The Army’s conversion to a modular force encompasses the Army’s total force—active Army, Army National Guard, and Army Reserve—and directly affects not only the Army’s combat units, but related command and support organizations. A key to the Army’s new modular force design is embedding within combat brigades battalion-sized, reconnaissance, logistics, and other support units that previously made up parts of division-level and higher-level command and support organizations, allowing the brigades to operate independently. Restructuring these units is a major undertaking because it requires more than just the movement of personnel or equipment from one unit to another. The Army’s new modular units are designed, equipped, and staffed differently than the units they replace; therefore successful implementation of this initiative will require changes such as new equipment and a different mix of skills and occupational specialties among Army personnel. By 2011, the Army plans to have reconfigured its total force—to include active and reserve components and headquarters, combat, and support units—into the modular design. The foundation of the modular force is the creation of modular brigade combat teams—combat maneuver brigades that will have a common organizational design and will increase the rotational pool of ready units. Modular combat brigades will have one of three standard designs—heavy brigade combat team, infantry brigade combat team, and Stryker brigade combat team. Until it revised its plans in March 2006, the Army had planned to have a total of 77 active component and National Guard modular combat brigades by expanding the existing 33 combat brigades in the active component into 43 modular combat brigades by 2007, and by creating 34 modular combat brigades in the National Guard by 2010 from existing brigades and divisions that have historically been equipped well below requirements. To rebalance joint ground force capabilities the 2006 QDR determined the Army should have a total of 70 modular combat brigades—42 active brigades and 28 National Guard brigades. Also in March 2006, the Army was in the process of revising its modular combat brigade conversion schedule; it now plans to convert its active component brigades by fiscal year 2010 instead of 2007 as previously planned, and convert National Guard brigades by fiscal year 2008 instead of 2010. As of March 2006 the Army had completed the conversion of 19 active component brigades to the modular design and was in the process of converting 2 active and 7 National Guard brigades. Table 1 shows the Army’s schedule as of March 2006 for creating active component and National Guard modular combat brigades. According to the Army, this larger pool of available combat units will enable it to generate both active and reserve component forces in a rotational manner that will support 2 years at home following each deployed year for active forces. To do this, the Army has created a rotational force generation model in which units rotate through a structured progression of increased unit readiness over time. Units will progress through three phases of operational readiness cycles, culminating in full mission readiness and availability to deploy. The Army’s objective is for the new modular combat brigades, which will include about 3,000 to 4,000 personnel, to have at least the same combat capability as a brigade under the current division-based force, which range from 3,000 to 5,000 personnel. Since there will be more combat brigades in the force, the Army believes its overall combat capability will be increased as a result of the restructuring, providing added value to combatant commanders. Although somewhat smaller in size, the new modular combat brigades are expected to be as capable as the Army’s existing brigades because they will have different equipment, such as advanced communications and surveillance equipment, and a different mix of personnel and support assets. The Army’s organizational designs for the modular brigades have been tested by its Training and Doctrine Command’s Analysis Center against a variety of scenarios, and the Army has found the new designs to be as capable as the existing division-based brigades in modeling and simulations. The Army’s cost estimate for modularity has continued to evolve since our September 2005 report. As we reported, the Army’s cost estimate for transforming its force through fiscal year 2011 increased from $28 billion in the summer of 2004 to $48 billion in the spring of 2005. The latter estimate addressed some of the shortcomings of the initial rough order of magnitude estimate and included lessons learned from operations in Iraq. For example, it included costs of restructuring the entire force, to include 77 brigade combat teams, as well as the creation of support and command units. However, it excluded some known costs. For example, the $48 billion estimate did not include $4.5 billion in construction costs the Army plans to fund through business process engineering efficiencies, which historically have been difficult to achieve. The Army added these costs when it revised its cost estimate in March 2006, bringing the most recent total to $52.5 billion. As shown in table 2, most of the planned funding for modularity—$41 billion, or about 78 percent—will be used to procure equipment, with the remaining funds divided between military construction and facilities and sustainment and training. In addition, Army leaders have recently stated they may seek additional funds after 2011 to procure additional equipment for modular restructuring. In our September report, we highlighted uncertainties related to force design, equipment, facilities, and personnel that could drive costs higher. Some of these uncertainties have been clarified. For example, we noted that costs in equipment and facilities would increase significantly if the Secretary of Defense decided to add 5 brigades to the Army’s active component to create a total of 48 brigade combat teams—a decision that was scheduled to be made in fiscal year 2006. The decision about the number of brigades was made based on the QDR. Instead of a 5 brigade combat team increase, the report stated that the Army would create a total of 42 such brigades in the active component, a 1 brigade combat team reduction from the Army’s plan. In addition, the number of National Guard brigade combat teams was reduced from 34 to 28. In sum, the QDR decisions reduced the number of planned brigade combat teams from 77 to 70. However, Army officials stated that the Army plans to fully staff and equip these units. Moreover, Army officials told us that the Army plans to use resources freed up by this decision to increase support units in the reserve component and to fund additional special operations capability in the active component. We also noted in our September 2005 report that the Army had not completed designs for all the support units at the time the estimate was set. According to Army officials, these designs have been finalized. Despite these refinements to the design and changes to the planned number of combat and support brigades, the Army has not made revisions to its $52.5 billion cost estimate or funding plan based on these changes. Moreover, as I will discuss shortly, uncertainty remains in the Army’s evolving strategy for equipping its modular combat brigades. As a result, based on discussions with Army officials, it remains unclear to what extent the $41 billion will enable the Army to equip units to levels in the Army’s tested design. In addition, it is not clear how the Army will distinguish between modularity, costs associated with restoring equipment used in operations, or modernizing equipment. In estimating its equipment costs for modularity, the Army assumed that some equipment from ongoing operations would remain in operational condition for redistribution to new and restructured modular units. To the extent equipment is not returned from operations at assumed rates, it is not clear how this will affect equipping levels of modular units or how the Army would pay for such equipment. As a result, the Secretary of Defense and Congress may not be in a sound position to weigh competing demands for funding and assess whether the Army will be able to fully achieve planned capabilities for the modular force by 2011 within the planned funding level. The Army has made progress in creating active component modular combat brigades, but it is not meeting its equipping goals for these brigades and is still developing its overall equipping strategy, which raises concerns about the extent to which brigades will be equipped in the near and longer term. While active brigades are receiving significant amounts of new equipment, Army officials indicated that they may seek additional funding for equipment beyond 2011. Moreover, brigades will initially lack key equipment, including items that provide enhanced intelligence, situational awareness, and network capabilities needed to help the Army achieve its planned capabilities of creating a more mobile, rapidly deployable, joint, expeditionary force. In addition, because of existing equipment shortages, the Army National Guard will likely face even greater challenges providing the same types of equipment for its 28 planned modular combat brigades. To mitigate equipment shortages, the Army plans to provide priority for equipment to deploying active component and National Guard units but allocate lesser levels of remaining equipment to other nondeploying units based on their movement through training and readiness cycles. However, the Army has not yet determined the levels of equipment it needs to support this strategy, assessed the operational risk of not fully equipping all units, or provided to Congress detailed information about these plans so it can assess the Army’s current and long-term equipment requirements and funding plans. The Army faces challenges meeting its equipping goals for its modular brigades both in the near and longer term. As of February 2006, the Army had converted 19 modular combat brigades in the active force. According to the Army Campaign Plan, which established time frames and goals for the modular force conversions, each of these units individually is expected to have on hand at least 90 percent of its required major equipment items within 180 days after its new equipment requirements become effective. We reviewed data from several brigades that had reached the effective date for their new equipment requirements by February 2006, and found that all of these brigades reported significant shortages of equipment 180 days after the effective date of their new equipment requirements, falling well below the equipment goals the Army established in its Campaign Plan.