The military services annually determine their current and future munition procurement requirements in accordance with the Defense Planning Guidance. Historically, the Defense Planning Guidance has directed the military services to arm a given force structure to win two nearly simultaneous major theaters of war. In recent years, the Department of Defense has engaged in a number of military operations that vary in size and circumstance from a major theater of war; consequently, the current National Military Strategy and the Defense Planning Guidance call for the services to prepare for a number of small-scale contingency operations in addition to the two major theaters of war. The conditions under which small-scale operations are fought may differ from conditions in a major theater war, which may increase the services’ requirements for highly technical precision munitions designed to limit loss of life and expensive military assets. The increased use of precision munitions in recent conflicts reduced inventories and raised questions about whether adequate attention had been paid to the impact of small- scale contingencies on the ability of U.S. forces to respond and sustain operations for the two major theaters of war. Of the approximately $4.2 billion of munitions the services are planning to procure in fiscal year 2001, 46 percent (or $1.9 billion) will be used to procure precision munitions designed to reduce the number of conventional munitions needed to defeat enemy targets while at the same time limiting loss of expensive weapons systems and life. By fiscal year 2005, the services are planning to increase their procurement of precision guided munitions by about 5 percent. In 1994, to generate consistent munition requirements Department-wide, and to ensure that the military services have both an adequate supply and the appropriate types of munitions to address changing mission needs, the Department of Defense standardized the process by which the services determine their munition requirements. In 1997, 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 munition 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 multiphased 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 warfighting Commanders in Chief, policy on munition requirements for the Defense Planning Guidance. The Defense Intelligence Agency uses the Defense Planning Guidance and its accompanying warfighting 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 for each of the two major theaters of war scenarios. The warfighting Commanders in Chief, responsible for the major 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. Next, the services develop their combat requirements using battle simulation models and scenarios to determine the number and mix of munitions needed to meet the Commanders in Chief’s objectives separately by each major theater of war scenario. To develop these requirements, the services draw upon and integrate data and assumptions from the Defense Planning Guidance requirements, 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 munition requirements include munitions (1) needed for forces not committed to support combat operations, (2) to provide a post-major theater of war combat capability, and (3) to train the force, support service programs, and peacetime requirements. These requirements, in addition to the combat requirement, comprise the services’ total munitions requirement. The total munitions requirement is then balanced along with projected inventory and affordability to determine how many of each munition the services will procure within their specified funding limits and used to develop the services’ Program Objectives Memorandum and Presidential budget submission. Despite Department efforts to standardize the process and generate consistent requirements, many questions have been raised about the accuracy or reliability of the requirements determination process. Between the Department of Defense Inspector General and our agency, 20 reports have been issued that state that systemic problems — such as questionable and inconsistently applied data, inconsistency of processes among and between services, and unclear guidance — have inflated the services’ requirements for certain categories of munitions. A list of these reports is included in appendix II. The Department acknowledged these weaknesses and recognized that inflated requirements can negatively affect munitions planning, programming, and budget decisions, as well as assessments of the size and composition of the industrial production base. As a result, the Defense Planning Guidance for fiscal years 2000-2005, dated April 1998, directed that a Capabilities-Based Munitions Requirements working group develop recommendations to improve the accuracy of the process. In October 1998, the group recommended several corrective actions to address weaknesses identified by both the Inspector General and our agency. Coordinated threat assessment Revised repair rates for damaged targets and target damage Modified the target allocation process Revised risk assessments Based on the recommendations of the Capabilities-Based Munitions Requirements working group, the Department has improved several key components of the requirements determination process. Process improvements include Department-wide coordination of the threat assessment, updated projections as to the amount of time it takes a potential enemy to repair and return damaged targets to the battlefield and target damage assessments, modifications to the target allocation process, and a risk assessment that includes the impact of small-scale contingency operations. The Department expects these improvements to correct weaknesses in the process that can result in over- or understated munition requirements. The Defense Intelligence Agency develops an annual threat assessment that identifies potential threats that the United States and allied forces could expect to meet for each of the two major theaters of war scenarios. The Capabilities-Based Munitions Requirements instruction directs that the Commanders in Chief and the Joint Chiefs of Staff use the threat assessment to allocate targets to each of the services. The Department has identified weaknesses in this area and taken steps to strengthen this assessment. Defense Intelligence Agency officials stated that in the past, the services could, based on input from their own intelligence sources or direction from the warfighting Commanders in Chief, develop an independent threat analysis that could result in the services planning to destroy the same targets and, consequently, overstating munitions requirements. To resolve this issue, the working group directed that the Defense Intelligence Agency fully coordinate the threat assessment with the services and throughout the Defense intelligence communities. In accordance with this directive, the Defense Intelligence Agency coordinated the most recent threat assessment that describes the threat for the fiscal year 2002-2007 planning cycle. By adopting a coordinated threat assessment, the Department expects to be better able to ensure that the services’ munition requirements will be more accurate. Repair rates are a projection of the amount of time it takes a potential enemy to repair and return a target to the battlefield and determine the number of attacks needed to destroy a target, which directly influences munition quantities. Since the services use these rates as input into their warfighting simulation models to determine their munition requirements, these rates should be current and reflect a country’s existing repair capability. In response to a Department of Defense Inspector General review of this process, the Department has taken steps to address the quality of its data on projected repair rates. A Department of Defense Inspector General audit of service requirements for specific categories of munitions reported that the services used repair rates that overstated the requirement for these munitions. According to an official from the Joint Staff, the services were using repair rates for countries from the Cold War era that were able to repair and return damaged property to the battle more quickly than could countries used in today’s war planning scenarios. To address this issue, in December 1999, the Defense Intelligence Agency updated and standardized the repair rates the services used in their battle simulation models, and the Department expects these actions will address the issue of overstated requirements. Battle damage assessments are more critical to munitions requirement planning with the increased use of precision guided munitions and changes in warfighting. Previously, munitions were fired from a range that allowed a visual damage assessment, but precision guided munitions are often fired miles from the target, which eliminates the ability to visually assess whether the target has been damaged or destroyed. Knowing in advance the probability that a specific munition will destroy the target is necessary to accurately determine the number and mix of munitions that will be required. To improve battle damage assessments, the Defense Intelligence Agency developed battle damage assessment factors that measure (1) whether a target was hit, (2) the extent of the damage, and (3) whether the objective was met. These factors are more predictive if the munition has a guidance system that provides damage information to the launch site. According to a Navy official, using the newly developed battle damage assessment factors for the fiscal year 2002-2007 requirements planning cycle significantly reduced the requirement for certain categories of naval munitions. According to an official from the Joint Staff, these assessments have also reduced the potential for overstated munition requirements for the services’ air components. Allocating targets to the services is one of the most critical steps in the requirement determination process as it defines the services’ role in the war fight and determines the number and type of munitions for which the services need to plan. In accordance with the Capabilities-Based Munitions Requirements instruction, the warfighting Commanders in Chief are required to allocate targets to the services for their area of responsibility. This is an area that has proven problematic in reaching an agreement among the services, but the Joint Chiefs of Staff have provided direction to strengthen the process.