For the past several years, DOD has planned and budgeted for about 1.4 million active military personnel active duty forces: about 482,400 in the Army; 359,300 in the Air Force; 373,800 in the Navy; and 175,000 in the Marine Corps. These active duty personnel levels have been generally stable since the mid-1990s, when forces were reduced from their Cold War levels of almost 2 million active military personnel. Active duty personnel are considered to be on duty all the time. Congress authorizes annually the number of personnel that each service may have at the end of a given fiscal year. This number is known as authorized end strength. Certain events, such as changes between planned and actual retention rates, may cause differences between the congressionally authorized levels and the actual numbers of people on board at the end of a fiscal year. Table 1 shows the congressionally authorized levels for fiscal years 2000 through 2005 as compared with the services’ military personnel actually on board at the end of fiscal years 2000 through 2004. As table 1 shows, the Army and the Air Force exceeded their authorized end strengths by more than 3 percent in fiscal years 2003 and 2004. The Secretary of Defense has statutory authority to increase the services’ end strengths by up to 3 percent above authorized levels for a given fiscal year if such action is deemed to serve the national interest. In addition, if at the end of any fiscal year there is in effect a war or national emergency, the President may waive end strength authorization levels for that fiscal year. On September 14, 2001, the President declared a state of national emergency and delegated end strength waiver authority to the Secretary of Defense. Since then, the President has annually renewed the national state of emergency as well as end strength waiver authorities specified in Executive Order 13223. In January 2004, the Secretary of Defense exercised the President’s authority and increased temporarily the Army’s end strength by 30,000 for fiscal years 2004 through 2009 to facilitate the Army’s reorganization while continuing ongoing operations. While the Secretary of Defense’s goal is ultimately to have the Army return to an active military personnel level of 482,400 by 2009, in October 2004, Congress increased the fiscal year 2005 end strength of the Army by 20,000 personnel, the Marine Corps by 3,000, and the Air Force by 400. Congress also authorized additional authority for increases of 10,000 active Army personnel and 6,000 Marines through fiscal year 2009. In contrast, Congress reduced authorized end strength for the Navy by 7,900 personnel from the fiscal year 2004 level. Moreover, Congress directed that for fiscal year 2005, the Army will fund active military personnel increases in excess of 482,400 and the Marine Corps will fund active military personnel increases in excess of 175,000 through either a contingent emergency reserve fund or an emergency supplemental appropriation. Our prior work has shown that valid and reliable data about the number of employees an agency requires are critical in preventing shortfalls that threaten its ability to economically, efficiently, and effectively perform its missions. Although OSD has processes through which it issues policy and budget guidance that set the overall priorities for defense activities, including personnel levels, it does not have a process for comprehensively analyzing the active personnel levels needed to execute the defense strategy within acceptable levels of risk. OSD has not placed an emphasis on reviewing active military personnel requirements, focusing instead on limiting personnel costs in order to fund competing priorities such as transformation. The services have processes to establish their active duty requirements; however, service processes vary in their methodologies, and several major reviews are still ongoing and have not fully identified long- term personnel needs. Although OSD has performed some reviews related to active duty levels, it does not review the services’ results in a systematic way to ensure that decisions on the numbers of active military personnel are driven by data that make clear the links between personnel levels and strategic goals, such as the defense strategy. Conducting such a review could enable OSD to more effectively demonstrate how the services’ requirements for active military personnel provide the capabilities to execute the defense strategy within an acceptable level of risk. Further, OSD could provide more complete information to Congress about how active military personnel requirements for each service are changing and about the implications of changes for future funding and budget priorities. The quadrennial review of the defense program planned for 2005 represents an opportunity for a systematic analysis and reevaluation of personnel levels to ensure that they are consistent with the defense strategy. Our prior work has shown that valid and reliable data about the number of employees an agency requires are critical if the agency is to spotlight areas for attention before crises develop, such as human capital shortfalls that threaten an agency’s ability to economically, efficiently, and effectively perform its missions. We have designated human capital management as a governmentwide high-risk area in which acquiring and developing a staff whose size, skills, and deployment meet agency needs is a particular challenge. To meet this challenge, federal managers need to direct considerable time, energy, and targeted investments toward managing human capital strategically, focusing on developing long-term strategies for acquiring, developing, and retaining a workforce that is clearly linked to achieving the agency’s mission and goals. The processes that an agency uses to manage its workforce can vary, but our prior work has shown that data-driven decision making is one of the critical factors in successful strategic workforce management. High- performing organizations routinely use current, valid, and reliable data to inform decisions about current and future workforce needs, including data on the appropriate number of employees, key competencies, and skills mix needed for mission accomplishment, and appropriate deployment of staff across the organizations. In addition, high-performing organizations also stay alert to emerging mission demands and remain open to reevaluating their human capital practices. Changes in the security environment and defense strategy represent junctures at which DOD could systematically reevaluate service personnel levels to determine whether they are consistent with strategic objectives. In 1999, Congress created a permanent requirement for DOD to conduct a review of the defense program every 4 years and to report on its findings. During these reviews, DOD is required, among other things, to define sufficient force structure and “other elements” of the defense program that would be required to execute successfully the full range of missions called for in the national defense strategy and to identify a budget plan that would be required to provide sufficient resources to execute successfully these missions at a low-to-moderate level of risk. The quadrennial review of the defense program thus represents an opportunity for DOD to review elements related to force structure, such as the total numbers of military personnel, both active duty and reserve, that are needed to execute the defense strategy most efficiently and effectively. Based on the legislative requirements, DOD plans to conduct a quadrennial review in 2005 and publish its next report in 2006. The terrorist attacks of September 11 changed the nation’s security environment. Shortly thereafter, DOD issued a new national defense strategy in its 2001 Quadrennial Defense Review Report. The 2001 report outlined a new risk management framework consisting of four dimensions of risk—force management, operational, future challenges, and institutional—to inform the consideration of trade-off decisions among key performance objectives within resource constraints. According to DOD’s Fiscal Year 2003 Performance and Accountability Report, these risk areas are to form the basis for DOD’s annual performance goals. In November 2004, DOD reported its performance results for fiscal year 2004, noting that it met some of its performance goals associated with these risk management areas. Our prior work suggests that agency leaders can use valid and reliable data to manage risk by highlighting areas for attention before crises develop and to identify opportunities for improving agency results. As agency officials seek to ensure that risk remains balanced across their agencies’ activities and investments, they can adjust existing performance goals. Likewise, they can create new performance goals to gather data about critical activities. OSD has recognized that the active and reserve forces have been challenged to provide ready forces for current operations, including high demand for some support skills, such as civil affairs and military police, and is taking steps to achieve a number of objectives, such as improving the responsiveness of the force and helping ease stress on units and individuals with skills in high demand. For example, the Secretary of Defense, in a July 9, 2003, memorandum, directed the services to examine how to rebalance the capabilities in the active and reserve forces. The services had already undertaken a number of steps to address requirements for high-demand skills sets as a part of their ongoing manpower management analyses. For example, in 2002 the Army began planning for fiscal years 2004 through 2009 to address high-demand areas, such as military police. However, the Secretary’s memorandum accelerated the services’ rebalancing efforts, which are critical to establishing requirements for active personnel. OSD provides policy and budget guidance to the services on balancing the costs of active personnel with other funding priorities, such as transformation. Its approach to active personnel levels has been to limit growth and initiate efforts to use current military personnel levels more efficiently. OSD also conducts a number of ongoing and periodic reviews and assessments related to active military personnel levels, although these do not represent a systematic analysis of requirements for active military personnel needed to perform missions in the nation’s defense strategy. For example: The 2001 Quadrennial Defense Review Report identified the defense strategy that guided DOD’s analysis of the force structure. Under the new strategy, DOD reported it needed sufficient forces to defend the homeland, provide forward deterrence, execute warfighting missions, and conduct smaller-scale contingency operations. Thus, DOD shifted its force planning approach from optimizing the force for conflicts in two particular regions to providing a range of capabilities for a variety of operations, wherever they may occur.