The Department of Defense, Science and Technology Program: An Analysis, FY1998-FY2007
Released: 2008-09-12T00:00:00

Introduction

Between FY1998 and FY2007, the annual budget of the Department of Defense (DOD) Science and Technology (S&T) Program grew from $7.7 billion to $12.8 billion. In constant FY2009 dollars, the cumulative increase was $22.5 billion. The purpose of this report is to aid Congressional oversight of DOD's S&T program by analyzing this budget increase by department and agency, by budget activity, and by program element. Specifically, the report examines whether the budget increase benefitted all programs or focused on certain priority areas. In a period of higher budget deficits, as sustaining current levels of military spending becomes more of a fiscal challenge, and as the nation continues to position itself to engage effectively in a changing strategic environment, policymakers may scrutinize the allocation of S&T resources more closely.

What Constitutes Defense Science and Technology

This report focuses on DOD's base Research, Development, Test, and Evaluation Program (RDT&E). As indicated by its name, this program funds activities that range from fundamental research in the basic sciences to the design, development, and testing of complex weapon systems ready for the field. The DOD divides this range of effort into seven budget activities, designated 6.1 through 6.7 (see Appendix). Activities 6.1 through 6.3 (basic research, applied research, and advanced technology development) constitute what is called the Science and Technology (S&T) program. Budget activities 6.4 and 6.5 focus on the development of specific new weapon systems or components (e.g., the Joint Strike Fighter or missile defense systems). Budget activity 6.6 provides management support, including support for test and evaluation facilities. Budget activity 6.7 supports system improvements in existing operational systems.

The S&T program is often referred to as DOD's "seed corn" because it supports the development of a science and technology base upon which tomorrow's high performance military systems will be built. The payoff from S&T investments is rarely immediate. The value of the knowledge tends to be unpredictable and hard to measure. The operational capabilities that are developed take time to be incorporated into fielded systems. Nevertheless, adequate support for S&T activities is seen by many in Congress and the defense community as imperative to maintaining U.S. military capabilities and superiority.

Funding Trends in DOD S&T

Figure 1 shows the DOD S&T budget from FY1962 (when the budget activity designations 6.1-6.7 were first being adopted) through FY2007. During the 1960s and early 1970s, budgets for S&T remained relatively flat in current dollars, with inflation eroding their real values in constant dollars. Beginning in the late 1970s and continuing through much of the 1980s, S&T budgets increased in both current and constant dollars.

At the end of the 1980s and into the 1990s, the Cold War began to wind down, but budget deficits of the federal government continued to grow. Funding for S&T became more erratic before essentially leveling off in constant dollars.

By the end of the 1990s, sustaining adequate support for S&T in a time of declining military spending became a particular concern. Congress initially sought to increase S&T funding by 2% per year after inflation, but achieved limited success toward this goal. During the 2000 election, the Bush presidential campaign advocated a general increase in military research and development as part of its proposal to increase military spending. As part of the 2001 Quadrennial Review, the DOD established a goal of stabilizing its base S&T funding at 3% of DOD's overall funding. Congress embraced this goal. Following the terrorist attacks of September 11, 2001, overall defense budgets began to rise quickly. Although not always achieving the 3% goal, S&T funding rose to historic levels, in both current and constant dollars.

Congressional Support for Increased S&T Funding

Figure 2 shows the role Congressional appropriations played in the general increase in S&T funding from FY1998 to FY2007. DOD began seeking increases to the S&T budget beginning in FY2002. However, Congress appropriated more than DOD requested throughout this time period.

Analysis

This report focuses on the growth in the base S&T budgets between FY1998 and FY2007. This period of time is interesting to policymakers for several reasons. It includes the transition in FY2000 to a period of significant and historic growth in the S&T budget. It includes a change in Administration, as well as the historic strategic transition from the post-Cold War era to the War-on-Terror era. Picking FY1998 as the baseline year is somewhat arbitrary, but because S&T funding for the three years prior to FY1998 was relatively stable, it would appear to represent a valid starting point. Also, declines in overall defense spending, beginning in FY1986, bottomed out in FY1998, representing the end of the post-Cold War draw-down. The period of analysis ends in FY2007, the latest budget year for which "actual" S&T funding data exist (see below).

Methodology

The analysis in this report is based on data from two primary DOD sources: the DOD R-1 document, and the RDT&E descriptive summaries of the departments and agencies.

The R-1 is an annual budget document released by the DOD Comptroller that summarizes all the Program Elements (PEs) that make up the base Research, Development, Test, and Evaluation (RDT&E) program. Program Elements are the building blocks of DOD's budget. In the case of the base RDT&E program, each PE represents an aggregation of research activities in a particular area. These areas could be related to a discipline (e.g. materials science), or mission (e.g. electronic warfare), or subsystem (e.g. propulsion technologies). Every RDT&E dollar is associated with one, and only one, PE. The R-1 document lists all of these PEs, broken out by department and agency and by budget activity (6.1-6.7). In the FY2009 RDT&E budget request, there were 712 PEs, of which 157 were considered to be in the S&T program.

The RDT&E descriptive summaries are released each year by the departments or agencies, usually a few days after the official release of the DOD budget. They provide a written description of each PE and include, among other information, goals and objectives and past and anticipated accomplishments. In many cases, a PE may be divided into one or more projects. This report does not examine projects below the PE level.

The funding amounts identified in these documents are total obligational authority (TOA). TOA is a DOD financial measure. In any given budget request, TOA equals budget authority (BA), which is what Congress grants in its appropriations bills (i.e. the authority to incur legally binding obligations). It expresses the value of the direct program. If changes are made to appropriations granted by Congress, because of general reductions, rescissions, lapsing unobligated funds, transfers of unobligated funds, re-appropriations, etc., these changes are accounted for differently when modifying the TOA and budget authority figures for prior years. The R-1 and the RDT&E descriptive summaries list the current year's budget request, an estimated TOA for the immediate prior year (which may include rescissions proposed in the current year's budget), and the actual TOA for two years prior (by which time most modifications to the initial appropriation's Budget Authority will have been made). The analysis in this report used actual TOA for FY1998 through FY2007, as shown in the R-1 documents for FY2000 through FY2009. It includes all S&T PEs listed in the R-1 documents for those years.

The TOA data were recorded in current dollars. These data were converted to constant FY2009 dollars using TOA deflators for RDT&E taken from the DOD's National Defense Budget Estimates for FY2009. Unless stated otherwise, from here on in this report, all data is given in FY2009 dollars.

The basic analysis compared the cumulative actual funding, from FY1998 through FY2007, in constant FY2009 dollars with what the cumulative funding would have been if the FY1998 amount had risen only with inflation. This comparison was done by department and agency, by budget activity, and by individual PE. The comparisons were calculated both in dollars and as percentages. Percentage changes take into account the size of the program. Changes in low cost programs, when measured in absolute dollars, may conceal the relative importance of the change as might be revealed when looking at the change in terms of percentages. On the other hand, initial changes in low cost programs could lead to relatively large percentage changes at first, and perhaps overstate the importance of those changes. The analysis takes this issue into consideration.

The methodology used in this analysis has a couple limitations. One problem is how to account for PEs that were initiated after FY1998. In these cases, the FY1998 baseline funding is zero. That does not present a problem when analyzing in terms of dollars, but it makes the percentage comparison meaningless. One could use the first year the PE was established to determine a truncated baseline for calculating the percentage increase or decrease. This, however, would not allow for a direct comparison with PEs that were in existence in FY1998. Therefore, the analysis of percentage changes in individual PEs is restricted to PEs that were in existence in FY1998 and does not include PEs established after that time.

Another limitation is that some PEs were reorganized during the course of the 10 year period. In some cases, PEs were terminated and their projects distributed to new or existing PEs. While it is possible in some of these cases to analyze the data for these PEs in the aggregate, in other cases it is difficult to compare the new PEs to the old PEs. These situations were handled on a case by case basis, based on the judgment of the author.

Results

For DOD S&T as a Whole

Figure 3 compares actual funding (in FY2009 dollars) with the FY1998 baseline. Baseline funding, in constant FY2009 dollars, was $9.6 billion dollars per year. Actual funding rose to $14.3 billion in FY2005 (in FY2009 dollars), before declining to $13.4 billion in FY2007 (in FY2009 dollars). In total, actual funding exceeded baseline funding by $22.5 billion (in FY2009 dollars), as represented by the area above the baseline line in Figure 3 .

By Department/Agency

Figure 4 shows how this extra $22.5 billion was distributed among the DOD departments and defense agencies. The Army received the largest dollar increase—$6.6 billion. Defense agencies, as a whole, increased the least—$5.2 billion. In percentage terms, the three departments fared about equally. The Army's S&T funding increased 34% above its baseline, the Navy's 32%, and the Air Force's 36%. However, the defense agencies, as a whole, increased only 11%.

By Budget Activity

When characterizing the additional $22.5 billion in terms of budget activity ( Figure 5 ), $2.3 billion went to basic research (budget activity 6.1), $10.0 billion went to applied research (budget activity 6.2), and $10.1 billion went to advanced technology development (budget activity 6.3). There has been much concern among some analysts and policymakers about maintaining adequate basic research (6.1). In absolute dollars, basic research increased noticeably less than 6.2 or 6.3 funding. However, basic research activity tends to be less costly. In percentage terms, the additional 6.1 funds were about an 18% increase above the baseline, while the additional 6.2 and 6.3 funds were respectively 27% and 21% above the baseline.

By Department/Agency and Budget Activity

Table 1 provides a breakdown of the $22.5 billion by both department/agencies and budget activity. Table 2 gives the same breakdown in percentage terms. While the defense agencies' 6.2 funding accounted for the single largest increase in funding in absolute dollars, the percentage increase was not as large as those of the departments. The largest increases, on a percentage basis, were in the departments' 6.3 funding. The 6.3 programs of the defense agencies, as a whole, received a noticeably lower percentage increase in funding.

There were some significant differences in the funding gains in basic research among the department and agencies. The Army and the Air Force basic research increased 39% and 31%, while the Navy's increased 14% and the basic research across all defense agencies increased only 3%.

By Individual PE

Of the 101 PEs, from all departments and agencies, that were in existence in FY1998 and were continuously funded throughout the 10-year period of the analysis, 74 exceeded their baseline. As noted above, all PEs that were established after FY1998 show an increase above their baseline, even if funding did not keep up with inflation after their initial establishment. Also as noted above, some PEs were eliminated during the 10 year period. The 101 PEs referred to above do not include either the newly created PEs or the baseline programs that were eliminated. The size and distribution of the increases and decreases above and below baseline funding for individual PEs appear to be distributed more or less evenly throughout the range. A complete breakdown by PE is beyond the scope of this report.

Table 3 shows the five PEs whose actual funding exceeded their baseline funding by the greatest amount, as measured in absolute constant FY2009 dollars. Table 4 below shows the five PEs whose actual funding exceeded their baseline by the greatest percentages. Table 3 considers and includes PEs that were established after FY1998. Table 4 does not.

The Combat Vehicle and Automotive Advanced Technology PE is one of a number of PEs that support the Army's Future Combat System (FCS). The Army has described the FCS as its top priority S&T effort. Funding for this PE rose from $48 million in FY1998 (in FY2009 dollars), prior to the beginning of the FCS effort, to $353 million in FY2003 (in FY2009 dollars), when funding peaked. Funding in FY2007 was $210 million (in FY2009 dollars). As noted below, this PE also experienced one of the larger percentage increases.

The Advanced Aerospace Systems PE was established FY2000. Funding increased substantially in FY2002 and again in FY2003 as DARPA expanded work on unmanned combat air vehicles (UCAVs) and the Orbital Express Space Operations Architecture, a program to develop and demonstrate the ability to perform autonomous on-orbit refueling and reconfiguration of satellites. Congress directed DARPA to split the PE into two separate PEs, Advanced Aerospace Systems and Space Programs and Technology, beginning in FY2005. For this analysis, the three PEs were considered as one. Funding for these activities began at $23 million in FY2000 (in FY2009 dollars) and peaked in FY2004 at $343 million (in FY2009 dollars). Funding for the two new PEs totaled $292 million in FY2007 (in FY2009 dollars).

The Materials and Electronics PE represented a core DARPA program for many years. In FY1998, funding for the PE was $267 million (in FY2009 dollars). In FY2005, Congress split this PE into two. The Materials and Biological Technology PE and the Electronics PE, together, received $554 million in FY2005 (in FY2009 dollars). In FY2007, the two PE received $507 million (in FY2009 dollars). The PE experienced its largest single-year increase in FY2002, due to increased funding for the materials processing project and the establishment of the Beyond Silicon project.

The Air Force's Special Programs PE was established in FY2003. While funding for the PE appears in the R-1 document, the activities it supports are classified and are not included in the descriptive summaries. Initially funded at $105 million in FY2003, it jumped to $408 million in FY2004 (both in FY2009 dollars). Funding in FY2007 was $312 million (in FY2009 dollars).

DTRA's 6.2 Weapons of Mass Destruction (WMD) Related Technologies PE has undergone a couple of name changes, but has continued to focus on two primary topics: counter-proliferation and sustainment. The former deals with preparing for and supporting the military and civil response to WMD events. The latter includes maintaining the viability and credibility of U.S. deterrent forces. Projects within these two areas include modeling, simulation, and testing of WMD effects and environments and the subsequent impact on the ability of U.S. forces to respond under such conditions. The PE also includes the development of vulnerability assessment tools and technologies to improve survivability of U.S. weapon systems and capabilities and those of our allies. It also supports targeting operations of U.S. deterrent forces. In FY2003, Congress directed that the PE be split into two new PEs: WMD Defeat Technology and Strategic Defense Technologies. The original PE received $255 million in FY1998 (in FY2009 dollars) and peaked in FY2002 at $458 million (in FY2009 dollars). The two new PEs received $338 million in FY2007 (in FY2009 dollars).

It is interesting to note that the Chemical and Biological Defense Program (both its 6.2 and 6.3 activities) and DARPA's 6.2 Biological Warfare Defense program were three of the next 6 PEs that received high increases. This, along with the increases allocated to DTRA's WMD Related Technologies PE, may reveal a slight emphasis on efforts to counter weapons of mass destruction.

The Army's 6.2 Computer and Software Technology PE exceeded its baseline funding by nearly five times. However, this is largely because its FY1998 funding was reduced to $824 thousand (in FY2009 dollars) from approximately $2.8 million (in FY2009 dollars) the previous year. The descriptive summary for that year indicated a change in the PE's priorities. Funding jumped back up to $4.7 million in FY1999 (in FY2009 dollars). In FY2007 the PE received $6.9 million (in FY2009 dollars). FY1998 appears to have been a transitional year for the PE.

The Army's 6.3 Combat Vehicle and Advanced Automotive Technology PE is discussed above.

In FY1998, the Army's 6.3 PE Line of Sight (Anti-tank) PE became an Advanced Concept Technology Demonstration program. The PE focused on adapting previously developed technology into an air-mobile configuration to support early entry of U.S. forces into a theater of action. Funding increased from $5.9 million in FY1998 to $85 million in FY2002, then declined to $9.7 million (all in FY2009 dollars) in FY2004. The PE was not funded after FY2004.

Funding for the Army's 6.3 Night Vision PE grew steadily from $22.1 million in FY1998 to $111.7 million in FY2005 before dropping to $77.0 million in FY2007 (all in FY2009 dollars).

Called Aerospace Structures until FY2002, the Air Force's Aerospace Technologies Development/Demonstration PE develops and integrates a wide range of technologies to enhance the performance, cost of operations, and life of current and future aerospace vehicles. The PE was funded at $12.0 million in FY1998 and grew steadily until it peaked at $50.5 million in FY2004. It received $47.4 million in FY2007 (all in FY2009 dollars).

Except for the Army's Combat Vehicle and Advanced Automotive Technology program, these PEs contributed little to the overall increase in S&T funding and their relatively high increases in percentage terms are mainly due to their relatively low funding levels. However, the Army's Night Vision program and the Air Force's Aerospace Technologies Development/Demonstration program did experience steady increases that indicate they were areas of sustained interest during this time period.

Review of Major Findings

The increase in S&T funding over the 10 years from FY1998 to FY2007 was distributed broadly across the S&T program. Each department (Army, Navy, and Air Force) and the defense agencies as a whole shared roughly equally in dollar terms. In percentage terms, the defense agencies' increase, taken as a whole, was noticeably less. Although the total increase in S&T funding, in dollar terms, was distributed between departments in roughly equal shares, the increases were distributed variably across their budget activities. Applied research (budget activity 6.3) of each of the departments increased the most and by roughly the same amount when taken as a percentage. Across all of DOD, basic research increased the least in dollar terms, although in percentage terms this varied considerably between departments and agencies. Of the PEs that were in existence throughout the 10-year period, 73% exceeded their baseline funding. The increases varied from PE to PE, but the PEs that increased the most represented a relatively small share of the total increase. It is difficult to discern any clear "winners" over these 10 years in terms of particular mission, disciplines, or sub-systems. A possible exception may be a growing emphasis on countering weapons of mass destruction. This could reflect a shift away from traditional force-on-force conflict toward a more unconventional post-Cold War threat.

Issues for Congress

Congress has three basic approaches to consider when funding S&T going forward—continue increasing S&T funding, reduce S&T funding, or keep S&T funding flat in inflation-adjusted dollars. Within each option, Congress may also decide to adjust the allocation of resources or keep it more or less the same. For example, the Director of Defense Engineering and Research has advocated more basic research. In an expanding program, Congress may be able to accommodate an increase in basic research (or elsewhere within the S&T program) without having to make other major allocation adjustments. However, in a flat or declining budget, growth in a particular department, agency, program, or budget activity would have to be accompanied by decreases somewhere else. Any such decrease could come from those programs that experienced the greatest increases over the last ten years, arguing that the past growth has been sufficient to meet perceived needs. If, however, these areas of past growth are deemed to require yet more growth, decreases would have to come from elsewhere within the program. In this situation, the relatively few programs that have already experienced decreases could be further reduced, indicating their lower priority. However, any such further reductions could render the program inefficient in trying to meet its goals. Alternatively, decreases could be spread evenly over all other programs, reducing the impact on any particular program areas.

Appendix.