JANUARY 2010

Long-Term 

Implications of the 

Fiscal Year 2010 

Defense Budget

CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

A

S T U D Y

CBO
Pub. No. 4069
The Congress of the United States O Congressional Budget Office

A

STUDY

CBO

Long-Term Implications of the 

Fiscal Year 2010 Defense Budget

January 2010
CBO

Notes

Unless otherwise indicated, all years referred to in this paper are fiscal years, and all dollar 

amounts are expressed in 2010 dollars (using the implicit price deflator for gross domestic 

product) of total obligational authority.

The numbers in the text and tables may not add up to totals because of rounding.

The projections in this paper deal with resources for the Department of Defense (subfunction 

051 of the federal budget) rather than for all defense activities (subfunction 050).

On the cover, clockwise from the top: A U.S. Air Force F-16 Fighting Falcon in flight 

(U.S. Air Force photo by Senior Airman Julianne Showalter); U.S. Army soldiers fire a 

howitzer during a training exercise at Fort Bragg, North Carolina, October 14, 2009 (U.S. 

Army photo by Spc. Jessica M. Kuhn); U.S. Marine on a security patrol in the Nawa District 

of Helmand province, Afghanistan, October 20, 2009 (U.S. Marine Corps photo by Corporal 

Artur Shvartsberg); the 5-inch/54-caliber (Mk 45) lightweight gun of the guided-missile 

cruiser USS Chosin (CG-65) is fired during a training exercise (U.S. Navy photo by Mass 

Communications Specialist 2nd Class Matthew A. Hepburn).
Preface

CBO

W	












the Administration’s plans for national defense as they were proposed during 2009? This Congressional Budget Office (CBO) study—prepared at the request of the Chairman and the 

Ranking Member of the Senate Budget Committee—addresses that question. The study 

updates the resource projections contained in CBO’s January 2009 paper Long-Term Implications of the 2009 Future Years Defense Program, 
	





made to defense plans in preparing the President’s budget request for fiscal year 2010. In keeping with CBO’s mandate to provide impartial analysis, the paper makes no recommendations.

Adam Talaber and Daniel Frisk of CBO’s National Security Division coordinated the 

preparation of this paper under the supervision of Matthew S. Goldberg. David Arthur, 

Michael Bennett, Kevin Eveker (formerly of CBO), Alec Johnson, Bernard Kempinski, 

Eric J. Labs, Frances Lussier, and Allison Percy of the National Security Division contributed 

to the analysis. Raymond Hall, David Newman, Dawn Sauter Regan, Matthew Schmit, and 

Jason Wheelock of CBO’s Defense, International Affairs, and Veterans’ Affairs Cost Estimates 

Unit also contributed to the report under the supervision of Sarah Jennings. James L. Wilson, 

an independent consultant, reviewed the manuscript before publication. (The assistance of 

external reviewers implies no responsibility for the final product, which rests solely with 

CBO.)

Sherry Snyder edited the study, and Kate Kelly proofread it. Cindy Cleveland produced drafts 

of the manuscript. Maureen Costantino designed the cover and prepared the report for 

publication with assistance from Jeanine Rees. Lenny Skutnik printed the initial copies, 

Linda Schimmel handled the print distribution, and Simone Thomas prepared the electronic 

versions for CBO’s Web site (www.cbo.gov).

Douglas W. Elmendorf

Director

January 2010

Contents

CBO

Summary and Introduction 

Projections of Funding for Operation and Support 

Military and Federal Civilian Pay and Benefits 10

Military Medical Costs 14

Trends in O&M Funding per Active-Duty Service Member 16

Projections for Military Construction and Family Housing 17

Unbudgeted Costs of Operation and Support 17

Projections of Funding for Acquisition 

Army Acquisition 19

Navy and Marine Corps Acquisition 24

Air Force Acquisition 27

Defense Agency Acquisition, Including Missile Defense 29
VI LONG-TERM IMPLICATIONS OF THE FISCAL YEAR 2010 DEFENSE BUDGET



Tables

 Resources for Defense in Selected Years 2

2. Resources for Operation and Support in Selected Years 9

3. Resources for Acquisition in Selected Years 21

Figures

 	

	
 3

2. Defense Resources as a Share of Gross Domestic Product 8

3. Resources for Operation and Support 11

4. Cumulative Difference Between Changes in Military and Private-Sector 

Pay Raises Since 1982 13

5. Resources for the Military Medical System 15

6. Trends in Resources for Operation and Maintenance per 

Active-Duty Service Member 16

7. Resources for Acquisition 20

8. Resources for Army Acquisition 22

9. Resources for Navy and Marine Corps Acquisition 25

10. Resources for Air Force Acquisition 28

11. Resources for Defense Agency Acquisition, Including Missile 

Defense Agency 30

12. Resources for Missile Defense Acquisition 31

Boxes

 

	

	
	

	
	 4

2. CBO’s Methods for Projecting the Resource Requirements of the 

Department of Defense 6


	
	





Fiscal Year 2010 Defense Budget

Summary and Introduction

	

	



Office (CBO) has published a series of reports about its 

projections of the resources that could be required over 

the long term (typically two decades) to carry out the 

nation’s defense plans.1

 This report presents CBO’s analysis of the Department of Defense’s (DoD’s) 2010 budget 

request, which was transmitted in 2009, including projections of resource requirements for fiscal years 2011 

through 2028. 

In CBO’s estimation, carrying out DoD’s 2009 plans for 

2010 and beyond—excluding overseas contingency operations (the wars in Iraq and Afghanistan and some much 

smaller military actions elsewhere)—would require 

defense resources averaging at least $573 billion annually 

(in 2010 dollars) from 2011 to 2028 (see Table 1). That 

amount, CBO’s base projection, is about 7 percent more 

than the $534 billion in total obligational authority 

(TOA) the Administration requested in its regular 2010 

budget, again excluding overseas contingency operations.2

 The projection also exceeds the peak of about 

$500 billion (in 2010 dollars) during the height of the 

Reagan Administration’s military buildup in the mid1980s (see Figure 1). During that period, for example, 

DoD was pursuing a Navy fleet of 600 battle force ships, 

more than twice the size of the current fleet of 287.

Assuming no changes to the department’s plans, its 

resource requirements could be even greater. CBO has 

also estimated some “unbudgeted” costs that reflect the 

likelihood that weapon systems would cost more than initially estimated; that medical costs would grow at rates 

faster than DoD has anticipated; and that pay raises the 

Congress enacts for military personnel and DoD’s civilian 

employees might exceed the percentages in the department’s plans. Furthermore, additional appropriations 

may be necessary to fund overseas contingency operations 

(see Box 1).

Including the unbudgeted costs increases the projection 

to an annual average of $632 billion through 2028, or 

18 percent more than the regular funding requested for 

2010. Some 35 percent of the total unbudgeted costs 

between 2013 and 2028 are associated with overseas contingency operations; in particular, 30,000 troops engaged 

in contingency operations from 2013 through 2028 

would increase funding requirements by about $20 billion per year. The total costs of $670 billion at the endpoint in 2028 would approach the peak of the past three 

years (measured in 2010 dollars), which includes the 

height of operations in Iraq (see Figure 1).

1. The first of those Congressional Budget Office reports, The LongTerm Implications of Current Defense Plans appeared in January 

2003. Each year since then, CBO has published summary and 

detailed updates (the latter in annotated briefing format); all are 

available online at www.cbo.gov.

2. All funding in CBO’s projection is calculated as TOA, most of 

which is for annual appropriations sought by the department. 

Budget authority differs from TOA in that it includes the effects 

of certain receipts, permanent spending in certain trust funds and 

other accounts, and certain payments to the Military Retirement 

Fund. In recent years, the difference between TOA and budget 

authority in subfunction 051 of the federal budget (Department 

of Defense, Military), which funds DoD, generally has been 

$2 billion or less.
2 	
	












Table 1.

Resources for Defense in Selected Years

(Billions of 2010 dollars)

Source: Congressional Budget Office.

Note: n.a. = not applicable.

a. For the current analysis, CBO folds the revolving funds into the appropriation for operation and maintenance. Those funds generate 

receipts from fees charged to customer organizations in the military services and defense agencies and may also receive appropriations.

b. Excludes $74 billion in other supplemental and emergency funding allocated among the appropriation titles listed above.

c. Includes $17 billion that the Administration has not requested but that CBO projects could be needed to fund either contingency 

operations or other unbudgeted costs.

Acquisition

Procurement 113 109 120 124 115 125

Research, development, test, and evaluation 81 79 57 61 54 59 ____ ____ ____ ____ ____ ____

Subtotal 194 187 177 185 168 185

Operation and Support

Military personnel 127 136 142 157 178 157

Operation and maintenancea 246 188 199 221 247 220  ____ ____ ____ ____ ____

Subtotal 373 324 341 378 425 376

 28 23 11 11 13 12      

Total 595 534 530 575 605 573

Additional Supplemental, Emergency, and

 Contingency Funding 74 b 130 n.a. n.a. n.a. n.a.      

Total 

Including Additional Funding 669 664 530 575 605 573

Including Total Unbudgeted Costs n.a. 682 c 573 634 670 632

Actual

2009

Requested

2010 2013 2020 2028 2011–2028

Projected Average

Regular Defense Budget

Other Resources
	
	








 3



Figure 1.

	
	

	



 Congressional Budget Office.

Notes: Only the 2009 supplemental appropriations and the 2010 contingency request are separately identified in this figure. The 

supplemental and emergency appropriations for earlier fiscal years are included with the appropriation titles.

RDT&E = research, development, test, and evaluation.

a. For the current analysis, CBO folds the revolving funds into the appropriation for operation and maintenance. Those funds generate 

receipts from fees charged to customer organizations in the military services and defense agencies, which may be augmented by 

appropriations.

	









the greater resources required in the long term to sustain 

the 2010 budget plan:

B The likelihood of continued real growth in pay and 

benefits for DoD’s military and civilian personnel;

B The projected increases in the costs of operation and 

maintenance for aging equipment and for newer, more 

complex equipment;

B DoD’s plans to develop and field advanced weapon 

systems to replace many of today’s military systems 

that are nearing the end of their service life; and

B Investments in new capabilities, such as advanced 

intelligence, surveillance, and reconnaissance systems, 

to meet emerging security threats.

These long-term projections differ from CBO’s baseline, 

under which discretionary defense appropriations grow at 

the rate of inflation without reference to the Department 

of Defense’s plans.3

 CBO’s base projection uses the prices 

that DoD has assumed would apply to the levels of personnel and acquisitions in its plans. CBO’s unbudgeted 

cost projection includes prices that CBO anticipates are 

more likely to be faced, as well as contingency operations 

not in the plans. CBO views the base projection as a 

lower bound on the costs of the plans, and the projection 

including total unbudgeted costs as a much more likely 

outcome (for additional details on CBO’s projection 

methods, see Box 2).

This report uses information from a variety of sources 

about defense plans through May 2009 to project the 

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028

0

100

200

300

400

500

600

700

800

Military Personnel

Operation and Maintenancea

Procurement

RDT&E

Family Housing Military Construction

2010 Projection with

Contingency

Unbudgeted Costs 2010 Projection

with Total

Unbudgeted Costs

Projected

January 2009

Base Projection

2009 Supplemental

Appropriations

2010 Contingency

Request

Actual

Congressional Budget Office, The Budget and Economic Outlook: 

Fiscal Years 2009 to 2019(January 2009).
4 	
	












Box 1.

CBO’s Estimate of the Costs of Overseas Contingency Operations

	
	



contingency operations that consist of the wars in 

Iraq and Afghanistan and some much smaller military actions elsewhere. Supplemental and emergency 

appropriations for those purposes peaked at $180 billion in 2008 ($185 billion in 2010 dollars), 27 percent of total budget authority for the Department of 

Defense (DoD) in that year. In 2009, those appropriations dropped to $146 billion ($147 billion in 2010 

dollars), or 22 percent of DoD’s appropriations. 

As of June 2009, the U.S. military had deployed 

172,000 service members to the Iraq theater and 

59,000 to the Afghanistan theater. Along with its 

regular defense budget for 2010, the Administration 

requested and received $130 billion for war-related 

funding, albeit to support a smaller total number of 

deployed troops: 100,000 service members in Iraq 

and 68,000 in Afghanistan.1

 The average number of 

personnel in Iraq (100,000) is consistent with the 

schedule for withdrawing U.S. forces from Iraq that 

the President outlined in a speech he delivered at 

Camp Lejeune, North Carolina, on February 27, 

2009.2

 Although the 2010 budget planned for an 

increase in U.S. service members in Afghanistan from 

59,000 to 68,000, neither that budget nor the 

Congressional Budget Office’s (CBO’s) projection 

anticipated the further increase of 30,000 troops 

in Afghanistan that the President proposed on 

December 1, 2009.3

CBO does not have access to DoD’s estimates of costs 

for overseas contingency operations in 2011 or later. 

Those estimates would have been contained in the 

2010 Future Years Defense Program, an adjunct to 

the budget submission that the Administration chose 

not to submit to the Congress for 2010. In lieu of 

those estimates, CBO has developed a scenario under 

which all U.S. troops would be withdrawn from Iraq 

by December 31, 2011. That scenario is consistent 

with the Status of Forces Agreement signed by the 

governments of Iraq and the United States in November 2008 and with the President’s speech of February 

27, 2009. The total number of U.S. military personnel deployed to Afghanistan and to contingency 

operations at all other locations worldwide under that 

scenario would decline to 30,000 starting in fiscal 

year 2013. (That figure excludes U.S. military personnel permanently based overseas in locations such 

as South Korea or Okinawa, Japan, who are not 

engaged in contingency operations.) CBO estimates 

that supporting a deployment of that size would 

require recurring annual appropriations of about 

$20 billion in 2010 dollars.4

1. Department of Defense, Fiscal Year 2010 Budget Request: 

Summary Justification 	
http://comptroller

.defense.gov/defbudget/fy2010/fy2010_SSJ.pdf.

2. Remarks of President Barack Obama, “Responsibly Ending 

the War in Iraq,” February 27, 2009, www.whitehouse.gov/

the_press_office/Remarks-of-President-Barack-ObamaResponsibly-Ending-the-War-in-Iraq. CBO’s analysis of that 

withdrawal schedule is found in Congressional Budget 

Office, “Withdrawal of U.S. Forces from Iraq: Possible Timelines and Estimated Costs,” letter to the Honorable John F. 

Tierney (October 7, 2009). 

3. Remarks by the President, “Address to the Nation on the 

Way Forward in Afghanistan and Pakistan,” December 1, 

2009, www.whitehouse.gov/the-press-office/remarkspresident-address-nation-way-forward-afghanistan-andpakistan. CBO has estimated the costs for 2010 and 2011 of 

increasing the number of U.S. troops in Afghanistan along 

with corresponding changes to the number of troops in Iraq. 

SeeCongressional Budget Office, “CBO’s Analysis of Scenarios for Funding the Wars in Afghanistan and Iraq,” letter to 

the Honorable John M. Spratt Jr. (January 21, 2010).

4. Congressional Budget Office, 	


	

look: An Update (August 2009), pp. 21–26. CBO also developed a second scenario in which the number of U.S. military 

personnel deployed to contingency operations would decline 

more slowly, reaching 75,000 by 2014. That scenario would 

require annual appropriations of about $50 billion starting in 

2014. The recurring annual costs referenced in the current 

study exclude an estimated $5 billion for diplomatic operations and foreign aid; that amount is funded through other 

agencies and does not appear in DoD’s budget.
	
	








 5



costs of those plans over the next 18 years. The main 

sources were DoD’s budget request for 2010 and budget 

justification materials the Administration provided to the 

Congress in May 2009 along with that request.4

 Among 

the other sources were DoD’s press releases and briefing 

materials and Secretary of Defense Robert M. Gates’s 

announcement in April 2009 of changes to the nation’s 

defense plans that foreshadowed the actual budget submission.5

 CBO also used information in DoD’s Future 

Years Defense Program (FYDP), although the most 

recent FYDP containing data for future years was submitted with the 2009 budget request.

Real (inflation-adjusted) defense resources would continue to increase under CBO’s projection of DoD’s plans 

for 2010 but not as rapidly as U.S. gross domestic product (GDP), and the share of GDP devoted to national 

defense would therefore steadily decline.6

 That share fell 

from an annual average of 5.6 percent in the 1980s to 

3.8 percent in the 1990s and rose again above 4 percent 

starting in 2008, with supplemental and emergency 

funding included. If DoD’s plans for 2010 were carried 

out, defense spending would decline to 3.2 percent of 

GDP in 2015 and to 2.6 percent of GDP by 2028 under 

CBO’s base projection. Spending would be higher when 

unbudgeted costs are included, but it would still decline 

to 3.8 percent of GDP in 2015 and to 3.1 percent of 

GDP by 2028 (see Figure 2).

Projections of Funding for 

Operation and Support

	

		





the appropriations for military personnel, operation and 

maintenance (O&M), and the revolving funds.7

 The 

2010 regular budget request (excluding overseas contingency operations) includes $188 billion (35 percent of 

the total) for O&M and $136 billion (25 percent of the 

total) for military personnel (see Table 1 on page 2). Over 

the longer term, carrying out DoD’s plans for 2010 

would push O&S funding from $324 billion in 2010 to 

$425 billion in 2028 (annual real growth of 1.5 percent), 

increasing from 61 percent to 72 percent of the total budget (see  ). Including unbudgeted costs, the annual 

real growth rate of O&S funding would be 2.0 percent.

For its projections, CBO divided O&S funding into the 

functional categories used by DoD’s program analysts:8

B Operating forces—	

	


	

to combatant commands;

4. This report is based on the fiscal year 2010 budget request, 

Department of Defense, “DoD [2010 Budget Request],” http://

comptroller.defense.gov/Budget2010.html. The Department of 

Defense Appropriations Act, 2010 (Public Law 111-118) was 

enacted in December 2009. The appropriation act includes 

$530 billion in regular funding and $130 billion in contingency 

funding. The total of $660 billion comprises $130 billion for 

procurement; $80 billion for research, development, test, and 

evaluation; $150 billion for military personnel; $272 billion for 

operation and maintenance; and $28 billion in other funding. 

Although DoD will update its plans to reflect Congressional 

actions, those changes will not be visible in its plans until DoD 

submits the 2011 Future Years Defense Program.

5. Department of Defense, “Defense Budget Recommendation 

Statement” (as prepared for delivery by Secretary of Defense 

Robert M. Gates, April 6, 2009), www.defense.gov/speeches/

speech.aspx?speechid=1341.

6. CBO’s estimate of future growth in GDP is based on continuing 

the time series on GDP presented in its report 	


Economic Outlook: An Update(August 2009). Defense spending in 

this paragraph is measured by the actual disbursements (outlays) 

from the Treasury that arise from funding for defense programs.

7. For the current analysis, CBO folds the revolving funds into the 

O&M appropriation. Those funds generate receipts from fees 

charged to customer organizations in the military services and 

defense agencies. To augment those receipts, DoD also requested 

appropriations for the following funds in 2010: the National 

Defense Sealift Fund, the Defense Commissary Agency, Defense 

Coalition Support, and the working capital funds of the Army and 

the Air Force.

8. The definitions of those categories are adapted from Ronald E. 

Porten, Daniel L. Cuda, and Arthur C. Yengling, 




Infrastructure Categories: A FYDP-Based Conceptual Model of 

Department of Defense Programs and Resources (Alexandria, Va.: 

Institute for Defense Analyses, September 2002).
6 	
	












Continued

Box 2.

CBO’s Methods for Projecting the Resource Requirements of the 

Department of Defense

	

	



tion of defense plans is an estimate of the resources 

that would be required to sustain the plans, programs, and policies described in the Department of 

Defense’s (DoD’s) budget and in its Future Years 

Defense Program (FYDP).1

 In contrast to a projection, which assumes that future appropriations and 

other legislative actions will facilitate the continuation of DoD’s current plans, a forecast or prediction 

would allow for legislative actions that could compel 

DoD to revise those plans.

In light of pressures on spending in the overall federal 

budget, it may become increasingly difficult for the 

Congress to continue to provide the appropriations 

necessary to sustain DoD’s current programs or those 

planned up to five years into the future. The defense 

programs in the current plan may have to be curtailed 

to fit within a compressed defense “top-line.” One 

value of a projection, such as the one presented in 

this study, is that it highlights the tension between 

current plans and future fiscal realities.

CBO has developed several projections of DoD’s 

budget, which are intended to answer different questions and which use different simplifying assumptions. CBO constructs its baseline, which it publishes 

in The Budget and Economic Outlook
	

accordance with the provisions set forward in the 

Balanced Budget and Emergency Deficit Control 

Act of 1985 and in the Congressional Budget and 

Impoundment Control Act of 1974. (Although the 

provisions of the Deficit Control Act that pertain to 

the baseline expired at the end of September 2006, 

the agency generally continues to follow that law’s 

specifications in preparing its baseline.)

That baseline begins with appropriations to date in 

the current fiscal year and projects that sum by 

adjusting it using a forecast of inflation in future 

years. The value of the budget baseline is that it clarifies the extent to which Congressional choices 

(changes to the laws determining mandatory spending or enactment of authorization bills determining 

discretionary spending) will increase or decrease federal spending (and, in conjunction with estimates of 

future revenues, increase or decrease the federal debt).

The budget baseline is problematic, however, for projecting supplemental and emergency appropriations 

for overseas contingency operations. Although the 

Congress often provides some funding for those operations at the beginning of a fiscal year, that initial 

funding is usually supplemented by additional funding provided later in the year. The budget baseline 

applies future years’ inflation to the sum appropriated 

at the time the baseline estimate is published. The 

resulting estimate could understate the full-year cost 

of continued conflict in the near term but overstate 

costs over the longer term if the United States withdraws its military forces from ongoing conflicts. To 

avoid that conundrum, CBO also publishes alternative paths that project funding under two illustrative 

schedules for withdrawing troops from wartime 

operations.2

Just as the budget baseline is problematic when dealing with the costs of overseas contingency operations, 

the projections in the FYDP are problematic in 

1. Concurrent with its budget request, DoD delivers to the 

Congress a FYDP that comprises a historical record of 

defense forces and funding as well as DoD’s plans for future 

programs. The historical portion shows costs, forces, and personnel levels since 1962. The plan portion presents DoD’s 

program budget (estimates of funding needed for the next 

five or six years, based on the department’s current plans for 

all of its programs). A recent exception is the FYDP that 

accompanied DoD’s fiscal year 2010 budget request, which 

did not contain any information for the out-years.

2. Congressional Budget Office, 	




Outlook: An Update		


 
	
	








 7



 Continued

	

		
	
	


Department of Defense

	


					

be conducted at the costs or prices that DoD has 

assumed. DoD has often underestimated the costs of 

developing and purchasing new weapon systems. The 

cost of a plan that calls for procuring a particular 

number of units of a weapon system at a particular 

price may change if, as is frequently the case, the unit 

cost of that weapon system increases. Similarly, the 

military’s medical costs may continue to rise faster 

than DoD has anticipated; the Congress may enact 

pay raises for military personnel and civilians working in DoD that exceed what the department has 

planned for. All such costs have increased in the past 

and are likely to do so in the future.

On the basis of those and other factors, CBO has 

estimated the unbudgeted costs that show the difference between what would occur if the Administration 

was able to execute all of its plans at the prices it 

assumes and what would occur if the Administration 

attempted to execute all of its plans at the prices it is 

more likely to face.

In conventional risk analysis, the base projection is, if 

not the most likely case, at least a case to which relatively high probability is attached.3

 However, in 

CBO’s view, the base projection that incorporates all 

of DoD’s planning and cost assumptions is more like 

a lower bound: Costs may turn out to be that low, are 

unlikely to be any lower, and are much more likely to 

be higher, perhaps considerably so. CBO’s projection 

that includes unbudgeted costs is intended to represent a much more likely outcome than does the base 

projection of the FYDP, although the specific probability attached to that outcome and its percentile 

rank relative to all other outcomes are impossible to 

estimate in light of the confluence of many underlying risk factors.

3. M. Granger Morgan and Max Henrion, Uncertainty: A Guide 

to Dealing with Uncertainty in Quantitative Risk and 

Policy Analysis	

		



Press, 1990); and Paul Garvey, 	

	
		

Management: A Systems Engineering Approach

Fla.: CRC Press, 2009). 
8 	
	












	

Defense Resources as a Share of Gross Domestic Product

(Percent)

 Congressional Budget Office.

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028

0

1

2

3

4

5

6

7

2010 Projection With

Unbudgeted Costs

Actual Projected

2010 Projection Without

Unbudgeted Costs

Actual, Including Supplemental and

Emergency Appropriations
	
	








 9





	





	



 Congressional Budget Office.

Note: Operation and support consists of the appropriations for military personnel, operation and maintenance, and the revolving funds.

n.a. = not applicable. 

a. Excludes $64 billion in other supplemental and emergency funding allocated among the funding categories listed above.

b. Includes $300 million that the Administration has not requested but that CBO projects could be needed to fund either contingency 

operations or other unbudgeted costs.

Operating Forces 161 124 130 141 154 140

Medical 44 46 54 70 90 69

Bases, Installations, and Infrastructure 52 47 48 51 54 51

Command and Intelligence 22 22 23 24 25 24

Central Training 33 32 33 35 37 35

Central Logistics 21 16 17 19 21 19

Headquarters and Administration 39 36 37 39 43 39 ____ ____ ____ ____ ____ ____

Subtotal 373 324 341 378 425 376

Additional Supplemental, Emergency, and

 Contingency Funding 47 a 105 n.a. n.a. n.a. n.a.  ____ ____ ____ ____ ____

Total

Including Additional Funding 420 429 341 378 425 376

Including Total Unbudgeted Costs n.a. 429 b 363 407 465 408

Regular Defense Budget

Other Resources

Actual

2009 2010 2013 2020 2028

Projected Average

2011–2028

Requested
10 	
	












B Medical—uniformed medical personnel, operation of 

military medical treatment facilities (MTFs) in the 

direct care system, medical care purchased from the 

private sector, pharmaceuticals, and accrual charges 

that fund health care for military retirees and dependents who are eligible for Medicare;9

B Bases, installations, and infrastructure—		




military forces, communications and information 

infrastructure, central benefit programs for DoD personnel, and miscellaneous activities;

B Command and intelligence—operational headquarters, 

command-and-control systems, and intelligence 

collection;

B Central training—training at central locations away 

from service members’ duty stations;

B Central logistics—depot-level maintenance, supplies, 

and transportation of materiel; and

B Headquarters and administration—
	


tion of acquisition programs, science and technology 

programs, central personnel administration, and 

departmental management.

CBO assumes that all costs other than those for military 

and civilian pay and the two categories labeled “operating 

forces” and “medical” grow at the same rate as the deflator 

for gross domestic product, which is a standard measure 

of general inflation in the U.S. economy (see Figure 3). 

In CBO’s projections, the costs of operating forces 

increase over time because weapon systems become more 

expensive to operate and maintain as they age. Moreover, 

new generations of weapon systems are likely to be more 

complex and thus more expensive to operate and maintain than are the systems they replace.10

Medical costs also have grown faster than other O&Mfunded activities in the past, and DoD anticipates growth 

in per capita medical spending in the categories of inhouse care, purchased care, and military personnel. However, DoD expects that pharmaceutical funding per capita 

will experience a one-time decrease of about 11 percent 

from 2009 to 2010, largely because of a recent federal 

regulation that applies federal ceiling prices to pharmaceuticals covered by DoD’s TRICARE system and purchased through its retail pharmacy network.11

Military and Federal Civilian Pay and Benefits





	

	
	

ian pay. In November 2003, Congress passed a law that 

indexed the annual increase in basic military pay to the 

percentage increase in the Bureau of Labor Statistics’ 

employment cost index (ECI) for wages and salaries in 

private industry.12 The ECI grew more rapidly than the 

GDP deflator in all years but two from 1981 to 2009;

CBO projects that the same pattern will continue 9. CBO’s projections for defense medical spending include only 

funding in the appropriations for operation and maintenance and 

military personnel. The 2010 budget also identified approximately $1 billion in medical-related military construction and 

small amounts (around $1 million) in procurement and in 

research, development, test, and evaluation. The latter appropriations are excluded from this section but are included elsewhere in 

this report in CBO’s projections of acquisition spending. Medical 

accrual charges are intragovernmental payments—payments from 

one governmental account to another—representing future medical costs that current service members (and their eligible family 

members) will incur to pay for care from civilian providers under 

the military’s TRICARE for Life program and at medical treatment facilities once they retire from the military and become eligible for Medicare. Each year, the Treasury, on behalf of DoD, 

contributes an amount to the Medicare-Eligible Retiree Health 

Care Fund based on the current number of military personnel. 

Although the Treasury makes the contribution, the amount is 

included in DoD’s funding in the budget and appropriation process. Within the FYDP, medical accrual charges are distributed 

among all of the O&S functional categories. To provide a comprehensive estimate of DoD’s medical costs, CBO consolidated all 

such charges in the medical category.

10. Congressional Budget Office, 	



		


Operating and Maintaining Military Equipment 		


11. Manufacturers may sell drugs to federal agencies or under Medicaid as long as the prices they charge the “big four” government 

agencies (DoD, the Department of Veterans Affairs, the Public 

Health Service, and the Coast Guard) for brand-name drugs are 

no higher than the federal ceiling prices, which are computed 

as a fixed percentage of the previous year’s average price paid to 

manufacturers by wholesalers. See Congressional Budget Office, 

Prices for Brand-Name Drugs Under Selected Federal Programs

(June 2005), p. 8.

12. Section 602 of the National Defense Authorization Act for Fiscal 

Year 2004 (NDAA, P.L. 108-136, 117 Stat. 1498, amending 37 

U.S.C. 1009). See Department of Labor, Bureau of Labor Statistics, “Employment Cost Trends: Data Usage,” www.bls.gov/ncs/

usage.htm; and Charles A. Henning, Military Pay and Benefits: Key 

Questions and Answers, 



Service, updated October 31, 2008), http://assets.opencrs.com/

rpts/RL33446_20081031.pdf.
	
	








 



Figure 3.

	




	



 Congressional Budget Office.

Notes: Operation and support consists of the appropriations for military personnel, operation and maintenance, and the revolving funds.

Only the 2009 supplemental appropriations and the 2010 contingency request are separately identified in this figure. The supplemental and emergency appropriations for earlier fiscal years are included with the funding categories.

	
	
	

	
	
					

will exceed growth of the GDP deflator by an average of 

1.4 percentage points per year. In 20 of the past 28 years, 

the annual pay raise for federal civilians has been set equal 

to (and, in one year, above) the percentage increase in 

basic military pay.13 Assuming that pay raises for federal 

civilians continue to keep pace with those for military 

personnel, CBO projects continued real growth in pay 

for both groups.

Enhanced Military Benefits. 			

several developments over the past decade that provided 

new or enhanced military benefits:

Changes to the REDUX Retirement System. 	
	

annuity paid to military personnel who retire after 

20 years of active service increased from 40 percent to 

50 percent of a service member’s “high-three” basic pay, 

and the system now provides full (rather than partial) 

cost-of-living adjustments each year.14

Establishment of TRICARE for Life.	 
	
	
	

coverage is now available for military retirees and their 

families who are eligible for Medicare. That coverage pays 

most of the costs that would otherwise have been the 

share of the costs that retirees pay out of pocket under 

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028

0

50

100

150

200

250

300

350

400

450

500

Headquarters and Administration

Central Logistics

Central Training

Bases, Installations, and

Infrastructure

Medical Operating Forces

Command and

Intelligence

2010 Projection with

Contingency

Unbudgeted Costs January 2009

Base Projection

2009

Supplemental

Appropriations

2010 Contingency

Request

2010 Projection with

Total Unbudgeted Costs

Actual Projected

 In three other years—2000, 2001, and 2007—the pay raise for 

civilian employees was set equal to the across-the-board increase in 

basic military pay, but the Congress enacted additional military 

pay raises tied to seniority. Thus, the average military pay raise 

exceeded the civilian pay raise in those three years.

14. Basic pay is the single largest component of military pay, received 

by all members and determined by the member’s grade (usually 

the same as rank) and years of service. The basic pay that determines an active-duty service member’s retirement annuity is computed as the average of the 36 highest months of basic pay in the 

service member’s career. The retirement changes were enacted in 

the NDAA for fiscal year 2000 (P.L. 106-65, 113 Stat. 512) and 

affected service members who retired beginning in 2006.
 	
	












Medicare; it also funds care for retirees at MTFs if space 

is available.15

Elimination of the Social Security Offset for the Survivors’ 

Benefit Plan.	
	

	



spouses who participate in the plan and are age 62 or 

older increased from 35 percent to 55 percent of the 

deceased service member’s retirement pay.16

	

	
	



classes of retired military personnel are now permitted to 

receive military retirement pay without any offset for 

compensation for a service-connected disability they 

receive from the Department of Veterans Affairs.17

		
	

	


Reservists

	
	
	

reserve components can receive retirement pay was lowered to under age 60 in some cases and is based on the 

accumulation of periods on active duty in support of a 

contingency operation during the member’s time spent in 

a reserve component.18

Pay Comparability with Private-Sector Workers. 	

early 1980s, several relatively large increases in military 

pay were enacted that purportedly equalized the pay 

scales for military personnel and private-sector workers. 

However, many observers assert that, since 1982, the 

equality has gradually eroded and a gap has developed 

between basic military pay and wages and salaries in the 

private sector.





in an effort to close that gap and restore pay equality. 

Those measures affect the pay of active-duty service 

members and their future retirement annuities. DoD 

makes payments into the Military Retirement Fund to 

reflect its accruing liabilities for service members’ retirement benefits. Those payments are charged against the 

military personnel accounts. Higher basic pay today leads 

to higher projections of future retirement annuities, in 

turn requiring larger payments today from the military 

personnel accounts into the retirement fund.19

Until 2003, the annual increase in basic military pay had 

been loosely linked to the percentage increase in the General Schedule pay scale under the Federal Employees Pay 

Comparability Act of 1990.20 In November 2003, the 

Congress enacted a law requiring that annual increases in 

basic pay from 2007 forward be indexed to the ECI. That 

law also stipulated that the pay increases for 2004, 2005, 

and 2006 exceed the increase in the ECI by one-half of 

one percentage point.21 Those increases in pay—and 

the ones enacted in 2008 and 2009, which also exceeded 

the percentage increase in the ECI—reduced the pay gap 

that had once stood at 13.5 percent (in 1998 and 1999) 

to 2.9 percent (see Figure 4).22

The pay gap, measured as described above, might not 

provide the best information on the adequacy of military 

compensation. First, the broad sample of civilian workers 

included in the survey that is used to produce the ECI 

consists of people who are, on average, older than military personnel and more likely to have a college degree. 

Since 1980, the pay of college-educated workers has risen 

faster than that of high school graduates in the civilian 

sector. Also, the pay of older civilian workers generally 

has grown faster than that of younger workers.

15. TRICARE for Life was enacted in the NDAA for fiscal year 2000. 

The program is funded on an accrual basis, with payments into 

the Medicare-Eligible Retiree Health Care Fund charged against 

the military personnel accounts.

16. That change was enacted in section 644 of the NDAA for fiscal 

year 2005 (P.L. 108-375, 118 Stat. 1960, 10 U.S.C. 1451).

17. The rules for concurrent receipt have been relaxed successively 

in section 636 of the NDAA for fiscal year 2003 (P.L. 107-314, 

116 Stat. 2574, 10 U.S.C. 1413a, as amended by section 642 of 

the NDAA for fiscal year 2004, P.L. 108-136, 117 Stat. 1516) and 

in section 641 of the NDAA for fiscal year 2008 (P.L. 110-181, 

122 Stat. 156).

18. That change was enacted in section 647 of the NDAA for fiscal 

year 2008 (P.L. 110-181, 122 Stat. 160, 10 U.S.C. 12731).

19. Those calculations are revisited each year by DoD’s Office 

of the Actuary, most recently in “Valuation of the Military 

Retirement System: September 30, 2008” (December 2009), 

http://actuary.defense.gov/valbook2008.pdf.

20. An exception was the “pay table reform,” which provided additional increases in basic military pay tied to seniority, spread over 

calendar years 2000 and 2001.

21. Section 602 of the NDAA for fiscal year 2004 (P.L. 108-136, 

117 Stat. 1498, amending 37 U.S.C. 1009).

22. Rick Maze, “War of words heats up over 2010 pay raise,” 

Times	

	www.armytimes.com/news/2009/

03military_payraise_MOAA_031009w. The pay gap, which was 

13.5 percent in 2008 and 2009, is the percentage by which the 

cumulative increase in military basic pay since 1982 fell short of 

the cumulative increase in the ECI for wages and salaries in private industry.
	
	








 



Figure 4.

Cumulative Difference Between Changes in Military and 

Private-Sector Pay Raises Since 1982



 Congressional Budget Office.

Note: The employment cost index (ECI) measures wages and salaries in private industry.

a. Regular military compensation (RMC) includes basic pay, allowances for housing and subsistence, and the federal tax advantage that 

occurs because those allowances are not taxed.

	

	



50th percentile (median) earnings for civilian counterparts of comparable age and education. With cash 

allowances added to the equation, pay for the average 

enlisted member in 2006 matched the 75th percentile of 

civilian earnings, exceeding DoD’s stated goal of paying 

at the 70th percentile.23

Calculation of the pay gap focuses on one component of 

military compensation—basic pay—and ignores changes 

in other components. Regular military compensation 

(RMC) is a broader measure that, in addition to basic 

pay, includes housing and food allowances, which are not 

subject to the federal income tax. In addition to raising 

basic pay in 2000, DoD requested and lawmakers authorized a restructuring of housing allowances that eliminated out-of-pocket expenses typically paid by service 

members (those payments had averaged about 20 percent 

of housing costs).24 Other changes included more closely 

linking allowance rates to increases in local housing prices 

and protecting service members from any declines in 

those prices. 

With all of those legislated changes, the 10 annual pay 

raises between 2000 and 2009 added 65 percent in 

nominal terms (or an average of 5.1 percent compounded 

annually) to RMC; the comparable increase in basic pay 

was 52 percent (or an average of 4.3 percent per year). 

Recomputed using RMC, the pay gap reversed sign in 

1982 1985 1988 1991 1994 1997 2000 2003 2006 2009

-15

-10

-5

0

5

10

15

Cumulative Difference

Between Changes in

Military Basic Pay and the

Civilian ECI

Cumulative Difference Between

Changes in RMC and the

Civilian ECIa

 Comparisons of the percentiles were reported in Congressional 

Budget Office, 	


	



DoD’s goal of paying at the 70th percentile was first stated in 

Department of Defense, 








Military Compensation 


http://prhome.defense.gov/qrmc/

Vol1/Pref.pdf.

24. Those changes were enacted in section 605 of the NDAA for fiscal 

year 2001 (P.L. 106-398, 114 Stat. 1654A-147, 37 U.S.C. 403).
 	
	












2002 and stood at +10.3 percent on January 1, 2009 

(see Figure 4).

Many factors complicate the process of determining a 

military pay raise that is perceived as fair and facilitates 

the military’s efforts to meet its goals for recruiting and 

retaining high-quality personnel. Military service involves 

more sacrifices than many other occupations, including 

frequent moves during peacetime and, since 2002, the 

prospect of deployment to Afghanistan or Iraq. Military 

compensation includes payments in kind (such as medical care for service members and their eligible family 

members) and deferred compensation (such as retirement 

pay and medical care for retired service members and 

their families); additional deferred compensation is available through the Department of Veterans Affairs, 

although it is not included in DoD’s budget. Given the 

unique aspects of military life and the emphasis on noncash compensation, assessing the validity of benchmarking contemporaneous military pay against the 70th or 

any other percentile of the civilian wage distribution is 

difficult.25 Ultimately, the best barometer of the effectiveness of DoD’s compensation system is how well the military attracts and retains high-quality personnel. Overall, 

in recent years, DoD has met its goals in recruiting and 

retaining active-duty members, perhaps because military 

compensation compares favorably with civilian options.26

Many of the same considerations apply to DoD’s civilian 

personnel. DoD’s 2010 budget calls for employing 

745,000 full-time-equivalent civilians who would earn 

$70 billion in compensation in that year. Of that sum, 

$56 billion would be paid from the O&M appropriation.27 The same pressures that real increases (above general inflation) in military compensation exert on the 

appropriation for military personnel are reinforced by real 

increases in civilian compensation in the O&M and other 

appropriations, both contributing to the real increases in 

funding required for operation and support.

Military Medical Costs

	


	
				
		

funding will grow from $46 billion in 2010 to $90 billion by 2028, CBO estimates, for a real increase of 

97 percent compared with the 2010 amount. Medical 

funding accounts for almost half of the growth projected 

for O&S funding between 2010 and 2028.

For the base projection of medical costs without unbudgeted costs, CBO used the 2010 budget as a starting 

point and then used information provided by DoD’s 

TRICARE Management Activity to estimate changes in 

direct care, purchased care, and pharmaceutical costs for 

2011 through 2015. Although the implied rates of cost 

growth for that period differ from those estimated for the 

general U.S. population, they reflect the evolving demographics of the military population, the structure of the 

military health care benefit, and policy initiatives specific 

to military medicine. For fiscal years 2016 through 2018, 

CBO assumed that DoD’s per capita spending on health 

care would grow at rates similar to those anticipated for 

medical spending elsewhere in the economy.28

Pay increases for uniformed medical personnel account 

for only 4 percent of the overall growth in medical costs 

that CBO projects between 2010 and 2028. Various 

other expenses—most notably accrual charges for 

TRICARE for Life and the costs of pharmaceuticals and 

of purchased care and contracts—will be more important 

(see Figure 5). Accrual payments make up about 

29 percent of the projected increase in medical funding. 

For the base projection, CBO assumes that medical 

accrual payments will grow at a long-run nominal rate of 

6.25 percent per year from 2011 through 2018, then 

gradually drop to an annual rate of 4.87 percent by 25. Congressional Budget Office, 	




26. Congressional Budget Office, Recruiting, Retention, and Future 

Levels of Military Personnel (October 2006).

27. See the “Green Book,” namely, Department of Defense, National 

Defense Budget Estimates for FY 2010 (June 2009), Tables 6-1, 6-2, 

and 7-5, http://comptroller.defense.gov/defbudget/fy2010/

Green_Book_Final.pdf. (The remaining civilians would be paid 

from other appropriation titles: For instance, civilians in military 

laboratories might be paid from the appropriation for research, 

development, test, and evaluation; civilians in acquisition program offices might be paid from the procurement appropriation.)

28. CBO derived its estimates for the growth of funding for 

pharmaceuticals, direct care, and purchased care for 2016 

through 2018 from the projections for pharmaceuticals, hospital 

care, and physician and clinical services in “National Health 

Expenditure Projections 2008–2018,” www.cms.hhs.gov/

NationalHealthExpendData/downloads/proj2008.pdf, published 

by the Centers for Medicare and Medicaid Services. Those projections extend only to 2018, and CBO assumed that growth would 

slow after that date, eventually reaching a rate in 2033 that was 

1 percentage point higher than the growth of per capita GDP.
	
	








 



Figure 5.

	







	



 Congressional Budget Office.

Note: Before 2001, pharmaceutical costs were not separately identifiable but were embedded in the costs of two categories, “Purchased 

Care and Contracts” and “Direct Care and Other.” Starting in 2001, most pharmaceutical costs are separately identifiable, but some of 

those costs may be embedded in the category “TRICARE for Life Accrual Payments.”

29 CBO estimates that accrual charges will increase 

by 118 percent in real terms between 2010 and 2028, 

from $10.8 billion to $23.4 billion.

DoD anticipates that pharmaceutical spending per capita 

will decrease by about 11 percent in nominal terms from 

2009 to 2010, largely because of a recent federal regulation that applies federal ceiling prices to pharmaceuticals 

purchased through TRICARE’s retail pharmacy network. 

DoD expects that regulatory change and other factors 

will hold growth in pharmaceutical spending below historical rates during most of the 2011–2015 period. CBO 

projects that per capita costs for pharmaceuticals will 

then resume increasing at a nominal annual rate of 7 percent beginning in 2016, slowing to about 5 percent per 

year by 2028. CBO estimates that pharmaceutical spending will increase by 121 percent in real terms between 

2010 and 2028, from $3.7 billion to $8.2 billion.

DoD expects that per capita funding for purchased care 

will increase by 11 percent in nominal terms between 

2009 and 2010 and that per capita funding for direct care 

in MTFs will remain flat in those years. In CBO’s projections, per capita funding for direct care and purchased 

care grows at rates averaging 6 percent and 9 percent, 

respectively, per year from 2011 through 2015; beginning 

in 2016, growth rates for both types of care drop, averaging about 5 percent per year through 2028. Pay for uniformed medical personnel is projected to follow the same 

trend as for other military personnel in DoD’s budget.

 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028

0

20

40

60

80

100

120

Military Personnel

Direct Care and Other

Purchased Care and

Contracts

TRICARE for Life

Accrual Payments

Pharmaceuticals

January 2009

Base Projection

2010 Projection with

Total Unbudgeted Costs

Actual Projected

January 2010

Base Projection

 The independent Board of Actuaries for DoD’s Medicare-Eligible 

Retiree Health Care Fund annually updates its estimate of the 

accrual charges necessary to fund TRICARE for Life. Those 

accrual charges are intended to fund health care for military 

retirees and dependents who are eligible for Medicare. Using 

assumptions similar to those applied to spending on direct care, 

purchased care, and pharmaceuticals, CBO assumed that the 

growth in those accrual charges would eventually slow, reaching a 

rate equal to 1 percentage point above growth in GDP per capita 

by 2033.
 	
	












Figure 6.

Trends in Resources for Operation and Maintenance per 

Active-Duty Service Member

(Thousands of 2010 dollars)

 Congressional Budget Office.

a. Includes supplemental and emergency appropriations that had been enacted or requested at the time of the 2010 budget submission.

	

							

DoD’s funding in real terms would rise by 21 percent for 

military medical personnel, 121 percent for pharmaceuticals, 93 percent for direct care, and 124 percent for purchased care and contracts.

Trends in O&M Funding per Active-Duty 

Service Member

					
	
	
 !	

service member increased steadily by about $2,200 per 

year (in 2010 dollars) because of factors such as medical 

inflation and civilian pay raises, discussed above (see 

Figure 6). O&M costs have fluctuated above that trend 

since 2002 because the wars in Iraq and Afghanistan have 

required large amounts of O&M funding but more modest increases in active end strength (the number of activeduty military personnel as of the last day of the fiscal 

year.)30 Those funds supported U.S. military forces in the 

Iraq and Afghanistan theaters, providing food, housing, 

and security contracts; fuel, spare parts, and maintenance 

for military equipment; transportation of personnel and 

equipment to and from the theater; and other services.

CBO’s projections through 2028 include O&M funding 

that starts above the prewar trend by between $12,000 

and $15,000 per service member per year, then continues 

to increase at roughly the prewar rate (see Figure 6). That 

jump reflects, in part, Secretary of Defense Gates’s initiative to move support funding into the regular (or “base”) 

defense budget that had previously been provided instead 

through supplemental and emergency appropriations:

I just wanted to see that the needs of the 

warfighter—on the battlefield, at home, or in 

the hospital—had a seat at the table when 

priorities were being set and long-term base 

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028

0

20

40

60

80

100

120

140

160

180

200

220

Trend Estimated from

1980 to 2001

2010 Projection With

Contingency Unbudgeted Costs

Actual Projected

2010 Projection Without

Unbudgeted Costs

Actual Resourcesa

 The Army’s active-duty end strength increased from 480,000 in 

2001 to 544,000 in 2008—an increase of 13 percent. The supplemental and emergency appropriations for Army O&M in 2008 

totaled twice the amount in the regular budget for that year.
	
	








 



budget decisions were being made. And one of 

the things I’ve learned since entering government 43 years ago is that the best way to ensure 

that an organization really cares for and fights 

for something—as a lioness does for her cubs—

is to put that thing in its base budget. So, the 

top priority recommendation I made to the 

President was to move programs that support 

the warfighters and their families into the services’ base budget, where they can acquire a 

bureaucratic constituency and long-term funding. This includes, among others, more funding 

for medical research and treatment for TBI 

[traumatic brain injuries] and post-traumatic 

stress, improved child care, spousal support, 

lodging, and education.31

Still more O&M funding would be required to support 

overseas contingency operations. CBO estimates that 

funding would level off at $9,000 per service member 

annually in 2014 and beyond under the scenario of 

30,000 troops deployed worldwide (see Figure 6).

Projections for Military Construction and 

Family Housing

	



	



	





planning, design, construction, and major restoration of 

military facilities. Those appropriations also pay for the 

base realignment and closure (BRAC) process, including 

environmental assessments of sites designated for closure 

and construction projects needed to help consolidate personnel and units. Since 1980, appropriations for military 

construction (excluding funding for BRAC) have averaged about $7 billion annually. DoD plans to dedicate 

enough funding to its facilities to achieve a recapitalization rate of 67 years. (The recapitalization rate is calculated by dividing the replacement value of all military 

facilities by the average funding used to restore or replace 

a portion of them annually.) That goal will require average funding of between $8 billion and $11 billion per 

year, CBO estimates.

The Administration’s plans for 2010 include $8 billion in 

funding for military construction for the round of base 

realignments and closures that began in 2005; CBO estimates that $4 billion will be required beyond 2010 to 

complete that round. DoD projects that recurring annual 

savings will eventually reach more than $5 billion.32

Unlike previous BRAC rounds, which were more likely to 

close facilities, the current round would achieve savings 

primarily by consolidating activities more efficiently on 

existing military bases. Because few facilities would be 

completely closed, that round would have a minimal 

effect on future requirements for recapitalizing DoD’s 

facilities. Further, in CBO’s projections, the savings from 

consolidating bases do not reduce DoD’s total demand 

for resources. Instead, the projections incorporate the 

assumption that DoD will retain the budget authority for 

that money and use it for unspecified purposes not necessarily related to maintaining facilities.

Appropriations for family housing pay for the construction, operation, maintenance, and leasing of military 

family housing. Since 1980, those appropriations have 

averaged $5 billion per year. The 2010 budget and CBO’s 

projections envision that such funding will drop to 

$2 billion in future years, because some funding for military housing will come from third-party financing that is 

not recorded in the federal budget. Although such plans 

would reduce DoD’s funding for building and operating 

family housing, they also could increase expenditures for 

the basic allowance for housing that military personnel 

receive to rent private housing units.33

Unbudgeted Costs of Operation and Support

CBO analyzed the potential unbudgeted costs that might 

result from changes in several assumptions regarding the 

2010 budget. If all of those assumptions were changed, 

funding for O&S would total $465 billion in 2028, some 

9 percent more than the amount in CBO’s base projection that excludes unbudgeted costs.

Unbudgeted Costs for Contingency Operations.
	









	







	





Administration requested $130 billion for 2010 to fund 

contingency operations involving 100,000 U.S. military 

personnel deployed to Iraq and 68,000 deployed to 

31. Department of Defense, speech delivered by Secretary of Defense 

Robert M. Gates at the Air War College, Maxwell-Gunter Air 

Force Base, Alabama, April 15, 2009, www.defense.gov/speeches/

speech.aspx?speechid=1344.

32. Department of Defense, 	




vol. 1 (May 2005), p. 4. 

33. Housing allowances are not included in the family housing 

budget, but they appear among military personnel costs in the 

O&S budget. CBO’s projection of overall military personnel costs 

beyond 2015 implicitly incorporates changes in the basic allowance for housing that reflect changes in the 2010 budget.
 	
	












Afghanistan.34 Subsequently, in December 2009, the 

President announced his plan to increase (“surge”) the 

number of U.S. military personnel in Afghanistan by 

30,000. Because the President’s announcement was not 

anticipated in the Administration’s 2010 budget request, 

implementing his plan would require additional supplemental appropriations. Although the President indicated 

that the one-year cost of a surge of 30,000 troops would 

be about $30 billion, the Administration has not provided a projection of troop levels beyond 2010 or estimates of the associated costs in those later years.35

CBO’s projection of the 2010 budget does not specifically account for the surge in Afghanistan either. Instead, 

CBO has developed a longer-term scenario in which the 

total number of U.S. military personnel deployed to contingency operations worldwide would decline to 30,000 

starting in fiscal year 2013, although those troops would 

be in unspecified locations and not necessarily in Iraq or 

Afghanistan.36 CBO estimates that supporting that number of deployed service members would require recurring 

annual appropriations of about $20 billion (in 2010 dollars), of which about $16 billion would consist of O&S 

costs.

	

			




ical costs could rise more rapidly than anticipated. 

Growth rates could be higher if any of the following 

items rise faster than anticipated: prices of the goods and 

services used as inputs to medical care; the range of medical services provided; the average intensity of services provided; or the number of eligible beneficiaries relying on 

TRICARE rather than on other sources of care (for 

example, employer-provided health insurance or the 

health facilities of the Department of Veterans Affairs).

For its analysis of unbudgeted costs, CBO assumed that 

DoD’s medical costs per capita would increase during fiscal year 2010 at the rates outlined in the department’s 

annual memorandum on inflation guidance.37 For fiscal 

years 2011 and beyond, CBO assumed that per capita 

medical costs would increase 30 percent faster than the 

rates used in the base case.38 For direct care and purchased 

care, those nominal rates would average 8 percent and 

12 percent per year, respectively, between 2011 and 2015 

and then slow to 6 percent per year by 2028 (compared 

with 6 percent and 9 percent, respectively, falling to 

5 percent, as in the base projection). For pharmaceuticals,

CBO assumed 9 percent growth in 2016, falling to 7 percent in 2028 (rather than 7 percent falling to 5 percent, 

as in the base projection).

Finally, for estimating unbudgeted costs CBO assumed 

that accrual charges would rise steadily at a nominal rate 

of 6.25 percent per year even in later years rather than 

falling gradually after 2018, as is assumed in the base projection. The higher rate reflects the current estimate by 

DoD’s independent Board of Actuaries of the long-term 

growth for health care spending by military retirees and 

dependents who are eligible for Medicare. Under all of 

those alternative assumptions, DoD’s total medical 

spending would increase by 144 percent (rather than by 

97 percent) in real terms from 2010 to 2028 if unbudgeted costs are included, rising to $112 billion by 2028 

(rather than to $90 billion, as in the base projection), 

CBO estimates.

34. Department of Defense, 	

			

mary Justification 	
http://comptroller.defense.gov/

defbudget/fy2010/fy2010_SSJ.pdf.

35. Remarks by the President, “Address to the Nation on the Way Forward in Afghanistan and Pakistan,” December 1, 2009. CBO’s 

estimates of the costs for 2010 and 2011 of increasing the number 

of U.S. troops in Afghanistan are contained in Congressional 

Budget Office, “CBO’s Analysis of Scenarios for Funding the 

Wars in Afghanistan and Iraq,” letter to the Honorable John M. 

Spratt Jr. (January 21, 2010).

36. Congressional Budget Office, 		

An Update 
	


37. DoD anticipates that medical costs will escalate more rapidly than 

general inflation. In DoD’s most recent programming guidance, 

the DoD comptroller promulgated inflation rates for 2010 of 

7 percent for private-sector medical care purchased by the Defense 

Health Program, 10.1 percent for the program’s pharmacy outlays, 

and 6.2 percent for its other outlays (mostly for in-house care provided at military medical treatment facilities). See Department of 

Defense, “Inflation Guidance—Fiscal Year (FY) 2010 President’s 

Budget” (memorandum from the Under Secretary of Defense 

[Comptroller], February 13, 2009), www.ncca.navy.mil/services/

PB2010_Inflation_Guidance_Feb_13_2009.pdf. 

38. For the justification of the 30 percent acceleration in costs, see 

Congressional Budget Office, Growth in Medical Spending by the 

Department of Defense (September 2003), p. 14.
	
	








 



	
	
			
		

Increases. 	

		

and civilian pay raises from 2011 forward will be set 

equal to the percentage increase in the ECI.39 CBO has 

estimated the additional costs that would accrue if the 

military and civilian pay raises from 2011 through 2015 

instead equaled its projection of the percentage increase 

in the ECI plus a premium of 0.5 percentage points. 

Funding larger pay raises over those five years would 

require an additional appropriation of $2.8 billion for 

military personnel and $1.4 billion for O&M (to fund 

higher civilian salaries) in 2015. Although pay raises are 

assumed to revert to the ECI after 2015, the funding necessary to sustain the larger pay raises assumed from 2011 

through 2015 would continue to compound in future 

years, requiring total appropriations of $3.6 billion for 

military personnel and $1.8 billion for O&M in 2028.

	

		
	

		
				

two components: research, development, test, and evaluation (RDT&E) and procurement. DoD’s plans for 2010 

call for acquisition spending of $187 billion in 2010. 

Carrying out those plans over the long term would cause 

acquisition funding—excluding unbudgeted costs—to 

peak at $202 billion in 2017, CBO projects, and to average about $185 billion annually from 2011 through 2028 

(see Figure 7).

CBO’s current projections of procurement and of total 

acquisition funding—based on DoD’s 2010 budget 

request—differ from CBO’s earlier projections that were 

based on DoD’s 2009 budget and FYDP. Comparing a 

future year common to both analyses, CBO currently 

projects procurement funding of $124 billion ($8 billion

below its earlier projection) in 2020 and total acquisition 

funding $185 billion ($7 billion below its earlier projection) in that year (see Table 3).40 The new, smaller projections incorporate changes to DoD’s acquisition plans 

announced by the Secretary of Defense and are embedded in the department’s 2010 budget request.

CBO has estimated the unbudgeted costs that measure 

the difference between two budget requirements—one in 

which DoD is able to execute all of its plans at the costs 

and prices it assumes; and one in which DoD attempts to 

execute all of its plans at the prices it is more likely to 

face. Including those unbudgeted costs and the costs for 

repairing, replacing, and upgrading equipment used in 

contingency operations, CBO projects that acquisition 

funding based on the 2010 request would peak in 2017 

at $231 billion. In that case, funding for acquisition 

would average $212 billion annually, about 15 percent 

more than in the case excluding unbudgeted costs. 41

Army Acquisition

						
	

of the Army in the 2010 budget, excluding supplemental 

and emergency appropriations, total $48 billion. CBO 

projects that an average of $32 billion per year would be 

needed between 2011 and 2028 to carry out the Army’s 

acquisition programs (see Figure 8).

In 2009, the Army received $17 billion in supplemental 

and emergency appropriations in the RDT&E and procurement accounts. That funding was used to repair and 

replace equipment that had been worn out, damaged, or 

destroyed in operations in Iraq and Afghanistan; to 

upgrade equipment; and to buy new equipment, including 

equipment for the Army National Guard. Supplemental 

and emergency appropriations provided 31 percent of the 

Army’s total acquisition funding in 2009. CBO’s base 

projection does not anticipate any future supplemental or 

emergency appropriations. However, CBO has estimated

39. CBO’s base projection assumed a 2.9 percent pay raise for military 

personnel, consistent with DoD’s 2010 budget request; CBO 

allowed for the possibility of a 3.4 percent pay raise with attendant 

unbudgeted costs. Section 601 of the NDAA for fiscal year 2010 

authorized the military pay raise of 3.4 percent that took effect on 

January 1, 2010 (P.L. 111-84, 123 Stat. 2347, 37 U.S.C. 1009), so 

the unbudgeted costs associated with the additional 0.5 percent 

pay raise were actually realized. There are no corresponding 

unbudgeted costs for civilian pay because the Administration’s 

request for a 2.0 percent raise was enacted in section 744 

of the Consolidated Appropriations Act for Fiscal Year 2010 

(P.L. 111-117), which provided an increase averaging 2.0 percent—an increase in base pay of 1.5 percent and an increase in 

locality pay averaging 0.5 percent.

40. See Congressional Budget Office, 	
	





Fiscal Year 2009 Future Years Defense Program 	




41. Historical analysis of DoD’s acquisition programs indicates that 

costs have grown substantially relative to initial estimates. See 

Mark V. Arena and others, Historical Cost Growth of Completed 

Weapon System Programs, 

United States Air Force, 2006), www.rand.org/pubs/

technical_reports/2006/RAND_TR343.pdf; and Obaid Younossi 

and others, Is Weapon System Cost Growth Increasing? A Quantitative Assessment of Completed and Ongoing Programs,MG-588-AF 

(prepared by RAND for the United States Air Force, 2007), 

www.rand.org/pubs/monographs/2007/RAND_MG588.pdf.
	
	












Figure 7.

	



	



 Congressional Budget Office.

Notes: Only the 2009 supplemental appropriations and the 2010 contingency request are separately identified in this figure. 

The supplemental and emergency appropriations for earlier fiscal years are included with the funding categories.

C4ISR = command, control, communications, computers, intelligence, surveillance, and reconnaissance.

	




as $42 billion annually when the unbudgeted costs of 

equipment for future contingencies and likely cost 

growth in procurement programs are included.42

CBO’s projection of the Army’s acquisition resources, 

which incorporates changes announced by the Secretary 

of Defense in April 2009, would require less annual funding for that purpose in each year from 2010 to 2028 than 

in CBO’s earlier projection, which was based on the 2009 

FYDP. The primary reason for that reduction is the 

change in the Future Combat Systems (FCS) program 

announced by the Secretary. In its projection, CBO 

assumed that the FCS program, as previously conceived, 

would be canceled and that some of the resulting savings 

would be reinvested in upgrading current combat vehicles 

and in fielding some of the less technologically challenging components of the FCS to the Army’s combat brigades on an accelerated schedule. Compared with the 

2009 FYDP, that change in the Army’s acquisition strategy would yield significant savings, starting in 2013, 

when the previous FCS program would have begun to 

require annual investments of $3 billion or more. 

Between 2017 and 2020, the increased investment that 

CBO projects would be needed to upgrade the Army’s 

combat vehicles and to field FCS technologies to combat 

brigades would offset much of the savings realized by canceling the FCS program. After 2020, however, almost the 

full $6 billion that the Army would have needed annually 

to complete the FCS program could be saved, according

Military Personnel

Direct Care and Other

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028

0

50

100

150

200

250

300

2010 Projection

with Total

Unbudgeted Costs

January 2009

Base Projection 2009 Supplemental

Appropriations

2010 Contingency

Request Ground Combat

Research, Development,

Test, and Evaluation

2010 Projection

with Contingency

Unbudgeted Costs

Aircraft

C4ISR

Missile

Defense

Missiles and

Munitions

Other Procurement

Ships

Actual Projected

 CBO’s projection of the Army’s acquisition program beyond 2010 

includes funds to procure missile defense systems such as the 

Medium Extended Air Defense System, the Terminal HighAltitude Area Defense, and interceptors for a boost-phase missile 

defense. Most of the research for those programs is currently 

funded by the Missile Defense Agency, but DoD plans to transfer 

procurement funding for those systems to the military services 

when the systems enter production.
	
	








 





	




	



 Congressional Budget Office.

Note: C4ISR = command, control, communications, computers, intelligence, surveillance, and reconnaissance; n.a. = not applicable.

a. Excludes $6 billion in other supplemental and emergency funding allocated among the funding categories listed above.

b. Includes $17 billion that the Administration has not requested but that CBO projects could be needed to fund either contingency 

operations or other unbudgeted costs.

	



	


shows a notch in 2013, followed by a hump through 

2020 similar to CBO’s earlier projection, then finally a 

rapid falloff after 2020 for the remainder of the projection period (see Figure 8).

DoD’s Plans to Lower the Target Number of BCTs in the 

Active Army from 48 to 45. 


 !"#$

DoD planned to expand the active Army from 42 to 48 

brigade combat teams (BCTs) by 2013 and to have 28 

BCTs in the Army National Guard. In its 2009 edition of 

	


%
&

probably be unable to identify 23,000 additional soldiers 

(beyond those already identified) to fully populate 6 new 

brigades under the then-current cap of 547,000 activeduty soldiers.43 In April 2009, the Secretary of Defense 

proposed curtailing the number of active BCTs at 45 

(versus 48) to ensure that deployed units would be fully 

staffed and to end the routine use of “stop loss” (the practice of involuntarily retaining deployed soldiers past the 

end of their enlistment or reenlistment contracts until 

after their units return to the United States). The Secretary also proposed maintaining the active Army’s planned 

end strength at 547,000. About three months later, the 

Secretary announced a temporary increase in the active 

Army’s end strength from 547,000 to 569,000 through 

fiscal year 2012, for the purpose of “[ensuring] that our 

deploying units are properly manned, and not to create

Procurement

Ground combat 10 7 7 13 5 9

Ships 15 16 21 23 23 24

Aircraft 29 26 31 20 24 25

Missiles and munitions 4 4 5 2 3 3

Missile defense 1 1 2 4 2 3

C4ISR 5 9 9 6 3 7

Other 48 46 45 56 55 55

Research, Development, Test, and Evaluation 81 79 57 61 54 59 ____ ____ ____ ____ ____ ____

Subtotal 194 187 177 185 168 185

Additional Supplemental, Emergency, and

Contingency Funding 25 a 23 n.a. n.a. n.a. n.a.  ____ ____ ____ ____ ____

Total

Including Additional Funding 219 211 177 185 168 185

Including Total Unbudgeted Costs n.a. 227 b 199 215 192 212

Regular Defense Budget

Other Resources

Actual

2009

Requested

2010

Projected

2013 2020 2028

Average

2011–2028

 Congressional Budget Office, Budget Options, Volume 2

(August 2009), Option 050-1, p. 6.
 	
	












Figure 8.

	




	



 Congressional Budget Office.

Notes: Only the 2009 supplemental appropriations and the 2010 contingency request are separately identified in this figure. 

The supplemental and emergency appropriations for earlier fiscal years are included with the funding categories.

FCS = Future Combat Systems; C4ISR = command, control, communications, computers, intelligence, surveillance, and 

reconnaissance.

	

	

	44 Thus, the Army’s plan for 

2010 is to level off at 45 active brigades and to have 

28 brigades in the Army National Guard, for a total of

73 brigades.

Future Combat Systems. In early April 2009, the Secretary of Defense outlined changes to plans for the Future 

Combat Systems program and recommended that those 

changes be incorporated into the Administration’s fiscal 

year 2010 budget request for defense.45 Although the 

2010 request was submitted in May 2009, it did not contain the programmatic details typically associated with 

budget submissions. In particular, the Administration 

announced that, unlike previous budget requests, the 

request for fiscal year 2010 would not be accompanied by 

 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028

0

10

20

30

40

50

60

70

80

90

Actual Projected

2010 Projection

with Total

Unbudgeted Costs

January 2009

Base Projection

2009 Supplemental

Appropriations

2010 Contingency

Request

Research, Development, Test, and Evaluation

2010 Projection

with Contingency

Unbudgeted

Costs

Ground

Combat

C4ISR

Missiles and

Munitions

FCS

Aircraft

Other Procurement Missile

Defense

Department of Defense, “DoD News Briefing with Secretary 

Gates and Chairman, Joint Chiefs of Staff, Admiral Michael 

Mullen” [news transcript, July 20, 2009], http://comptroller

.defense.gov/defbudget/fy2010/fy2010_oco.pdf. The Secretary 

indicated that the increase in end strength for fiscal years 2009 

and 2010 could be achieved without requesting any additional 

budget authority. Subsequently, the Department of Defense identified a requirement for about $1 billion in 2010 to pay for 

15,000 additional soldiers and recommended that those funds be 

reprogrammed from various accounts, including about $700 million originally slated for Army operations and to purchase 

medium tactical vehicles and high-mobility multipurpose wheeled 

vehicles. See Department of Defense, 	
	


FY2010 President’s Budget Request for Overseas Contingency Operations (OCO), Summary and Explanation of Changes, Exhibits for 

FY2010, Amended Justification Material	



http://comptroller.defense.gov/defbudget/fy2010/

fy2010_oco.pdf. The proposed source for funding in 2011 and 

2012 remains to be determined.

45. Details concerning the revised FCS program will probably not be 

available until the budget for 2011 is submitted in February 2010. 

The changes the Secretary specified included canceling the 

manned vehicle portion of the FCS program, counterbalanced by 

accelerating the fielding of other FCS technologies to all of the 

Army’s combat brigades.
	
	








 



revised and updated Selected Acquisition Reports, which 

would have supplied programmatic details for years after 

2010.

Canceling the basic FCS program and removing all of the 

related funding would save $110 billion in CBO’s 2010 

projection compared with the one associated with the 

2009 FYDP. However, the fielding of certain FCS technologies to the Army’s combat brigades would incur additional costs. In CBO’s projections, the Army would field 

unattended ground sensors, the two classes of unattended 

aerial vehicles, and the small unmanned ground vehicle 

and the non-line-of-sight launch system to all of its combat brigades.46 The Army would also continue to develop 

the network portion of the FCS program and field the 

necessary hardware to all of its combat brigades so that 

information gathered by the sensors could be shared by 

all elements within the brigade.47

The investments needed to insert FCS technologies into 

existing systems and units could cost $40 billion through 

2028, CBO estimates. Those funds would be used to 

insert technologies within the Army’s 73 combat brigades 

and would be $27 billion more than the amount 

included for the comparable program in last year’s projection. All told, costs for FCS-related acquisitions would be 

$75 billion less from 2011 to 2026 in CBO’s latest projection than in the previous one.

Programs to Purchase and Upgrade Other Ground 

Combat Vehicles. 		

	



significantly more funding for the purchase of Stryker 

vehicles and upgrades to the Army’s tanks and Bradley 

vehicles than was included in its previous projection. 

That increase is primarily due to CBO’s inclusion of 

additional funds in its projection to purchase and 

upgrade existing vehicles to offset the loss of the FCS 

vehicles that would have been introduced into Army 

units under the now canceled FCS program. Specifically, 

in the case of the Stryker program, CBO’s current projection includes the annual cost of roughly $3 billion for 

purchasing 700 Stryker vehicles each year (compared 

with 300 annually in last year’s projection) from 2015 to 

2022. Those projected purchases reflect the Army’s goals 

as reported in Army Modernization Strategy 2008	

ious press reports that indicate the Army’s intention to 

replace its aging fleet of M113-based vehicles with 

Stryker vehicles.48

The Army’s plans to upgrade its self-propelled 155-

millimeter howitzers will revitalize the entire fleet at an 

annual cost of about $200 million from 2010 through 

2021. For the rest of the combat vehicles, CBO assumed 

that upgrading Abrams tanks and Bradley vehicles would 

have a combined cost of roughly $2 billion annually. 

Future budgetary constraints could result in some of 

those programs receiving amounts less than those currently projected by CBO, particularly if the Army carries 

through on reported plans to field an entirely new ground 

combat vehicle in the next 5 to 10 years.

	


	
	
	

truck programs is roughly the same as last year’s estimates 

for the common years through 2026. About $28 billion 

would be used to purchase a new vehicle the Army and 

Marines are developing—the joint tactical light vehicle—

as a replacement for the Army’s high-mobility multipurpose wheeled vehicles, of which it has more than 

100,000. The newer vehicle is expected to be safer and 

more fuel-efficient than the vehicle it replaces, but the 

large quantities required would result in average expenditures from 2015 to 2028 of $1.7 billion per year. Additional purchases planned for 2011 to 2028 include trucks 

from the family of medium tactical vehicles and upgrades 

to extend the service life of the Army’s heavy trucks. All 

told, CBO’s projection includes expenditures for trucks 

that average $2.7 billion per year from 2011 to 2028 and 

peak at $4.0 billion in 2018.


	

	
		

require a total of $66 billion in procurement funding 

between 2010 and 2028, CBO estimates. The primary 

46. For a detailed discussion of the Army’s FCS program and its costs, 

see Congressional Budget Office, 	



formation Programs and Possible Alternatives(June 2009). 

47. CBO’s projection does not include the cost to field the unmanned 

ground vehicles that were part of the former FCS program and 

that may be retained in the restructured program. Nor does it 

include funds to develop and procure an entirely new ground 

combat vehicle. If those portions of the FCS program, as included 

in the 2009 FYDP, were included in CBO’s current projection, 

the overall cost of FCS-related acquisition would be roughly equal 

to that included in CBO’s previous projection.

48. U.S. Army, Army Modernization Strategy 2008	

	

p. 30; Stephen Speakes and Gregory Martin, “Army Modernization in an Era of Persistent Conflict,” , vol. 58, no. 1 (January 2008), pp. 31–36; and Jason Sherman, “Army Eyes Major 

Boost to Stryker Fleet Size to Replace Aging M113s,” 



Army	
	


 	
	












change to CBO’s current projection relative to its projection based on the 2009 FYDP is the cancellation of the 

armed reconnaissance helicopter program that was being 

developed to replace the Army’s OH-58D Kiowa Warriors. CBO’s projection assumes that a new program 

(similar in scope to the canceled program) would begin in 

2010 to develop and procure more than 500 armed 

reconnaissance helicopters to replace the OH-58Ds. 

Funding for the Army’s aviation programs would also 

pay for the purchase of more than 300 new light-utility 

helicopters to replace the UH-1H Hueys and OH-58C 

Kiowas that are slated for retirement. In addition, the 

Army has tentative plans to begin a new joint heavy-lift 

rotorcraft program. CBO’s updated projection incorporates those programs along with programs to upgrade and 

extend past 2028 the service life of the Army’s Apache, 

Blackhawk, and Chinook helicopters.

	
	

	




Army will invest an average of $1.4 billion per year from 

2011 to 2028 to purchase equipment to defend against 

ballistic missiles. The Army’s purchases would include the 

Terminal High-Altitude Area Defense system, the Patriot 

Advanced Capability-3 system, and the Medium 

Extended Air Defense System to defend against tactical 

ballistic missiles. (Details of CBO’s projection for missile 

defenses are provided in a later section.)

Navy and Marine Corps Acquisition

The President’s budget for 2010 includes $64 billion for 

acquisition by the Department of the Navy, which 

includes the Marine Corps. In CBO’s projections, acquisition funding would rise to $76 billion in 2017 and then 

decline to $48 billion by 2028. Between 2011 and 2028, 

the Navy’s acquisitions would average $63 billion a year. 

Including unbudgeted costs, the department’s acquisition 

funding could peak at $86 billion in 2017 and then fall 

back to about $56 billion by 2028—averaging $72 billion a year from 2011 to 2028 (see Figure 9).

The uneven funding profile for ships reflects the construction schedule in the Navy’s 2009 shipbuilding plan 

(the Navy did not release a plan for 2010).49 Generally, 

CBO assumes that Navy ships are fully funded in the year 

they are authorized, with the exception of aircraft carriers, 

for which funding can, by law, be spread over four years. 

Between 2010 and 2028, CBO projects, shipbuilding 

costs would reach a low of $15.3 billion in 2021, a year in 

which the Navy plans to buy only six ships—two cruisers, 

two attack submarines, and two oilers—although that 

projection also includes partial funding for a new aircraft 

carrier and for refueling the nuclear reactor of an older 

aircraft carrier. The years before and after 2021 include 

funding to purchase not only cruisers, attack submarines, 

and oilers but also amphibious assault ships, amphibious 

dock landing ships, and ballistic missile submarines. 

Funding for the littoral combat ship program is scheduled to end in 2019, contributing to the notch in the 

Navy’s acquisition profile (see Figure 9).

Ships. A substantial portion of the Navy’s resources under 

DoD’s plans for 2010 would be taken up by the procurement of battle force ships. CBO based its assumptions 

about ship procurement on the Navy’s 2009 shipbuilding 

plan and on the Secretary of Defense’s recommendations 

for the 2010 defense budget.50 CBO assumes that the 

Navy still plans to expand its fleet from the current 287 

ships to 313. On the basis of information provided in the 

Navy’s 2009 plan as modified in the Secretary of 

Defense’s speech, CBO estimates that the Navy’s purchases of ships to expand the fleet would average $24 billion per year between 2011 and 2028; that figure would 

rise to $29 billion per year through 2028 if unbudgeted 

costs were included.

	





fleet is primarily in the surface combatant force, which 

currently consists of 110 cruisers, destroyers, frigates, and 

littoral combat ships. By 2028, under CBO’s projection 

of DoD’s plans for 2010, the fleet would consist of 142 

ships—including 55 littoral combat ships, which are 

smaller and faster than any of the Navy’s current surface 

combatants.

The Navy’s plans for the surface combatant force changed 

substantially between the 2009 FYDP and the 2010 

49. CBO has compared the Navy’s 2009 shipbuilding plan with a preliminary version of its 2011 plan. See statement of Eric J. Labs, 

Senior Analyst, Congressional Budget Office, before the Seapower 

and Expeditionary Forces Subcommittee, House Armed Services 

Committee, The Long-Term Outlook for the U.S. Navy’s Fleet

(January 20, 2010).

50. Department of the Navy, A Report to Congress on Annual Long 

Range Plans for the Construction of Naval Vessels, Fiscal Year 2009

(February 2008); and Department of Defense, “Defense Budget 

Recommendation Statement” (as prepared for delivery by Secretary of Defense Robert M. Gates, April 6, 2009), 

www.defense.gov/speeches/speech.aspx?speechid=1341.
	
	








 



Figure 9.

Resources for Navy and Marine Corps Acquisition

	



 Congressional Budget Office.

Notes: Only the 2009 supplemental appropriations and the 2010 contingency request are separately identified in this figure. 

The supplemental and emergency appropriations for earlier fiscal years are included with the funding categories.

C4ISR = command, control, communications, computers, intelligence, surveillance, and reconnaissance.

	



	



	







purchased five more DDG-1000 destroyers in addition to 

the two purchased in 2007 and would have started a new 

class of air- and missile-defense cruisers in 2011. In the 

summer of 2008, however, the Navy announced its plans 

to truncate the DDG-1000 program—first at two ships, 

then at three—and to resume production of the DDG-51 

Arleigh Burke class of destroyers at a rate of one or two 

ships per year through 2017. In addition, according to 

the Secretary of Defense, the Navy will delay the start of 

the new cruiser program to revisit the requirements and 

acquisition strategy, but he did not specify when the 

Navy might begin producing those new cruisers. CBO 

assumed that the Navy would not purchase the first new 

cruiser until 2017 but would still purchase 19, as outlined in the 2009 shipbuilding plan.

The Navy is reportedly considering a number of designs 

for the new cruiser. Those designs include a modified 

repeat of the DDG-51 destroyer, an air- and missiledefense version of the DDG-1000, and conventional- or 

nuclear-propelled ships displacing 20,000 tons or more 

(more than twice the displacement of a DDG-51). CBO 

assumed for this analysis that the Navy would use the 

DDG-1000 hull to design its new cruiser. As the service’s 

plans become more defined, CBO will adjust its estimates 

accordingly.

Under the 2009 shipbuilding plan, the Navy would also 

start a new destroyer program in 2022, providing for 

replacement of the DDG-51 class. Between 2022 and 

2028, the Navy would purchase 15 ships, designated as 

the DDG(X), and would continue to acquire them at a 

rate of three per year at least through 2038. In total, the 

Navy’s current procurement plan for surface combatants 

Military Personnel

Direct Care and Other

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028

0

10

20

30

40

50

60

70

80

90

100

2010 Projection with Total

Unbudgeted Costs

January 2009

Base Projection

2009 Supplemental

Appropriations

2010 Contingency

Request Ground Combat

2010 Projection

with Contingency

Unbudgeted Costs

Aircraft

C4ISR

Missile

Defense

Missiles and

Munitions

Other Procurement

Ships

Actual Projected

Research, Development, Test, and Evaluation
 	
	












would cost an average of $7.9 billion a year between 2011 

and 2028—$11.5 billion annually, CBO estimates, if 

unbudgeted costs were included.

	
	





plan would lead to a smaller submarine force. The Navy’s 

requirement for attack submarines (SSNs) remains at 48 

through the projection period; the Navy’s plan would 

meet that requirement through 2022 but not thereafter. 

That plan also indicates that the Navy would replace its 

current 14 ballistic missile submarines (SSBNs) of the 

Ohio class with 12 new submarines starting in 2019. 

None of the four guided-missile submarines (SSGNs) that 

are scheduled for retirement would be replaced. 

The Navy’s short-term goal is to reduce the price of the 

new Virginia class attack submarine to $2.5 billion (in 

2010 dollars) and to increase procurement to two per 

year starting in 2011. CBO projects that the Navy’s plan 

for 2010 for sustaining the attack, ballistic missile, and 

guided-missile submarine forces would cost, on average, 

more than $8.6 billion per year between 2011 and 2028, 

or as much as $9.3 billion annually if unbudgeted costs 

were included.


		




	




 !"

tionary strike groups, each consisting of one amphibious 

assault ship or helicopter carrier (LHA or LHD), one 

amphibious transport dock, and one dock landing ship 

(LSD), together with three surface combatants and an 

attack submarine. The Navy envisions reducing the number of expeditionary strike groups from the 11 existing 

today to 9 by 2020. To support that plan, the Navy 

would purchase a second new America class LHA-6 

amphibious assault ship in 2011, which is a delay of one 

year compared with the 2009 shipbuilding plan. The 

plan also anticipates seven replacements for Wasp class 

LHD-1 amphibious assault ships, four of which would be 

bought by 2028. It calls for 12 replacements for existing 

LSD-41 and LSD-49 ships, 7 of which would be purchased by 2028.

In addition to the expeditionary strike groups, the Navy’s 

2009 shipbuilding plan calls for purchasing 11 new maritime prepositioning ships—part of the Maritime Prepositioning Force (Future) squadron—to forward deploy the 

equipment of one Marine expeditionary brigade. The 

Navy plans to buy a mix of different ship types to populate the squadron. Three existing ships transferred from 

the amphibious and existing maritime prepositioning 

forces would operate with the squadron.

The resources needed for new amphibious and maritime 

prepositioning ships would be $2.7 billion per year, on 

average, between 2011 and 2028, CBO projects. Including unbudgeted costs, required resources would average 

$3.0 billion per year.

	
	






#



$$
"

deck ships, all of which eventually would be nuclear powered. The Navy ordered the first of its new class of aircraft 

carriers, the CVN-21, in 2008. Under the plan to maintain 11 carriers, the Navy would order a new ship every 

four or five years thereafter, in addition to refueling an 

existing nuclear-powered Nimitz class carrier about every 

three years. The Secretary of Defense announced in his 

speech of April 6, 2009, however, that the Navy would 

purchase a new carrier every five years rather than alternate between intervals of four and five years. As a result, 

the Navy’s carrier force would fall to 10 ships after 2040 

compared with 11 or 12 for most years under the 2009 

shipbuilding plan. CBO projects that those efforts would 

require $3.3 billion annually, on average, between 2011 

and 2028, or $3.7 billion including unbudgeted costs.

	%
	





programs include Navy and Marine Corps aircraft and 

aircraft-related weapon systems. As envisioned in the 

2010 budget, carrying out the Navy’s procurement plans 

for modernizing the aircraft of both services would cost 

about $12.2 billion. In CBO’s projections, implementing 

those plans would require resources that averaged 

$8.1 billion per year between 2011 and 2028, or $9.9 billion per year accounting for unbudgeted costs. Average 

annual funding for 2010 through 2023 would be considerably higher—about $10.6 billion per year—because of 

simultaneous purchases of several types of both fixed- and 

rotary-wing aircraft. Over that period, purchases would 

average about 200 aircraft per year. The completion of 

production for several types of those aircraft would result 

in lower average funding, about $1.2 billion per year, 

from 2025 through the end of the projection period.

Fighter Aircraft. 
#	







&'("$)*'&
*("$)+
	
	








 



warfare aircraft (for a total of 506 and 85 aircraft, respectively) and a total of 680 F-35 joint strike fighters in two 

variants: the F-35B short takeoff/vertical landing aircraft 

for the Marine Corps and the F-35C carrier-based aircraft for the Navy. In addition, as part of the Unmanned 

Combat Air System Carrier Demonstration (UCASD) 

program, the Navy is developing technologies that could 

lead to unmanned combat air vehicles capable of carrierbased strike missions or suppressing enemy air defenses. 

CBO assumed that those development efforts would be 

successful and that the Navy will have purchased more 

than 100 such aircraft by 2028. Those aircraft could augment manned aircraft in carrier wings or could replace 

F/A-18E/Fs that are expected to reach the end of their 

service life after 2025. (Alternatively, the Navy could elect 

to extend the service life of the F/A-18s, replace them 

with more F-35s, or develop a new manned fighter. 

CBO’s projection does not include resources for those 

options.)

Other Fixed-Wing Aircraft. 	
	
	




Navy plans to procure other types of carrier- and landbased fixed-wing aircraft:

B A new version of the carrier-based E-2 Hawkeye airborne early-warning aircraft;

B A new land-based patrol aircraft, the P-8A Poseidon, 

which is based on a Boeing 737 airframe and will 

replace the P-3C Orion; and

B An unmanned broad-area maritime surveillance aircraft that will be a modified version of the Air Force’s 

Global Hawk high-altitude unmanned aerial vehicle.

	
	

	
	


plans for 2010 include replacing or upgrading nearly 

every component of the Marine Corps’ tilt-rotor and 

rotary-wing forces. The MV-22 Osprey tilt-rotor aircraft 

is replacing the current fleet of CH-46E medium-lift helicopters. The Marine Corps plans to replace its fleet of 

heavy-lift CH-53E helicopters with an upgraded version 

(currently called the CH-53K). It also plans to modernize 

the fleets of UH-1N light-utility helicopters and AH-1W 

attack helicopters with a mix of new and remanufactured 

aircraft. Plans for the VH-71 helicopter, which transports 

the President and is known as Marine One, were canceled 

in the 2010 budget request, and DoD indicated it would 

explore options for a follow-on program. CBO’s projection includes resources for a program that would begin 

delivering replacements for Marine One around 2014.

	

		


to change much from the 2009 FYDP to the 2010 budget. CBO assumed that the 2009 plan for procuring new 

expeditionary fighting vehicles would remain in place for 

the 2010 budget plan. Those vehicles would replace the 

amphibious assault vehicles and were reduced by nearly 

half in the 2008 FYDP. Under that assumption, procurement for the expeditionary fighting vehicle would start in 

2012.

Under the 2009 FYDP, the Marines would begin buying 

the joint light tactical vehicle in 2013, and CBO assumed 

that those purchases would also be in the 2010 budget 

plan. The Marine Corps has used supplemental or emergency appropriations in the past two years to purchase 

many tactical vehicles, including high-mobility multipurpose wheeled vehicles and mine-resistant ambushprotected vehicles. In addition, by 2011 the service 

expects to complete its plan to replace about 1,500 heavyduty logistics vehicles, which it began replacing in 2007. 

Those vehicles will come in cargo, wrecker, and tractor 

variants. All of those commitments would require average 

spending of about $600 million per year through 2028, 

without cost growth; that amount is more than twice the 

average this category has received for the past two 

decades.

	




		

		


and for procuring Air Force systems would total roughly 

$68 billion in 2010. CBO projects that continuing those 

plans throughout the 2011–2028 period would require 

about $67 billion per year. Year-to-year funding would 

decline slowly, to about $61 billion in 2017, and then 

increase to more than $78 billion in 2028 (see Figure 10). 

The dip in funding around 2017 and the subsequent 

increase are mostly due to purchases of new aircraft models in the 2020s, including a delay in fielding the followon bomber program from 2018, as previously planned, to 

after 2025. If the costs of developing and purchasing Air 

Force systems grew beyond the service’s current estimates 

to the same extent that they have in the past, carrying out 

the Administration’s plans for that period would require 

an additional $6 billion per year, on average, between 

2011 and 2028.
 	
	












Figure 10.

	




	



 Congressional Budget Office.

Notes: Only the 2009 supplemental appropriations and the 2010 contingency request are separately identified in this figure. 

The supplemental and emergency appropriations for earlier fiscal years are included with the funding categories.

C4ISR = command, control, communications, computers, intelligence, surveillance, and reconnaissance.

	

	

		


Force, CBO tracked five categories of major systems: aircraft; command, control, communications, computers, 

intelligence, surveillance, and reconnaissance (C4ISR) 

systems; missiles and munitions; missile defense systems; 

and unclassified space systems.

	

		

	





chases of new aircraft and major modifications to existing 

aircraft. During the projection period, funding for new 

aircraft systems is dominated by the F-35A joint strike 

fighter and the KC-X replacement for the KC-135 airborne tanker. (CBO’s projection assumes that KC-X production will begin in 2012.) Elements of DoD’s acquisition plans for the Air Force’s aircraft that changed 

significantly in 2010 relative to the previous year’s plans 

include:

B Cancellation of the CSAR-X combat search-andrescue rotorcraft program. DoD is currently reevaluating how to best provide CSAR capabilities. CBO’s 

projection includes funding to replace current aircraft 

with a modern version of the Blackhawk helicopter.

B Increases in the number of medium-altitude 

unmanned aerial vehicle orbits that can be sustained. 

Consistent with DoD’s budget request and the Air 

Force’s long-term plans for unmanned aircraft, the 

2010 projection includes substantially increased funding for MQ-9 Reaper aircraft.

B Postponement of a follow-on bomber program pending a review of requirements and available technologies. For its projection, CBO delayed the fielding of a 

new long-range strike aircraft from 2018, as previously 

planned, to after 2025.

C4ISR Systems. C4ISR systems consist of satellites, terrestrial systems, and surveillance aircraft. Over 40 percent of 

projected procurement funding is dedicated to a single 

	





Direct Care and Other

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2010 Projection

with Total

Unbudgeted Costs

January 2009

Base Projection

2009 Supplemental

Appropriations

2010 Contingency

Request

Research, Development, Test, and Evaluation

2010 Projection

with Contingency

Unbudgeted Costs

Aircraft

C4ISR

Missile

Defense

Missiles and

Munitions

Other Procurement

Actual Projected
	
	








 



satellite system: the new Global Positioning System satellites. DoD’s decision to cancel the Transformational 

Communications Satellite program was the primary reason for the decrease in total funding for the C4ISR category relative to CBO’s previous projection. Increased 

funding for the MQ-9—an aircraft that contributes to 

C4ISR capabilities but can also attack ground targets—is 

included in the aircraft category.

	

	

	

that range from air-to-air weapons to intercontinental 

ballistic missiles (ICBMs). CBO’s projection includes the 

cost of upgrades to existing Minuteman III ICBMs and 

RDT&E for a new ICBM that would be fielded sometime after 2028. Air-to-surface weapons in this category 

include the joint air-to-surface standoff missile, the joint 

direct attack munition, and the small-diameter bomb. 

For this projection, CBO added the new joint dual-role 

air dominance missile that DoD is beginning to develop 

for use against both air and surface targets.


	
	

Force in this category consists primarily of the Space 

Tracking and Surveillance System, a constellation of satellites carrying infrared sensors that would help the United 

States track ballistic missiles and discriminate between 

warheads and decoys and other debris associated with a 

ballistic missile’s trajectory. Funding for missile defense 

systems is considerably lower than in CBO’s previous 

projection because of major changes announced by the 

Secretary of Defense regarding the airborne laser (ABL) 

program. That program was developing a system to 

destroy enemy ballistic missiles during their boost 

phase—the few minutes after launch before a missile’s 

rocket motors burn out—by means of a high-energy 

chemical laser carried on modified Boeing 747 aircraft. 

Under previous plans, a successful test of the first ABL 

against a missile in flight would have been followed by 

development of a second prototype and, eventually, by 

the fielding of seven aircraft for operational use. Citing 

problems with technology and cost as well as doubts 

about the operational roles envisioned for the ABL, the 

Secretary announced that plans for the second aircraft 

would be shelved and that the program would be shifted 

to a research and development effort.


	

	

	

launch systems used to put satellites into orbit. (The satellites themselves are included in the categories that best 

match their intended function.) About two-thirds of the 

funding in this category supports the purchase of the 

Evolved Expendable Launch Vehicle over the next two 

decades. CBO’s projection assumes that the Air Force will 

purchase 78 of those vehicles through 2028. The remainder of the funding is for boosters, satellites, and related 

services to support what is known as the “operationally 

responsive launch concept” for access to space.

Defense Agency Acquisition, Including 

Missile Defense


	


Army, Navy, and Air Force, DoD’s budget provides 

money for specialized agencies that perform advanced 

research, develop missile defenses, oversee special operations, and manage financial and information systems. For 

defense agencies other than the Missile Defense Agency 

(MDA), CBO projects average acquisition costs totaling 

about $17 billion over the 2011–2028 period (see

Figure 11).

Development of missile defense programs is managed by 

MDA, but the military departments have responsibility 

for procuring and fielding missile defense systems. The 

President’s 2010 budget request proposes funding of 

about $7.8 billion for RDT&E for missile defense systems and about $1 billion for procuring terminal-phase 

and midcourse-phase defense programs (see Figure 12).

CBO based its projection on the Administration’s policy 

statements, on detailed plans developed by MDA, and on 

plans developed by the military services for executing the 

individual programs for which they are responsible. 

CBO’s projection assumes that MDA will focus on research 

and development of a range of technologies and systems. 

The results of those efforts will eventually inform decisions about which systems should proceed to procurement and operational deployment. As with existing programs, CBO has included projected procurement costs in 

the acquisition budgets of the branches of the military 

that would operate them. For cases in which the service 

has not been designated, CBO has assigned programs on 

the basis of the nature of the program.

In the 2010 budget, DoD has made significant changes 

to a number of missile defense programs, as described in 

detail in the following sections. Overall, CBO projects 

that carrying out those plans would cause total acquisi-
	
	












	

Resources for Defense Agency Acquisition, Including Missile Defense Agency

	



 Congressional Budget Office.

Note: Only the 2009 supplemental appropriations and the 2010 contingency request are separately identified in this figure. 

The supplemental and emergency appropriations for earlier fiscal years are included with the funding categories.

a. Includes research, development, test, and evaluation and procurement by defense agencies other than the Missile Defense Agency.

	


	





annually during the period 2011 through 2028 (excluding unbudgeted costs), about $4 billion per year lower 

than CBO’s projection based on the 2009 FYDP. The 

projected peak in total acquisition—about $10.1 billion 

in 2014—is substantially lower and occurs earlier than 

the $17 billion peak that CBO projected to occur in 

2018 on the basis of the 2009 FYDP. That reduction 

results from the cancellation of several development programs (removing from the projection both the cost of 

completing development and of subsequent procurement 

of operational versions of those systems) and the reduction in the scope of other systems.

	

				



course Defense (GMD) system comprises ground-based 

interceptors (GBIs), sensors, and fire-control systems to 

intercept and destroy ballistic missiles during their midcourse phase of flight.51 Earlier plans based on the 2009 

FYDP had called for procuring a total of 44 GBIs and 

placing them at either Fort Greely, Alaska, or Vandenberg 

Air Force Base, California. CBO had assumed that additional GBIs would be procured for tests and for use as 

spares. In the 2010 budget, however, MDA curtailed its 

plans, which now call for a total of 30 GBIs at those two 

sites. Some 14 additional GBIs would be procured and 

used to replace GBIs that are already emplaced; those 

14 older GBIs would be refurbished and then used for 

testing purposes or as operational spares.

	





Direct Care and Other

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0

5

10

15

20

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30

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40

2010 Projection

with Total

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January 2009

Base Projection

2009 Supplemental

Appropriations

2010 Contingency

Request

Other Acquisitiona

Aircraft

Missile Defense

Agency

Actual Projected

 Ballistic missile defense programs are categorized by the portion of 

the incoming missile’s trajectory that they target. Boost-phase 

defenses attempt to destroy hostile missiles before their warheads 

separate from their booster rockets. Midcourse-phase defenses 

attempt to destroy warheads after they separate from their boosters but before they reenter Earth’s atmosphere. Terminal-phase 

defenses attempt to destroy warheads after they have reentered 

Earth’s atmosphere and are relatively close to their intended 

targets.
	
	








 



	


	

	

	



 Congressional Budget Office.

Note: The data include research, development, test, and evaluation and procurement of missile defense systems by the Missile Defense 

Agency and the Departments of the Army, Navy, and Air Force.

	

	
					
	

	

called for extending GMD coverage to protect U.S. allies 

and deployed forces against attacks from Iran. That coverage would be achieved by deploying additional interceptors in Poland, a high-resolution tracking radar in the 

Czech Republic, and a forward-based radar at a European 

location that has not been specified. As part of that plan, 

MDA is developing a new two-stage version of the current interceptor (the existing interceptor has three stages), 

and 10 of those new interceptors would be placed at the 

European site. Then, in September 2009, the Administration announced that it was replacing plans for a 

GMD-based system in Europe with one that uses the 

Standard Missile-3 (SM-3) interceptor, which is currently 

used in the Aegis ballistic missile defense system. However, the new plans still call for developing the two-stage 

version of the GBI “as a back-up.”52

For this projection, CBO has incorporated the Administration’s new plan based on the SM-3 and has assumed 

that developing the two-stage GBI will continue and that 

10 of those interceptors will be procured. The European 

Midcourse Radar, which had been slated for installation 

in the Czech Republic, and the cost of missile silos in 

Poland have been removed from this projection. However, CBO has assumed that the movable forward-based 

radar (at a location yet to be determined) and the supporting communications infrastructure that had been 

part of the initial GMD-based plan for the defense of 

Europe will still be pursued under the Administration’s 

new plan.

In the 2010 budget, MDA has canceled the kinetic 

energy interceptor (KEI), which had been intended to fill 

both midcourse- and boost-phase roles in the ballistic 

missile defense system. In its projection based on the 

2009 FYDP, CBO had assumed that MDA would begin 

in 2014 to use the KEI to replace existing interceptors in 

Military Personnel

Direct Care and Other

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028

0

5

10

15

20

25

2010 Projection

with Total

Unbudgeted

Costs

January 2009

Base Projection

Terminal-Phase

Missile Defense

Research, Development, Test, and Evaluation

Aircraft

Midcourse-Phase

Missile Defense

Common Systems

Actual Projected

 Robert M. Gates, “A Better Missile Defense for a Safer Europe,” 

	
	




	
	












the GMD system; those replacements are not included in 

this projection.

Another aspect of the previous Administration’s plans, 

which the current Administration has not yet indicated it 

would change, called for MDA to use RDT&E funds to 

pay for deploying the GMD system. In keeping with 

those plans, CBO has included the costs of the GMD 

system in RDT&E. 

The Navy’s procurement of missiles for the Aegis seabased ballistic missile defense is included in the 

midcourse-phase missile defense category. The Aegis 

combines the ability of the SPY-1 radar and associated 

fire control system to detect and track ballistic missiles of 

all ranges with the ability of the Standard Missile to 

engage enemy missiles from short through intermediate 

ranges in their midcourse phase of flight. DoD’s plans 

include developing a new, larger version—the SM-3 

Block IIA—to increase the system’s effectiveness against 

long-range ballistic missiles, among other threats. The 

United States and Japan have entered into a cooperative 

agreement to support the development of the SM-3 

Block IIA; the U.S. contribution would be funded from 

the Missile Defense Agency’s RDT&E accounts. CBO 

has assumed that the Navy will procure enough of the 

new SM-3s to equip 25 percent of the available vertical 

launch system tubes on the Navy’s fleet of Aegis-equipped 

ships. 

MDA is developing the Space Tracking and Surveillance 

System, which would ultimately be procured and fielded 

by the Air Force. MDA launched two demonstration satellites in 2009. DoD’s plans originally envisioned an 

operational constellation with as many as 27 satellites; 

subsequently, the 2008 budget documentation called for 

a smaller constellation of 6 to 9 satellites. MDA is now 

planning a reassessment that focuses on affordability and 

a shorter development cycle and incorporates information from the demonstration launches. CBO has assumed 

that MDA will develop an operational constellation with 

6 satellites (the low end of the 2008 plan), launching one 

satellite per year beginning in 2020.

	
		
	
	



craft that is now used to test the integration of the air 

vehicle with the airborne laser and targeting systems in 

preparation for a “shoot-down” test that was scheduled 

for 2009. (The shoot-down test did not occur but is currently scheduled for 2010.) Earlier plans had called for 

procuring a second developmental ABL aircraft and, after 

development was complete, a fleet of seven operational 

aircraft. In the 2010 budget, the ABL program has been 

downscaled to a research-only effort, and plans for any 

further aircraft have been canceled. For its 2010 projection, CBO has assumed that MDA will continue experiments using the existing ABL aircraft at a constant level 

of effort throughout the projection period.

In its projection based on the 2009 FYDP, CBO had 

assumed that a boost-phase version of KEI would be fully 

developed and fielded. CBO’s current projection does not 

include those costs, however, because MDA has canceled 

the KEI program.

In the 2010 budget, MDA also canceled the Space Test 

Bed program. In previous budgets, MDA had established 

the Space Test Bed to explore concepts for and to conduct 

research to support potential deployment of boost-phase 

intercept defenses in space. In the 2009 budget, MDA 

had planned to spend about $300 million for that 

research, and CBO’s projection of DoD’s plans based on 

the 2009 FYDP incorporated the assumption that an 

operational space-based interceptor system would be 

developed and fielded. Those costs are not included in 

this projection.

	
	
		
	


of missile defenses also includes funding for systems that 

are designed to hit incoming warheads during the terminal phase of their flight. That group of missile defense 

systems includes the Patriot Advanced Capability-3 

short-range system, the Medium Extended Air Defense 

System, and the Terminal High-Altitude Area Defense 

system, all of which are mobile ground-based systems. 

MDA also has begun developing a sea-based terminal 

system. According to CBO’s projection of DoD’s plans 

for 2010, average annual funding for terminal-phase 

defense systems would amount to $2.0 billion through 

2028.

The Patriot missile system is already in operation for the 

Army, but it will be replaced eventually by the Medium 

Extended Air Defense System, the product of a joint venture involving the U.S. government and the governments 

of Italy and Germany. Although MDA is still developing 

the Terminal High-Altitude Area Defense system, CBO’s 

projections incorporate the assumption that when the 

system’s operational deployment proceeds beyond 2013, 

its funding will move from MDA to the Army. The Army 
	
	








 



activated the first high-altitude unit at Fort Bliss, Texas, 

in May 2008.

The sea-based program would add a terminal-phase capability to the existing Aegis ballistic missile defense system; 

that sea-based program is divided into a near-term and a 

far-term capability. The near-term capability uses 

upgrades to existing software and a modified version of 

the SM-2 Block IV interceptor. MDA is currently analyzing missile requirements for the far term that could result 

in the development of a new interceptor. CBO has 

assumed for its projection that a new interceptor would 

be developed and that the Navy would begin procuring 

those missiles in 2014.