out the strategy; 

and the amount of spending that is reasonably necessary to support those forces. 

Whether one considers the defense budget to be adequate or not, therefore, does not 

depend on the defense share of GDP, but rather, first of all on strategic requirements, second on programs needed to support the strategy, and then, and only then, 

on budget totals. 

The premise that budgets should be derived from an analysis based first of all 

on defense strategy is reflected in standing law. The congressional mandate for the 

Quadrennial Defense Review, which was made into a permanent requirement as 

Section 118 of Title 10 U.S. Code by the FY2000 National Defense Authorization 

Act,10 lays out the principle that a review of strategy should lead to an assessment 

of force requirements and then of budgets as follows: 

Sec. 118. Quadrennial defense review 

[ * * * ] 

(b) CONDUCT OF REVIEW—Each quadrennial defense review shall be conducted 

so as—— 

(1) to delineate a national defense strategy consistent with the most recent 

National Security Strategy prescribed by the President pursuant to section 108 

of the National Security Act of 1947 (50 U.S.C. 404a); 

(2) to define sufficient force structure, force modernization plans, infrastructure, budget plan, and other elements of the defense program of the United 

States associated with that national defense strategy that would be required to 

execute successfully the full range of missions called for in that national defense 

strategy; and 

(3) to identify (A) the budget plan that would be required to provide sufficient 

resources to execute successfully the full range of missions called for in that national defense strategy at a low-to-moderate level of risk, and (B) any additional 

resources (beyond those programmed in the current future-years defense program) required to achieve such a level of risk. 

QUESTION

Should the U.S. set a limit on Defense spending before assessing our needs? 

RESPONSE

I am not aware of any defense analysis or of any defense advocacy group that has 

argued that defense spending should be limited before assessing requirements, nor, 

for that matter, of any who have argued that 4% of GDP or more should be spent 

on defense without regard to requirements. There has been considerable debate, 

however, about the degree to which resource constraints should be reflected in defense planning, particularly in the Quadrennial Defense Review. Many have complained that earlier QDRs were ‘‘budget drills’’ rather than ‘‘strategy-driven’’ assessments. In the FY2007 John Warner National Defense Authorization Act (NDAA), 

Congress specifically required that the assessment of defense strategy, force structure, and budgets in future Quadrennial Defense Reviews not be ‘‘constrained to 

comply with the budget submitted to Congress by the President pursuant to section 

1105 of title 31.’’ 11

DOD has not, however, taken this provision to require that QDRs be conducted 

without regard to limits on resources. As Secretary Gates expressed it, the QDR 

needs to be ‘‘resource informed’’ if not ‘‘resource constrained.’’ One purpose of QDRs 

is to guide priorities in allocating resources that are always, to some degree, limited. 

Indeed, a key element of any strategic thinking is how to manage necessarily limited resources to accomplish critical objectives, and strategic objectives themselves 

must necessarily be defined in terms of what is possible. The issue for the upcoming 

QDR is how to balance the need for some degree of realism in budget planning with 

Congress’s clear intent that reviews should be conducted independently enough to 
67 

indentify significant shortfalls in resources. How well it does so may be a matter 

of some debate. 

QUESTION

How much is the delayed procurement process of the new Air Force Tanker costing the taxpayer? How much is the extended procurement process costing? How 

much more will U.S. taxpayers pay to maintain the existing tanker fleet? 

RESPONSE

The recompetition of the tanker contract has required each of the competitors to 

prepare new bids. The government is covering at least part of the cost for Boeing, 

since its appeal of the earlier contract award to Northrop Grumman-EADS was 

upheld. CRS does not have official information on the total cost, but, based on discussions with defense company executives, the total could be as much as $50 to 

$100 million. This is a substantial penalty to pay for an apparently flawed competitive bidding process, though officials comment that it is not a major expense compared to the ultimate $35-$40 billion cost of the overall acquisition program. The 

delay of the contract award will entail one or two years of additional operation of 

some KC-135 aircraft. Initial deliveries of new tankers will begin in about 2015, and 

KC-135s will then be retired as new aircraft are delivered. The delay will not significantly affect plans for depot maintenance overhauls of KC-135s, however, since 

bulk of the fleet will continue to operate for many more years as the new tankers 

are delivered. There may be a marginal difference in costs of operation between the 

older KC-135s and newer tankers, but, again, additional costs due to the delay do 

not appear to be of very great magnitude compared to the cost of the new acquisition. The extent of added costs depends on the pace at which new aircraft are purchased, which, in turn, depends on long-term budget trade-offs. 

QUESTION

You cited the underestimates, miscalculations and delays as reasons for the increased cost in the procurement process? What changes are being made in the procurement of new military equipment to ensure such a delay does not happen again? 

What had DoD learned from the USAF Tanker procurement debacle? 

RESPONSE

DOD officials have said that the main lesson of GAO’s rejection of the initial contract award was that the selection criteria were too broad, leaving too much uncertainty on the part of the competing companies about the final basis of the award 

decision. According to senior DOD officials, the initial Request for Proposals (RFP) 

listed 808 requirements, of which 37 were mandatory.12 The bidding companies had 

extensive latitude to propose trade-offs between the non-mandatory requirements, 

but were left with a great deal of uncertainty about which requirements the selection process would weigh most highly. That uncertainty was a large part of the 

basis for the Comptroller General’s decision to reject the award. The new RFP, 

which was released for comments in September 2009, reduced the 808 requirements 

to 373 mandatory requirements, with 93 additional non-mandatory requirements 

that bidders may propose to meet to varying degrees. Officials say that this clarifies 

the selection criteria sufficiently to be fair to the competing companies. As to the 

cost of recompetitions in general, it is not usual for programs to be delayed by the 

success of contract appeals. Most cost growth results from underestimates of costs 

at the inception of programs and from reliance on immature technologies that then 

grow in cost or cause delays. 

QUESTION

What cost saving measures, if any, are currently being utilized by DoD to counter 

these ballooning costs? 

RESPONSE

In general, DOD is in the process of implementing changes in the acquisition 

process that fall into five broad areas, all of which are affected to some degree by 

the Weapons Acquisition Reform Act of 2009, and all of which are important in improving the process. These include: 

1. Efforts to improve initial weapons cost estimates. Concern about systematic 

underestimation of costs at the inception of new programs is a large part of the reason Congress established an independent Director to oversee cost analyses and pro-
68 

gram evaluation. The success of the new directorate will depend on the willingness 

of senior defense officials to reject service cost estimates that appear overly optimistic, that are at odds with independent estimates, or that are based on new and 

untested premises.13

2. Measures to ensure technological maturity. New DOD regulations and many 

provisions of the Acquisition Reform Act are aimed an ensuring that new technology 

is mature enough at specific milestones in the acquisition process to warrant going 

ahead to new and costly stages in development. GAO refers to the principle as 

‘‘knowledge based acquisition.’’ GAO and other reviews of ‘‘technology readiness levels’’ in system development have found that DOD often proceeds with development 

without meeting its own criteria for the maturity of new technology. Efforts to reverse this pattern include requiring additional prototyping, more rigorous adherence 

to milestone requirements, and the requirement for independent reviews of new systems designs in an effort to rein in excessively optimistic efforts to make major technological leaps ahead without an adequate basis for assessing risks. Success, again, 

depends on how willing senior officials are to reject projects that do not meet established requirements. 

3. Ensuring that system requirements reflect strategic priorities. Secretary Gates 

has complained that the acquisition process appears still to be following a Cold War 

model that seeks maximum advances in technology in almost every area of system 

development. In some cases, the Secretary argues, a 75 percent solution may be appropriate, rather than a 99 percent solution that costs much more and that accepts 

much higher technical risk. Measures to review system design at the initial stages 

of development may help overcome the incentives to be unnecessarily aggressive in 

pursuing pursue unnecessarily aggressive in pursuing technological advances. Success, again, depends on senior officials ensuring that overall strategic priorities are 

reflected in decisions on specific systems. The issue is whether the acquisition system can strike an appropriate balance between the value of marginal improvements 

in capabilities and increased cost. Improvements in force protection, for example, 

might obviously warrant support even at very high cost. Improvements in cargo lift 

capabilities or in communications bandwidth compared to commercial technologies, 

in contrast, might not warrant such a high priority. 

4. Use of appropriate contracting procedures and competitive contract awards. The 

Defense Department has been working to develop criteria for managing competition 

and for using contracting procedures that will improve performance and also limit 

costs. Issues include whether second sources, though costly to maintain, may drive 

down costs by ensuring continued competition, when fixed price contracts are in 

order, how to use incentives to encourage improved performance, and what limits 

should be established on contract extensions. 

5. Improvements in the defense acquisition workforce. The Acquisition Reform 

Act, other legislative measures, and a number of DOD initiatives are aimed, first, 

at taking back into the government some acquisition management responsibilities 

that had been outsourced; second, at expanding the size and quality of the acquisition work force; and, third, at ensuring high quality continuing education and training of the work force. 

How successful these measures will be in improving the process remains to be 

seen. 

QUESTION

Currently, one bidder for the tanker has the pricing data from the other bidder 

(from the first round of bidding), but the other bidder does not have the pricing data 

from the first company. Do you know of any other major procurements in the past 

twenty years in which this was the case? 

RESPONSE

Because it was appealing the initial tanker award decision, Boeing was given access to Northrop Grumman-EADS pricing information. Company officials have complained that this gives Boeing an unfair advantage in the new competition. Others 

counter that Boeing and EADS have long experience competing in the commercial 

sector with aircraft that are identical in basic design to the aircraft they are proposing for the competition, so basic pricing is not a great secret. For their part, DOD 

officials have said that the current competition has both different selection criteria 

and a different contract structure, so that the previous bids are not necessarily a 

clear guide to the new bids.14

There may be some examples of cases in which a successful appeal of a contract 

award has led to one company having garnered data on another company’s initial 

offer. CRS has not had occasion to look at the history of DoD contract appeals and 
69 

subsequent recompetition of contract awards to be sure that this is the case, however, or to know of any specific examples. 

QUESTION

While the base budget does not directly fund the wars in Iraq and Afghanistan, 

how will the President’s request of a 2.5 percent increase in defense spending indirectly affect our troops in those two countries as compared to the 12 percent increase suggested increase from the Joint Chiefs? 

RESPONSE

There have been recent press accounts to the effect that the President’s FY2011 

budget will request an increase of 2 percent or more above inflation in funding for 

the Department of Defense, but Administration officials have not confirmed these 

accounts.15 The most recent reports are that the Administration plans to request 

$549 billion in discretionary funding for the base defense budget in FY2011, with 

an additional $159 billion for war costs.16 Assuming a final appropriation for the 

base DOD budget of $530 billion in FY2010, an increase to $549 billion would 

amount to growth of 3.5% without adjusting for inflation. If inflation is assumed to 

be 2.4%, real, inflation-adjusted growth would amount to about 1.1%. 

I am not aware of any account to the effect that the Joint Chiefs have proposed 

a larger increase in the FY2011-FY2015 defense plan. Prior to release of the FY2010 

budget request last year, there were some accounts to the effect that the Chiefs had 

endorsed an increase of as much as $57 billion in the FY2010 base DOD budget 

compared to earlier plans, and that the Administration rejected that proposal. Based 

on briefing materials that were published by the trade press, however, it appears 

that these accounts were quite misleading. DOD apparently did consider a $57 billion addition to the FY2010 budget in August of 2008. Of the $57 billion addition, 

more than $30 billion appears to have been due to a shift of some ongoing war costs 

into the base budget, and another $12 billion was to cover inflation and fuel cost 

increases that later did not materialize.17

Whether there might be significant gaps between service budget plans and overall 

top line budget totals in the upcoming FY2011 request may become more clear after 

release of the request, which is expected to be accompanied by a full five-year budget plan extending through FY2015. CRS testimony before the Budget Committee in 

February 2009 noted that each of the services had complained of shortfalls in funding for their projected long-term acquisition and operating plans. In its very detailed 

annual assessments of the long-term defense program, CBO has regularly pointed 

to significant gaps between projected plans and resources. 

ENDNOTES

1 A ‘‘Major Defense Acquisition Program’’ is defined by Section 2430 of Title 10 U.S. Code as 

‘‘a Department of Defense acquisition program that is not a highly sensitive classified program 

(as determined by the Secretary of Defense) and (1) that is designated by the Secretary of Defense as a major defense acquisition program; or (2) that is estimated by the Secretary of Defense to require an eventual total expenditure for research, development, test, and evaluation 

of more than $300,000,000 (based on fiscal year 1990 constant dollars) or an eventual total expenditure for procurement of more than $1,800,000,000 (based on fiscal year 1990 constant dollars).’’ Section 2432 of Title 10 requires the Defense Department to submit to Congress quarterly 

‘‘Selected Acquisition Reports’’ with detailed information on the schedule and cost of all Major 

Defense Acquisition Programs. 2Tony Capaccio, ‘‘Gates Calls for Delay in Pentagon Purchases of Lockheed F-35s,’’ 

Bloomber.com, January 7, 2010; Jason Sherman, ‘‘DOD Braces For Yet Another F-35 Cost And 

Schedule Assessment,’’ InsideDefense.com, January 6, 2010. 3Gopal Ratnam and Tony Capaccio, ‘‘Pentagon Concerned With Lockheed F-35’s Cost Trends,’’ 

Bloomber.com, December 2, 2009. 4 Based in part on author’s notes of comments at a meeting at CRS including CNA, CBO, and 

CRS analysts and congressional aides on December 14, 2009. 5See, for one example, John J. Young, Jr., Under Secretary of Defense for Acquisition, Technology, and Logistics, Memo for the Secretary of Defense, ‘‘Reasons for Cost Changes in Selected 

Major Defense Acquisition Programs,’’ January 30, 2009, published on line by 

InsideDefense.com. 6 Russell Vogel, Executive Secretary, Cost Analysis Improvement Group, ‘‘An Overview of the 

Cost Analysis Improvement Group,’’ Briefing Slides, June 14, 2002. Accessed on line on January 

8, 2010 at http://www.scaf.org.uk/library/prespaper/CAIG%20Overview.pdf. 7See DOD Instruction (DODI) 5000.02, ‘‘Operation of the Defense Acquisition System,’’ December 8, 2008. 8 An alternative source is the International Institute for Strategic Studies. IISS, however, 

shows only officially reported amounts of military expenditures for China and some other nations, which significantly understate expenditures. In 2007, IISS shows China’s military expenditures at $46 billion. 
70 

9The SIPRI yearbook shows total worldwide military expenditures in 2008 of $1,226 billion in 2005 U.S. prices, of which the U.S. total was $548 billion, or 45%. IISS shows worldwide military expenditures in 2007 of $1,279 billion in 2007 U.S. prices, of which the U.S. total was $553 

billion, or 43%. 10P.L. 106-65, Section 901. 11P.L. 109-364, Section 1031. 12See DoD News Briefing with Deputy Secretary of Defense William Lynn, Under Secretary 

of Defense Ashton Carter, and Secretary of the Air Force Michael Donley, September 24, 2009, 

available on line at http://www.defense.gov/transcripts/transcript.aspx?transcriptid=4484. 13 Case studies of cost underestimation would be useful in assessing the causes of recently 

worsening problems. Some have said that F-22 cost underestimates were based on overoptimistic assessments of progress in ‘‘lean’’ manufacturing techniques and also that early prototypes were not representative of production designs. DDG-1000 costs may have been underestimated because the Navy rejected traditional methods of estimating costs based on ship tonnage 

as out of date, but then did not project costs of electronics and other elements of the ship design 

on the basis of reliable models. These and other concerns about costing procedures, however, 

have not been studied as thoroughly as is needed to support firm conclusions. 14DoD News Briefing with Deputy Secretary of Defense William Lynn, Under Secretary of Defense Ashton Carter, and Secretary of the Air Force Michael Donley, September 24, 2009. 15 Jason Sherman, ‘‘OMB Grants Defense Department Nearly $60 Billion More Over Five 

Years,’’ Inside the Navy, December 7, 2009. 16 Anne Gearan and Anne Flaherty, ‘‘AP Exclusive: Obama Wants $33 Billion More for War’’, 

The Associated Press, Wednesday, January 13, 2010. 17 Army Briefing Slide, ‘‘Current Overview of $57 B,’’ November 2008, published by 

InsideDefense.com. 

[Whereupon, at 11:55 a.m., the Committee was adjourned.] 

Æ