The 2005 National Defense Strategy provided the strategic foundation for the 2006 QDR and identified an array of traditional, irregular, catastrophic, and disruptive challenges that threaten U.S. interests. To operationalize the defense strategy, the 2006 QDR identified four priority areas for further examination: defeating terrorist networks, defending the homeland, shaping the choices of countries at strategic crossroads, and preventing hostile state and non-state actors from acquiring or using weapons of mass destruction. These areas illustrated the types of capabilities and forces needed to address the challenges identified in the defense strategy and helped DOD to assess that strategy and review its force planning construct. Changes in the security environment and the force planning construct may require DOD and the services to reassess force structure requirements—how many units and of what type are needed to carry out the national defense strategy. Likewise, changing force structure requirements may create a need to reassess active end strength—-the number of military personnel annually authorized by Congress which each service can have at the end of a given fiscal year. The services allocate their congressionally authorized end strength among operational force requirements (e.g., combat and support force units), institutional requirements, and requirements for personnel who are temporarily unavailable for assignment. Operational forces are the forces the services provide to combatant commanders to meet mission requirements, such as ongoing operations in Iraq and Afghanistan. Institutional forces include command headquarters, doctrine writers, and a cadre of acquisition personnel, which are needed to prepare forces for combat operations. Personnel who are temporarily unavailable for assignment include transients, transfers, holdees, and students. The Secretary of Defense’s recent proposal to permanently increase the size of the Army and Marine Corps represents a significant shift in DOD’s plans, as reflected in the 2006 QDR. In fiscal year 2004, the Army’s authorized end strength was 482,400 active military personnel. Since that time, the Army has been granted authority to increase its end strength by 30,000 in order to provide flexibility to implement its transformation to a modular force while continuing to deploy forces to overseas operations. Rather than return the Army to the 482,400 level by fiscal year 2011, as decided in the 2006 QDR, DOD’s new proposal would increase the Army’s permanent end strength level to 547,000 over a period of 5 years. DOD’s plans for Marine Corps end strength have also changed. In fiscal year 2004, the Marine Corps’ was authorized to have 175,000 active military personnel. For the current fiscal year, Marine Corps end strength was authorized at 180,000, although DOD’s 2006 QDR planned to stabilize the Marine Corps at the 175,000 level by fiscal year 2011. The Secretary’s new proposal would increase permanent Marine Corps end strength to a level of 202,000 over the next 5 years. In terms of funding, DOD is currently authorized to pay for end strength above 482,400 and 175,000 for the Army and Marine Corps, respectively, with emergency contingency reserve funds or from supplemental funds used to finance operations in Iraq and Afghanistan. Until Congress receives the President’s budget request, it is unclear how DOD plans to fund the proposed increases. In 2004, the Army began its modular force transformation to restructure itself from a division-based force to a modular brigade-based force—an undertaking it considers the most extensive reorganization of its force since World War II. This initiative, according to Army estimates, will require an investment exceeding $52 billion through fiscal year 2011. The foundation of the modular force is the creation of standardized modular combat brigades in both the active component and National Guard. The new modular brigades are designed to be self-sufficient units that are more rapidly deployable and better able to conduct joint and expeditionary operations than their larger division-based predecessors. The Army planned to achieve its modular restructuring without permanently increasing its active component end strength above 482,400, in accordance with a decision reached during the 2006 QDR. The February 2006 QDR also specified that the Army would create 70 active modular combat brigades in its active component and National Guard. According to the Army, the modular force will enable it to generate both active and reserve component forces in a rotational manner. To do this, the Army is developing plans for a force rotation model in which units will rotate through a structured progression of increased unit readiness over time. For example, the Army’s plan is for active service members to be at home for 2 years following each deployment of up to 1 year. Both OSD and the military services play key roles in determining force structure and military personnel requirements and rely on a number of complex and interrelated process and analyses-–rather than on one clearly documented process. Decisions made by OSD can have a ripple effect on the analyses that are conducted at the service level, as I will explain later. OSD is responsible for the QDR–-the official strategic plan of DOD–-and provides policy and budget guidance to the services on the number of active personnel. The QDR determines the size of each services’ operational combat forces based on an analysis of the forces needed to meet the requirements of the National Defense Strategy. For example, the 2006 QDR specified the Army’s operational force structure would include 42 active Brigade Combat Teams and that the Army should plan for an active force totaling 482,400 personnel by fiscal year 2011. The QDR also directed the Marine Corps to add a Special Operations Command and plan for an active force totaling 175,000 military personnel by fiscal year 2011. In order to provide a military perspective on the decisions reached in the QDR, Congress required the Chairman of the Joint Chiefs of Staff to conduct an assessment of the review including an assessment of risk. In his assessment of the 2006 QDR, the Chairman concluded that the Armed Forces of the United States stood “fully capable of accomplishing all the objectives of the National Defense Strategy.” In his risk assessment, he noted that the review had carefully balanced those areas where risk might best be taken in order to provide the needed resources for areas requiring new or additional investment. Another area where the Office of the Secretary of Defense plays an important role is in developing various planning scenarios that describe the type of missions the services may face in the future. These scenarios are included in planning guidance that the Office of the Secretary of Defense provides the services to assist them in making more specific decisions on how to allocate their resources to accomplish the national defense strategy. For example, these scenarios would include major combat operations, stability operations, domestic support operations, and humanitarian assistance operations. GAO examined whether DOD had established a solid foundation for determining military personnel requirements. While we are currently reviewing the plans and analyses of the 2006 QDR, our February 2005 assessment of DOD’s processes identified several concerns that, if left uncorrected, could have hampered DOD’s QDR analysis. First, we found that DOD had not conducted a comprehensive, data-driven analysis to assess the number of active personnel needed to implement the defense strategy. Second, OSD does not specifically review the services’ requirements processes to ensure that decisions about personnel levels are linked to the defense strategy. Last, a key reason why OSD had not conducted a comprehensive analysis was that it has sought to limit personnel costs to fund competing priorities such as transformation. The Army uses a biennial, scenario-based requirements process to estimate the number and types of operational and institutional forces needed to execute Army missions. This process involves first determining the number and type of forces needed to execute the National Military Strategy based on OSD guidance, comparing this requirement with the Army’s present force structure, and finally reallocating military positions to minimize the risks associated with any identified shortfalls. Taken together, this process is known as “Total Army Analysis.” The Army has conducted this analysis for many years and has a good track record for updating and improving its modeling, assumptions, and related processes over time, as we noted in our last detailed analysis of the Army’s process. Active and reserve forces are included in this analysis in order to provide a total look at Army requirements and the total end strength available to resource those requirements. Also, the number of combat brigades is specified by OSD in the QDR and is essentially a “given” in the Army’s requirements process. The Army’s process is primarily intended to assess the support force structure needed to meet the requirements of the planning scenarios, and to provide senior leadership a basis for better balancing the force. In the first phase of the Army’s requirements determination process, the Army uses several models, such as a model to simulate warfights using the scenarios provided by OSD and the number of brigades OSD plans to use in each scenario. The outcomes of the warfighting analyses are used in further modeling to generate the number and specific types of units the Army would need to support its brigade combat teams. For example, for a prolonged major war, the Army needs more truck companies to deliver supplies and fuel to front line units. For other types of contingencies, the Army may use historical experience for similar operations to determine requirements since models are not available for all contingencies. The Army also examines requirements for the Army’s institutional force, such as the Army’s training base, in order to obtain a total bottom line requirement for all the Army’s missions. In the second phase of the Army’s process—known as the “resourcing phase”— the Army makes decisions on how to best allocate the active and reserve military personnel levels established by OSD against these requirements. In order to provide the best match, the Army will develop a detailed plan to eliminate lower priority units, and stand up new units it believes are essential to address capability gaps and meet future mission needs. For example, in recent years, the Army has made an effort to increase units needed for military police, civil affairs, engineers, and special operations forces. These decisions are implemented over the multiple years contained in DOD’s Future Years Defense Program.