The Army faces enormous equipping challenges while conducting operations in Iraq and Afghanistan, and restructuring to a modular force. The Army has four key initiatives underway that impact efforts to equip the force: the establishment of modular units, expansion of the force, equipment reset, and reconstitution of prepositioned equipment. The Army’s modular restructuring initiative, which began in 2004, is considered the most extensive reorganization of its force since World War II. This transformation was initiated, in part, to support current operations in Iraq and Afghanistan by increasing the number of combat brigades available for deployment overseas. The foundation of modular restructuring is the creation of new, standardized, modular units that change the Army’s legacy division-based force structure to smaller more numerous brigade formations embedded with significant support elements. A key goal of the modularity initiative is for modular brigades to have at least the same combat capability as a brigade under the division- based force. The new modular brigades are expected to be as capable as the Army’s existing brigades partly because they will have different equipment including key enablers such as advanced communications and surveillance equipment. Moreover, in contrast to the Army’s previous division-based force, modular National Guard and Army Reserve units will have the same design, organizational structure, and equipment as their active component counterparts. In addition, the Secretary of Defense announced in January 2007 an initiative to expand the Army by adding more than 74,200 soldiers and thereby creating six active brigade combat teams and additional modular support units. This planned expansion is intended to allow the Army to revitalize and balance the force, reduce deployment periods, increase time soldiers spend at home station in between deployments, increase capability, and strengthen the systems that support the forces. The Army relies on equipment reset and prepositioned equipment to improve equipment availability. Reset is the repair, replacement, and modernization of equipment that has been damaged or lost as a result of combat operations. The Army prepositioned equipment program is an important part of DOD’s overall strategic mobility framework. The Army prepositions equipment at diverse strategic locations around the world in order to field combat-ready forces in days rather than the weeks it would take if equipment had to be moved from the United States to the location of the conflict. The total cost to restructure and rebuild the Army is uncertain but this effort will likely require many billions of dollars and take at least several more years to complete. Our analysis of Army cost estimates and cost data indicate that it is likely to cost at least $190 billion dollars to equip modular units, expand the force, reset equipment, and replace prepositioned equipment from fiscal years 2004 through 2013. However, these estimates have limitations and could change. For example, the Army is likely to continue to have shortfalls of some key equipment beyond then and believes it will require additional funding to equip modular units through fiscal year 2017. Although the Army has not identified a total aggregate cost for its key equipping initiatives, it has previously reported some cost estimates and cost data for equipping modular units, expanding the Army, resetting equipment, and restoring pre-positioned stocks. However, these estimates have some limitations because they are based on incomplete information, have not been updated, or may change as a result of the evolving nature and unknown duration of ongoing operations in Iraq and Afghanistan. As a result, the full costs of these equipping efforts are unclear but will be substantial. Based on our analysis of various sources of Army cost data, it appears that the cost of these initiatives will exceed $190 billion dollars between fiscal years 2004-2013 (see table 1). These figures do not include data on Army longer term transformation efforts such as the Army’s Future Combat System. The John Warner National Defense Authorization Act for Fiscal Year 2007 required the Army to report annually on its progress toward fulfilling requirements for equipment reset, equipping of units transforming to modularity, and reconstitution of equipment in prepositioned stocks. In its February 2008 report, the Army stated that there is no longer a distinguishable difference between equipment purchased for modular restructuring and other modernized fielding. The report does not address future costs in detail, nor does it provide significant detail about progress achieved to date with funds that have already been appropriated. As a result, it is becoming increasingly difficult to track overall progress and costs. The following sections further describe the cost and status of the Army’s key initiatives including modular restructuring, expanding the force, resetting equipment, and restoring pre-positioned stocks. These initiatives will drive much of the costs of equipping the Army for the next several years. The Army has made progress establishing modular units but this initiative will likely cost billions more than the Army originally estimated because the Army’s estimate was based on some assumptions that no longer appear valid and was developed before some modular unit designs had been finalized. As a result, the Army now believes it will require additional funding through fiscal year 2017 to equip its modular units. However, it has not revised its 2005 cost estimate to reflect this. Moreover, because it will take time to procure equipment once funds are appropriated, units may not receive all scheduled equipment until 2019. In early 2005, the Army estimated that converting the Army to a modular design would cost approximately $52.5 billion from fiscal years 2005-2011, which was incorporated in a funding plan approved by the Office of the Secretary of Defense. The funding plan included costs for equipment, sustainment and training, and construction/facilities. As shown in table 2, most of these funds—$43.6 billion—were designated for equipment purchases. The Army made the decision to create modular units knowing that it would take several years after units were established to equip and staff them at authorized levels. At the end of fiscal year 2007, the Army had converted about two-thirds of its force to modular units. By the end of fiscal year 2008, the Army projects it will have converted 277 of 327 modular units (about 85 percent). The Army currently projects that the unit restructuring will be completed by fiscal year 2013. However, our ongoing work shows that the Army will continue to have significant shortfalls of key equipment that are critical to achieving the planned benefits of the modular force after the Army receives planned funding for fiscal years 2005-2011. For example, the Army projects that it will still need hundreds of thousands of modern equipment items including intelligence equipment, advanced radios, and trucks. In place of more modern equipment, many Army units will continue to have some older equipment that does not necessarily provide the same capability as the more modern counterparts. The Army has stated that it plans to request funds through 2017 to help fill modular unit equipment shortfalls. However, it has not revised its initial $43.6 billion estimate, even though it was based upon several assumptions that no longer appear valid. Specifically, we have reported that the Army believes it will need additional funding to equip modular units because its 2005-2011 funding plan: was developed before some modular unit designs had been finalized, assumed that Army National Guard and reserve units would retain some older models of equipment, and assumed that significant quantities of equipment would be returned from Iraq in good enough condition to help equip modular units. Additional explanation of each of these factors follows. At the time the Army’s cost estimate was developed, the Army’s modular designs were incomplete, so budget analysts were uncertain about the exact number of personnel and how many and what type of equipment items would be needed for modular units. For example, on the basis of lessons learned, the Army has reconfigured some of the modular unit designs and has added additional capabilities for force protection and route clearance to counter specific threats faced by deployed units. Further, because the number and composition of National Guard units had not been developed, budget analysts made certain assumptions about how much funding would be required by National Guard units to convert to the new modular designs. When the Army began to implement its modular restructuring initiative, it planned for the National Guard to establish 34 Brigade Combat Teams plus an additional number of support brigades. The 2006 Quadrennial Defense Review, however, recommended that the Army establish only 28 Brigade Combat Teams and convert the remaining units to support brigades. In addition, the Army’s original plan for equipping modular units also did not fully consider the equipping implications associated with the Army National Guard’s changing role in supporting military operations. Since 2001, the Army National Guard’s role has changed from a strategic reserve force to an operational force that is used to support a wide range of military operations at home and abroad. Prior to 2001, Army National Guard units were generally equipped with older equipment and at lower levels than comparable active duty units because it was assumed that they would have considerable warning and training time before deploying overseas. However, senior Army officials have determined that the National Guard’s modular units should be structured like those in the active component and receive similar equipment since the Guard has become an operational force that deploys along with active units. As a result, senior Army officials have stated the Army plans to request additional funds for Army National Guard equipment. In addition, the Army National Guard also has significant domestic missions, and equipment needs for those missions are uncertain. In January 2007 we issued a report on actions needed to address National Guard domestic equipment requirements and readiness. We found that DOD has not worked with the Department of Homeland Security to define National Guard requirements for responding to the 15 catastrophic scenarios developed by the Homeland Security Council. As a result, the equipment requirements and the funding needed to provide equipment for such missions are unknown. Last, when developing its cost estimate for equipping modular units, the Army assumed that significant quantities of equipment would come back from Iraq and be available after some reset and repair work to be distributed to new modular units. Given the heavy use of equipment in Iraq and Afghanistan, this assumption may no longer be valid. The increased demands for equipment used in Iraq operations have had a dramatic effect on equipment availability.