The September 2001 Quadrennial Defense Review outlined a strategy to sustain and transform the military force structure that had been in place since the mid-1990s. In that review, DOD committed to selectively recapitalize older equipment items, which the department recognized as being neglected for too long, to meet near-term challenges and to improve near-term readiness. DOD is currently conducting a new Quadrennial Defense Review, with the report scheduled to be issued in February 2006. The results of this Quadrennial Defense Review could identify changes to DOD’s future force structure and capabilities, thereby impacting the funding needed for both current and replacement systems. Based on DOD guidance, the services develop a Program Objective Memorandum that details the specific programs and funding needed to meet DOD requirements as determined by the Quadrennial Defense Review. As part of this process, the services analyze alternative force structure, weapons systems, and support systems together with their multiyear resource implications and evaluate various trade-off options. Basically, it is a process for balancing and integrating resources among the various programs according to service and DOD priorities. The annual FYDP contains DOD’s estimates of future funding needs for programs and priorities. Through the FYDP, DOD projects costs for each element of those programs through a period of either 5 or 6 years on the basis of proposals made by each of the military services. The Office of the Secretary of Defense considers the service proposals and the policy choices made by the current administration and, where needed, makes adjustments. For example, in preparing its 2006 budget, DOD made a number of significant changes in its long-term acquisition plans to meet budget targets established by the White House, as documented in Program Budget Decision 753. The 2005 FYDP extended from fiscal year 2005 to fiscal year 2009 and the 2006 FYDP extended from fiscal year 2006 to fiscal year 2011. While the condition of the 30 equipment items we reviewed varied, we found that average fleet-wide readiness rates for most of these items declined between fiscal years 1999 and 2004. The decline in readiness generally resulted from the high pace of recent operations and the advanced age or complexity of the equipment systems. Therefore, we rated the fleet-wide condition of 22 of the selected equipment items as red or yellow. However, 8 of the 30 items—including several tactical fighter aircraft and some newer equipment items such as the Marine Corps’ Medium Tactical Vehicle Replacement—were assessed as green (see fig. 1), indicating that we found no specific problems that warrant additional attention by DOD, the services, or Congress or that problems were already being addressed. DOD is currently conducting a Quadrennial Defense Review that will examine defense programs and policies and may change some equipment requirements. Eighteen of the equipment items we reviewed for this report were also included in our December 2003 report, and 12 of these equipment items received the same condition assessment in both analyses. For example, the surface ships examined in this study, the Navy’s DDG-51 Arleigh Burke Class Destroyer, the FFG-7 Oliver Hazard Perry Class Frigate, and the LPD- 4 Amphibious Transport Dock Ship received yellow condition ratings in both studies, as did the Air Force’s B-2 Spirit Bomber, the C-5 Galaxy Transport Aircraft, and the KC-135 Stratotanker Aircraft. However, for 6 of the items, the assessment changed—3 systems’ fleet-wide condition improved, 2 going from red to yellow and 1 from yellow to green, and 3 systems’ condition degraded, going from green to yellow. The condition assessments for the Marine Corps’ CH-46E helicopter and the Navy’s F/A-18 aircraft and Standard Missile-2 improved due, in part, to additional maintenance efforts and improvements that appear to address the condition concerns noted in our previous report. The condition assessments for the Army’s Abrams tank and Heavy Expanded Mobility Tactical Truck and the Marine Corps’ Light Armored Vehicle went from green to yellow largely as a result of increased use in ongoing operations overseas. For many of the equipment items included in our assessment, average fleet- wide readiness rates have declined, generally due to the high pace of recent operations or the advanced age or complexity of the systems. We assessed the fleet-wide condition of 3 equipment items as red, indicating that immediate attention is warranted by DOD, the services, and/or Congress to address problems or issues. In addition, we assessed the fleet-wide condition of 19 items as yellow, indicating that attention is warranted to address existing problems that, if left unattended, may worsen. Table 1 below shows the primary reasons used to rate selected equipment items’ condition and our assessment of those items as either red or yellow. Although selected equipment items have been able to meet wartime requirements, the high pace of recent operations appears to be taking a toll on selected equipment items and fleet-wide mission capable rates have been below service targets, particularly in the Army and Marine Corps. Further, according to officials, the full extent of the equipment items’ degradation will not be known until a complete inspection of deployed equipment is performed. Elevated flying hours in Iraq and Afghanistan, coupled with the harsh desert environment, have negatively impacted helicopters. For example, our assessment of the Army’s CH-47D/F Chinook helicopter’s condition as red reflects this platform’s mission capable rates, which were consistently below service goals. Officials stated that the aircraft is currently being flown in Iraq and Afghanistan at three times more than planned peacetime rates. This usage has increased the amount of maintenance and number of parts needed to sustain the aircraft, which in turn has negatively impacted overall readiness. Ground equipment has also been affected by high wartime usage. For example, the Marine Corps’ M1A1 Abrams tank fleet, also rated as red for condition, is being negatively impacted by operations in Iraq and a shortage of equipment maintainers due to transfers of personnel to units that are deploying. This system failed to meet its service readiness goals and recent trends indicate a steady decline away from these targets. Several heavily used equipment items included in our review did not have mission capable rates below their target; however, these rates have recently declined, primarily due to the high wartime usage. For example, while the Army’s Abrams Tanks and Bradley Fighting Vehicles met or exceeded the Army mission capable goals, they are both on a downward trend due to a shortage of spare parts and trained technicians. The shortage of spare parts is driven by the number of vehicles either deployed or being reset to a predeployment condition and the shortage of trained technicians is primarily due to the number of deployed National Guard military technicians. Both of these tracked vehicles have experienced high use in operations overseas in the past and will likely do so in the future. Similarly, while the readiness rates of the Marine Corps’ Assault Amphibian Vehicle varied by vehicle type in recent years, the gap between mission capable rates and service goals increased, indicating a decline in the material condition of this equipment. While not all of the equipment included in our review has been heavily used in recent overseas operations, in some cases, the advanced age or complexity of the equipment items have contributed to readiness declines. Many of the selected systems have either a fleet-wide average age of more than 20 years, such as the Navy’s LPD-4 Amphibious Transport Dock Ship, or entered the inventory prior to the 1980s, such as the Air Force’s KC-135 Stratotanker aircraft. These systems are likely to reach the end of their useful lives in this decade unless major modernizations, some of which are planned or underway, are made. Some of the problems degrading the fleet- wide condition of these aging systems include maintenance problems due to parts shortages or obsolescence, shortages of trained maintenance personnel, corrosion, deferred maintenance, and airframe fatigue. For example, the Navy’s P-3 Orion aircraft, while not as heavily tasked as Army and Marine Corps helicopters, have played an important role in overseas operations as a reconnaissance and surveillance asset despite consistently missing their mission capable goals by a significant percentage. The condition of the P-3 fleet, which has an average age of over 24 years, has been primarily degraded by the effects of structural fatigue on its airframe and the obsolescence of communication, navigation, and primary war- fighting systems in this aircraft. Some Air Force equipment also has age-related condition issues that warrant attention and therefore received yellow ratings. For example, mission capable rates for the C-5 Galaxy Transport Aircraft were consistently below Air Force goals between fiscal years 1999 and 2004. Officials stated that the size and age of the C-5 aircraft make it maintenance intensive, and that component items on the aircraft are older, making it difficult to find manufacturing sources for some parts, particularly avionics and engine components. In addition, the KC-135 Stratotanker aircraft has not met its mission capable goals due to issues associated with age and corrosion, such as problems with the landing gear’s steel brakes. Similarly, Navy surface ships examined in this study had a number of issues related to condition and these vessels also received yellow ratings. The Navy is challenged to maintain surface ships that are, in reality, a system of systems. The failure of any one of these complex systems affects the entire ship. For example, the DDG-51 Arleigh Burke Class Destroyer, the FFG-7 Oliver Hazard Perry Class Frigate and the LPD-4 Amphibious Transport Dock Ship all had problematic subsystems, for example, operating with limited communication ability or bandwidth, which affects their day-to-day operations such as on-line training and personnel activities.