The Department of Defense’s budget is the product of a complex process designed to develop an effective defense strategy that supports U.S. national security objectives. For munitions, the department generally does not have the combatant commands submit separate budgets, but relies on the military services’ budget submissions. Thus, the military services are largely responsible for determining requirements for the types and quantities of munitions that are bought. The Department of Defense Inspector General and GAO have issued numerous reports dating back to 1994 identifying systemic problems—such as questionable and inconsistently applied data, inconsistent processes among and between services, and unclear guidance—that have inflated the services’ requirements for certain categories of munitions and understated requirements for other categories. (For a listing of these reports, see app. II.) In 1997, as one step toward addressing these concerns, the Department of Defense issued Instruction 3000.4, which sets forth policies, roles and responsibilities, time frames, and procedures to guide the services as they develop their munitions requirements. This instruction is referred to as the capabilities-based munitions requirements process and is the responsibility of the Under Secretary of Defense for Acquisition, Technology, and Logistics. The instruction describes a multi-phased analytical process that begins when the Under Secretary of Defense for Policy develops—in consultation with the Chairman of the Joint Chiefs of Staff, the military services, and the combatant commands—policy for the Defense Planning Guidance. The Defense Intelligence Agency uses the Defense Planning Guidance and its accompanying scenarios, as well as other intelligence information, to develop a threat assessment. This assessment contains estimates and facts about the potential threats that the United States and allied forces could expect to meet in war scenarios. The combatant commanders (who are responsible for the theaters of war scenarios), in coordination with the Joint Chiefs of Staff, use the threat assessment to allocate each service a share of the identified targets by phases of the war. The services then develop their combat requirements using battle simulation models and scenarios to determine the number and mix of munitions needed to meet the combatant commanders’ specific objectives. Despite the department’s efforts to standardize the process and generate consistent requirements, many questions have continued to be raised about the accuracy or reliability of the munitions requirements determination process. In April 2001, we reported continuing problems with the capabilities-based munitions requirements determination process because the department (1) had yet to complete a database providing detailed descriptions of the types of targets on large enemy installations that would likely be encountered, based on warfighting scenarios; (2) had not set a time frame for completing its munitions effectiveness database; and (3) was debating whether to include greater specificity in its warfighting scenarios and to rate the warfighting scenarios by the probability of their occurrence. These process components significantly affect the numbers and types of munitions needed to meet the warfighting combatant command’s objectives. The department acknowledged these weaknesses and recognized that inaccurate requirements can negatively affect munitions planning, programming, and budget decisions, as well as assessments of the size and composition of the industrial production base. In responding to our report’s recommendations, the department has taken a number of actions to correct the problems we identified. Our review of the requirements process and related documentation showed that the Department of Defense corrected the previously identified systemic problems in its process for determining munitions requirements, but the reliability of the process continues to be uncertain because of the department’s failure to link the near-term munitions needs of the combatant commands and the purchases made by the military services based on computations derived from the department’s munitions requirements determination process. Because of differences in how requirements are determined, asking a question about the quantities of munitions that are needed can result in one answer from the combatant commanders and differing answers from the military services. For this reason, the combatant commands may report shortages of munitions they need to carry out warfighting scenarios. We believe—and the department’s assessment of its munitions requirements process recognizes—that munitions requirements and purchase decisions made by the military services should be more closely linked to the needs of the combatant commanders. The main issue that the department still needs to address is engaging the combatant commands in the requirements determination process, budgeting processes, and related purchasing decisions to minimize the occurrence of reported shortages. Because of the present gap between the combatant commands’ munitions needs and department’s requirements determination process, which helps shape the services’ purchasing decisions, munitions requirements are not consistently stated, and thus the amount of funding needed to alleviate possible shortages is not always fully understood. In April 2001, we reported that key components of the requirements determination process either had not been completed or had not been decided upon. At that time, the department had not completed a database listing detailed target characteristics for large enemy installations based on warfighting scenarios and had not developed new munitions effectiveness data to address deficiencies identified by the services and the combatant commanders. Additionally, the department had not determined whether to create more detailed warfighting scenarios in the Defense Planning Guidance or to rate scenarios in terms of their probability. We concluded that until these tasks were completed and incorporated into the process, questions would likely remain regarding the accuracy of the munitions requirements process as well as the department’s ability to identify the munitions most appropriate to defeat potential threats. In response to our report, the department took actions during fiscal years 2001 and 2002 to resolve the following three key issues affecting the reliability of the munitions requirements process: List of targets—The department lacked a common picture of the number and types of targets on large enemy installations as identified in the warfighting scenarios, and, as a result, each of the services had been identifying targets on enemy installations differently. To resolve this issue, the Joint Chiefs instructed the Defense Intelligence Agency, in coordination with the combatant commanders, to develop target templates that would provide a common picture of the types of potential targets on enemy installations. In August 2001, the department revised its capabilities-based requirements instruction to incorporate the target templates developed by the Defense Intelligence Agency as the authoritative threat estimate for developing munitions requirements. Munitions effectiveness data—The department was using outdated information to determine the effectiveness of a munition against a target and to predict the number of munitions necessary to defeat it. The department recognized that munitions effectiveness data is a critical component for requirements planning and that outdated information could over- or understate munitions requirements. To address this shortfall, the department updated its joint munitions effectiveness manual with up-to-date munitions effectiveness data for use by the services in their battle simulation models. Warfighting scenarios—The Defense Planning Guidance contains warfighting scenarios that detail conditions that may exist during the conduct of war; these scenarios are developed with input from several sources, including the Defense Intelligence Agency, the Joint Chiefs of Staff, and the services. This guidance should provide a common baseline from which the combatant commands and the services determine their munitions requirements. However, when the department adopted the capabilities-based munitions requirements instruction, details were eliminated in favor of broader guidance. To ensure that the combatant commanders and the services plan for the most likely warfighting scenario and do not use unlikely events to support certain munitions, the department revised the Defense Planning Guidance to provide fewer warfighting scenarios and more detail on each. The department expected that these actions to improve the munitions requirements process would correct over- or understated requirements and provide the combatant commands with needed munitions. However, despite the department’s efforts to enhance the requirements determination process, one problem area remains—inadequate linkage between the near-term munitions needs of the combatant commands and the purchases made by the military services based on computations derived from the department’s munitions requirements determination process. Various actions taken to address this issue have not been successful. The disjunction between the department’s requirements determination processes and combatant commanders’ needs is rooted in separate assessments done at different times. The services, as part of their budgeting processes, develop the department’s munitions requirements using targets provided by the combatant commands (based on the Defense Intelligence Agency’s threat report), battle simulation models, and scenarios to determine the number and mix of munitions needed to meet the combatant commanders’ objectives in each war scenario. To develop these requirements, the services draw upon and integrate data and assumptions from the Defense Planning Guidance, warfighting scenarios, and target allocations, as well as estimates of repair and return rates for enemy targets and projected assessments of damage to enemy targets and installations. Other munitions requirements are also determined, and include munitions needed (1) for forces not committed to support combat operations, (2) for forward presence and current operations, (3) to provide a post-theater of war combat capability, and (4) to train the forces, support service programs, and support peacetime operations. These requirements, in addition to the combat requirement, comprise the services’ total munitions requirement. The total munitions requirement is then compared to available inventory and appropriated funds to determine how many of each munition the services will procure within their specified funding limits and is used to develop the services’ Program Objectives Memorandum and their budget submissions to the President. Periodically the combatant commanders prepare reports of their readiness status, including the availability of sufficient types and quantities of munitions needed to meet the combatant commanders’ warfighting objectives, but these munitions needs are not tied to the services’ munitions requirements or to the budgeting process. In determining readiness, the combatant commanders develop their munitions needs using their own battle simulation models, scenarios, and targets and give emphasis to the munitions they prefer to use or need for unique war scenarios to determine the number and mix of munitions they require to meet their warfighting objectives. The combatant commanders calculate their needs in various ways—unconstrained and constrained and over various time periods (e.g., 30 days and 180 days).