The Insider

What, We Worry?
By John Liang
December 10, 2008 at 5:00 AM

Just because the world's economy is down doesn't mean that the aerospace and defense industry is too, according to the Aerospace Industries Association.

As AIA President and CEO Marion Blakey told attendees at the association's annual year-end luncheon at the lavish Mayflower Hotel in downtown Washington today:

I’m happy to report that, despite the challenges to our economy, our industry had a strong year in 2008. Total sales are on pace to reach $204 billion, a new record for the fifth straight year. It also represents the seventh year of growth in the last eight years, which is even more remarkable when you consider the widespread financial difficulties in our economy. This figure represents an increase of 2.1 percent, which is less growth than we’ve seen in recent years. The main reason for the drop was not the tough economic atmosphere, but the work stoppage at Boeing that trickled down through the industry. We are more than satisfied that there was continued progress throughout the aerospace industry in 2008.

Like last year, our industry saw modest growth in every sector – civil aircraft, military aircraft, missiles, space and related products. This is noteworthy because over the years these sectors were often on different, distinct cycles. When civil aviation was up, military was usually down, and vice-versa. To see this balanced growth across the sectors again is a good sign for our industry.

As for the upcoming year, Blakey said the industry "is in good position to weather the financial storm" for several reasons:

One is that funding levels for two of our three sub-sectors – defense and space – are largely set for the next fiscal year. The defense appropriations bill for fiscal 2009 was part of the continuing resolution that passed in October. The same bill also provides funding for NASA through March at largely the same levels as fiscal 2008.

While ideally we would like to see increased investment in space exploration, it at least keeps a stable base for NASA funding. Much of the groundwork for the fiscal 2010 budget is being laid right now. And the long lead times on federal budgets mean that we anticipate funding levels to remain steady -- without any major adjustments -- for the next 18 months, or even longer.

That said, defense and aerospace are not necessarily "immune" to the current recession, according to Blakey:

There is some speculation out there that the defense budget will be a source for cutbacks in future years to pay for other needs.

Defense R&D funding is expected to decrease, and supplemental budgets are poised to go down. In civil aviation, orders have decreased, passenger traffic is down and the contracting credit market makes aircraft financing deals more difficult. On top of that, anticipated fleet recapitalization by U.S. airlines does not look like it will materialize in the near-term. And, of course, the bad economic environment has traveled around the globe, and the bulk of existing aircraft customers are foreign airlines.

And lest Congress sees the multibillion-dollar defense budget as a potential till from which to pay for other government programs:

Aerospace and defense should not become a bill-payer for other areas of the federal budget, which would hurt our economy in the long-term for some temporary relief elsewhere.

Our industry provides a strong economic foundation for much of our nation’s advanced technology and innovation, and that would suffer if we don’t make adequate, sustained investment. All this effort is to underscore the message that aerospace is a cornerstone of our economy, and it deserves sustained support from our elected leaders.

MRAP Misjudgments?
By Marjorie Censer
December 9, 2008 at 5:00 AM

Following the release of the Pentagon Inspector General's report on the Mine Resistant Ambush Protected acquisition effort, Rep. Neil Abercrombie (D-HI) has issued a statement criticizing the Marine Corps and the overall defense procurement system.

Though the IG report cleared Marine Corps Combat Development Command of criminal negligence in failing to respond to requests from Iraq for the vehicles, it said the command failed to redirect the urgent request to the Pentagon, InsideDefense.com reported yesterday.

Abercrombie, who chairs the House Armed Services air and land subcommittee, said in today's statement that “Terrible misjudgments were made in not making MRAPs a top priority for Marines in combat in early 2005 when they were first requested by field commanders.

“And even when the MRAP’s ability to survive roadside bomb blasts and save lives was acknowledged, an insufficient number were initially ordered,” he continued.

However, Abercrombie more broadly faults “the entire defense procurement process,” citing a “systemic problem.

“It is ponderous and frequently unresponsive to urgent needs,” the statement says. “It seems unable to anticipate how threats to our troops will evolve. As a result, we are always playing catch-up, rather than getting ahead of new threats.”

Field Trip
By Sebastian Sprenger
December 9, 2008 at 5:00 AM

Members of a U.S. Central Command-led team charged with undertaking a comprehensive review of the command's strategy were scheduled to arrive in Afghanistan late last week to hear from military personnel and diplomats about the situation on the ground there, we're told.

A CENTCOM spokeswoman today declined to confirm or deny plans for the trip, citing security reasons. Officials are keeping a tight lid on the details surrounding the group so members can conduct a "fair and impartial" assessment, said Air Force Maj. Tina Barber-Matthew.

The assessment, led by CENTCOM deputy commander Marine Corps Lt. Gen. John Allen, is slated to produce a report for command chief Gen. David Petraus by February, she added.

Meanwhile, officials from United Kingdom are lending a helping hand in the effort, records show.

British Member of Parliament Keith Simpson recently asked government officials about what exactly his country's involvement is in the drill, according to a Nov. 26 edition of the "Hansard" parliamentary transcript service, which is available online.

Gillian Merron, a parliamentary under-secretary of state for the Foreign Office, told Simpson this:

US General David Petraeus established a Central Command (CENTCOM) Assessment Team (CAT) which began on 4 November and is due to conclude in February 2009. Its aim is to conduct a comprehensive assessment of the CENTCOM area of operations -- which spans the greater Middle East and parts of Asia, including Afghanistan and Pakistan.

The UK was asked to contribute to the review of American defence and security policy during September 2008. Participation in the review is part of the important bilateral relationship with the US. Some costs are being met by CENTCOM while other costs, including salary, will be covered by individual departments. We will write to the hon. Member separately with details. The UK is a key partner in the ongoing international coalition aiming to bring security and stability to this area. The CAT is an integral part of this effort and the UK therefore has a responsibility to participate.

The UK team is drawn from a range of thematic and geographical experience with two personnel from the ((Foreign and Commonwealth Office)), one person from ((the Department for International Development)) and 14 personnel from the ((Ministry of Defence)) and military. The FCO does not routinely release the names of individuals. The UK team began work in the CAT on 4 November following preparation in Whitehall within the policy and research community.

The UK objective for participation is to share our views, and learn those of others, across a very broad spectrum of issues concerning the provision of security, the rule of law and other issues of current global concern. The UK will contribute to a wide discussion and will not publish their contribution separately.

Bill Rammell, minister of state for foreign and commonwealth affairs in the Foreign Office, wrote this:

The US-led Central Command (CENTCOM) Assessment Team (CAT) will conduct a comprehensive assessment of the CENTCOM area of operations, drawing on US interagency and international partner expertise. The US has invited the UK and other nations to participate. The assessment will include visits by members of the CAT, including UK team members, to Afghanistan for consultation with the Government of Afghanistan and its officials.

Barber-Matthew, the CENTCOM spokeswoman, declined to identify additional countries participating in the assessment.

Earth Day
By Christopher J. Castelli
December 8, 2008 at 5:00 AM

President-elect Barack Obama and Vice President-elect Joe Biden are slated to meet with former Vice President Al Gore in Chicago tomorrow to discuss “energy and climate change and how policies in this area can stimulate the economy and create jobs,” the Obama camp just announced.

No word yet whether national security issues will factor into the meeting. There's no mention of such an angle in the brief statement. However, as Inside the Pentagon recently reported, Leon Fuerth, who advised Gore on national security during the Clinton administration, will be among the participants in a new study of climate, energy, and national security that is getting under way at the National Academy of Sciences.

Shocker
By Jason Sherman
December 8, 2008 at 5:00 AM

As if the incoming Obama administration doesn't already have enough on its plate -- with forecasts of a protracted and deep recession, a half-million workers knocked off the payrolls last month, and the Big Three automakers on the brink of insolvency -- a new Army War College monograph warns that the new leadership team should brace in its early days for a challenge akin to the Sept. 11, 2001, terrorist attacks.

That's the the advice of Nathan Freier, visiting professor of strategy, policy, and risk assessment at the U.S. Army’s Peacekeeping and Stability Operations Institute and a senior fellow in the International Security Program at the Center for Strategic and International Studies (CSIS).

Just as President George W. Bush faced a strategic shock in his first eight months, President-elect Barack Obama “would be well-advised to expect the same,” writes Freier, a retired Army lieutenant colonel who worked in the Office of the Secretary of Defense preparing the 2005 National Defense Strategy.

Defense-relevant strategic shocks jolt convention to such an extent that they force sudden, unanticipated change in the Department of Defense’s perceptions about threat, vulnerability, and strategic response. Their unanticipated onset forces the entire defense enterprise to reorient and restructure institutions, employ capabilities in unexpected ways, and confront challenges that are fundamentally different than those routinely considered in defense calculations...

They will rise from an analytical no man’s land separating well-considered, stock and trade defense contingencies and pure defense speculation. Their origin is most likely to be in irregular, catastrophic, and hybrid threats of “purpose” (emerging from hostile design) or threats of 'context' (emerging in the absence of hostile purpose or design). Of the two, the latter is both the least understood and the most dangerous.

The 2008 National Defense Strategy, singed by Defense Secretary Robert Gates in June, warns that strategic shocks “could potentially change the rules of the game and require a fundamental re-appraisal of the strategy.”

For more than two years, the Pentagon’s policy shop has spearheaded a project examining “trends and shocks” looking across a range of non-military disciplines for hints of where the next set of challenges that might require a military response could come from.

In September 2007, we explored that construct, which is poised to play a pivotal role in the 2010 Quadrennial Defense Review, now that Defense Secretary Robert Gates will continue to head the Pentagon during the Obama administration:

The project, led by Thomas Mahnken, deputy assistant secretary of defense for policy planning in the Pentagon’s policy shop, has been endorsed by Deputy Defense Secretary Gordon England. The goal is to assess the potential defense implications of consequential events -- “shocks” -- that could include major changes in global climate, a nuclear attack against a major western city, a new technology revolution or a financial market collapse that triggers a global depression.

“It really is an effort to get the department to think about long-term trends, particularly those the department hasn’t thought about systematically in the past, and explore their implications for the department,” said a senior Pentagon official in a July (2007) interview with InsideDefense.com.

Projecting
By Dan Dupont
December 8, 2008 at 5:00 AM

The Cambridge, MA-based Project on Defense Alternatives has released two new reports on the future of national security, one targeted at the transition and near-term debate over defense and the other more broadly focused.

From "Re-Envisioning Defense: An Agenda for U.S. Policy Debate & Transition":

The United States is entering a critical period of policy transition. Beginning with the advent of a new administration in Washington, and continuing through the end of 2010, all of America's national security and defense planning guidance will be revised. Certainly the need for change is manifest.

Recent defense policy evinces a disturbing paradox: it has been delivering less and less security at ever increasing cost. And, on a world scale, a process of global re-polarization and re-militarization underway. If unchecked, this portends a return to conditions reminiscent of the Cold War, which would add impetus to weapon proliferation, arms races, and conflicts.

Reviewing current US policy, we have identified 25 specific concerns that relate to the problems noted above. These might form an agenda for policy discussion and change. From these we have distilled a “short list” of three overarching topics or concerns that, taken together, capture the fundamental problems in current policy. Alternatives addressing these three core concerns can provide guidance for understanding and addressing the rest.

And from "Forceful Engagement: Rethinking the Role of Military Power in US Global Policy":

Setting a new course in policy begins with acknowledging that the surge in US military activism that followed the 9/11 attacks has gone too far and has become, on balance, counter-productive. National leadership must become more realistic about what can be reliably accomplished by military means and more sensitive to the costs and chaos that attend war.

Although military primacy has proved less useful than many had hoped, it has become a US security goal in its own right. This distorts US global policy and practice. More relevant than the power balance between the United States and its adversaries is the balance between US power and US objectives.

Military primacy is not sustainable, at any rate. The more it is exercised, the more it invites balancing behavior on the part of others. Notably, present global disparities in military power do not reflect the distribution of human and material resources. This means that other nations have considerable latent capacity to narrow the military gap between themselves and the United States, if they so choose.

Rough Count
By Kate Brannen
December 8, 2008 at 5:00 AM

The Federation of American Scientists reports today that surface-to-air missiles, including man-portable air-defense systems (MANPADS), are still being found in weapons caches in Iraq. These shoulder-launched missiles can be used to shoot down low-flying aircraft like helicopters.

After analyzing U.S. military press releases and media reports, FAS determined that at least 121 surface-to-air missiles and four additional launchers have been recovered by U.S. and Iraqi forces. Of these, at least 91, or 73 percent, are identified as Soviet-designed, Warsaw Pact missiles.

The prevalence of these missiles is no surprise because it is well known that Saddam Hussein stockpiled thousands of these types of weapons and that after his regime collapsed, they were looted from government depots, states the report.

Missiles produced by other countries have also been found in Iraq, according to FAS, but in much smaller numbers. There have been two public reports of Iranian MANPADS, the Misagh-1 missile, being discovered.

The good news: No reports of western missiles turning up in Iraq, suggesting that current U.S. and European export controls on MANPADS are "fairly effective," writes FAS.

"Western governments are also, generally speaking, more discriminating regarding whom they sell MANPADS to and what they demand of importers," states the report. "The, U.S. for example, conducts 100 percent on-site physical inventories by serial number of nearly all exported Stinger missiles."

However, the report notes that despite these controls western missiles still find their way to the black market, citing how the CIA lost control of hundreds of missiles it had given to the Mujahideen in Afghanistan in the 1980s.

Despite this analysis, it is still unclear how many illicit missiles are still in circulation in Iraq, writes FAS. The number of missiles seized in raids has held steady over the past two years, but the report suggests that this may have more to do with stepped-up neighborhood patrols than the total number of missiles.

What is definitely down is the number of aircraft crashes resulting from missile attacks and ground fire, according to the report.

"The threat persists, however, as evidenced by reports of missile launches at a C-130 cargo plane carrying a Congressional delegation in August 2007 and at an Apache helicopter flying over Sadr City in May 2008," it states.

Football, Futbol and War
By John Liang
December 5, 2008 at 5:00 AM

It’s Army-Navy game weekend, which in wartime brings the reminder that many of the student-athletes and fans in attendance will be going to war in the not-too-distant future.

And they’ll be heading to countries where most fans follow another kind of football, which seems as good an excuse as any to go back to an The Armed Forces Journal article from a few years back. It addresses the crucial question of whether warfare in the current age more resembles the fluid tactics of soccer than the solid lines of American football:

In contrast to American football, where long, blitzkrieg-style passes from a single quarterback to a single receiver are common, soccer employs tactics of multiple, quick and short passes among three, four or even five players in coordination to distract and confuse the opposing team. Like a pinball in a machine, the ball is passed from one attacking player to another quickly without any centralized plan. This style of soccer attack is ideally suited to guerrilla and terrorist warfare because it requires improvisation among the players rather than detailed advance planning. It also enjoys the advantages of surprise, since the defender cannot predict which player will receive the ball. The defending team can be surprised by such an attack and defeated even if it has numerical superiority.

That article stirred up quite a bit of debate in the following months after it was published, as The New York Times Magazine noted:

Throughout 2004, rebuttal articles appeared touting ''the football advantage'' over what was sometimes sniffily referred to as soccer's ''more continental nuances.'' They argued that the ''gridiron approach'' keeps American casualties down and is generally superior as a war-fighting strategy. But according to John Roos, editor of The Armed Forces Journal, ''the military is trying for a more mobile, flexible force in Iraq, so at least for now it's leaning more toward the soccer side.''

Maybe, then, more pomp and circumstance should be showered on the annual Army-Navy soccer encounter. On Nov. 7, the Army men's soccer team beat Navy 1-0 in a game televised live on Fox Soccer Channel. And two days later, the Army women's soccer team beat Navy by the same score in double overtime.

Perhaps the idea is beginning to sink in: This year, the Marine Corps was a presenting sponsor of ESPN's weekly Thursday-night Major League Soccer broadcast, as well as the network’s telecasts of games featuring the U.S. Men's National Team.

Bull's-Eye
By John Liang
December 5, 2008 at 5:00 AM

UPDATE: The Missile Defense Agency announced today that its Ground-based Midcourse Defense system conducted a successful intercept of a ballistic missile target over the Pacific Ocean. According to the agency's statement:

For this test, a threat-representative target missile was launched from Kodiak, Alaska at 3:04pm (EST).This long-range ballistic target was tracked by several land- and sea-based radars, which sent targeting information to the interceptor missile. At 3:23pm (EST)the Ground-Based Interceptor was launched from the Ronald W. Reagan Missile Defense Site, located at Vandenberg Air Force Base, Calif. The interceptor's exoatmospheric kill vehicle was carried into the target's predicted trajectory in space, maneuvered to the target, performed discrimination, and intercepted the threat warhead.

This was the first time an operational crew located at the alternate fire control center at Ft. Greely, Alaska remotely launched the interceptor from Vandenberg AFB. In previous interceptor launches from Vandenberg, military crews at the fire control center at Schriever AFB, Colo. remotely launched the interceptor.

The target was successfully tracked by a transportable AN/TPY-2 radar located in Juneau, Alaska, a U.S. Navy Aegis BMD ship with SPY-1 radar, the Upgraded Early Warning Radar at Beale Air Force Base, Calif., and the Sea-Based X-band radar.  Each sensor sent information to the fire control system, which integrated the data together to provide the most accurate target trajectory for the interceptor.

As Inside Missile Defense reported in May, MDA retooled the program’s flight-test lineup following the last delay in the intercept test schedule:

FTG-4, the intercept test originally scheduled for the fourth quarter of fiscal year 2007 -- which had been pushed back to the second quarter of FY-08, and then pushed back again from this summer to early autumn -- has been renamed FTG-5, according to MDA spokesman Rick Lehner.

A telemetry unit aboard the exoatmospheric kill vehicle failed a recent electrical test, necessitating its replacement and causing the intercept-test delay, Lehner told IMD May 14.

The unit is called the Pulse Code Modulation Encoder, according to Lehner. It transmits real-time EKV performance data via telemetry.

Built by L-3 Communications West, the unit is only used during test flights and “has no role in an operational EKV,” he wrote.

Outgoing MDA Director Lt. Gen. Trey Obering “decided to move the test to the fall rather than risk losing performance data, as obtaining the data is one of the primary objectives of the test,” Lehner added.

Accordingly, FTG-4 was supplanted by a test that did not involve an interceptor:

“FTG-4 will be replaced by FTX-3, a target-only test, planned for July using all available range sensors -- transportable AN/TPY-2 at Juneau, AK, an Aegis ship and ((Sea-Based X-band Radar)), as well as Beale ((Air Force Base)) upgraded early warning radar,” Lehner told IMD May 15.

The target test flight “will provide ((an)) excellent risk-reduction flight for the FTG-5 intercept test, now scheduled for late this fall,” he wrote in an e-mail.

MDA’s FY-09 budget justification book states that FTG-4’s test objectives were to have included “demonstrat((ing)) the functionality of the GBI engage on ((upgraded early warning radar)) or AN/TPY-2 ((engagement sequence group)) for a GBI launched from Vandenberg AFB performing all functions through acquisition, discrimination, transition to terminal, and intercepting the lethal object from a live target complex launched from Kodiak using a more complex target scene than previous tests.”

Objectives for FTG-5, according to MDA’s latest budget book, include: “Demonstrate ((Ballistic Missile Defense System)) multisensor integration and functionality of the GBI engage on UEWR, AN/SPY-1, AN/TPY-2 or ((Sea-Based X-band radar)) for GBI launched from Vandenberg AFB to perform all functions through acquisition, discrimination, transition to terminal, and intercepting a medium/high closing velocity lethal object.”

One missile defense critic didn't wait for the test to take place. Phil Coyle, a senior adviser at the Center for Defense Information, sent out an e-mail to reporters last night stating:

If there were a credible threat, U.S. missile defenses can't deal with it anyway. If Iran or North Korea believed that U.S. missile defenses were effective, they would simply build more missiles or use decoys and countermeasures. That's what's behind the test scheduled for tomorrow, but if successful it won't prove what the MDA will say it proves.

U.S. missile defenses have no demonstrated effectiveness to defend Europe or the U.S. under realistic operational conditions. U.S. missile defenses lack the ability to deal with decoys and countermeasures, lack demonstrated effectiveness under realistic operational conditions, and lack the ability to handle attacks involving multiple missiles.

Proposed U.S. missile defenses in Europe are threatening to Russia, and are causing the Cold War with Russia to be reignited. Proposed space-based missile defenses are also threatening to Russia, as well as China.

Can America depend on missile defenses for its security? Unfortunately the answer is no. The United States has been trying unsuccessfully to develop effective missile defenses for over 60 years, and we still don't know how to deal with a realistic threat. Fortunately we don't have a real threat unless you want to worry about Russia or China someday, and with their missiles Russia and China already can overwhelm the most futuristic missile defenses the Pentagon can imagine.

Amended, Again
By Marcus Weisgerber
December 5, 2008 at 5:00 AM

The Air Force late today issued yet another amendment to its solicitation for the still-in-limbo Combat Search-and-Rescue Helicopter Replacement Program. It's actually only the seventh amendment, but for people around the program -- and those who write about it -- it feels like the millionth.

The amendment contains “minor changes that are intended to further clarify how the Air Force will make its source selection decision,” the Air Force said in a statement.

Beyond the clarifications, Amendment 7 updates the schedule and funding profiles to properly align with the new schedule. The contract award date will be extended to accommodate this amendment, but an exact date has not been established.

The Air Force is committed to a fair and transparent process to select a new CSAR helicopter. The Air Force plans to buy 141 CSAR-X aircraft to replace the current aging fleet of HH-60G helicopters.

The “minor” 325-page document can be found here.

The Air Force has been trying to award the CSAR-X contract for a number of years. More than two years ago, the service awarded the contract to Boeing and its HH-47. However, the contract was re-opened months later after two successful protests by competitors Lockheed Martin and Sikorsky.

Holding Pattern
By Jason Sherman
December 5, 2008 at 5:00 AM

The Pentagon has shipped to the Office of Management and Budget a roughly $80 billion war cost spending request that would fund operations in Iraq and Afghanistan from spring through September, according to a defense official.

Still, it may be a few more days at the soonest before the package is forwarded to Congress.

Defense Secretary Robert Gates earlier this week said this package -- which, when combined with the $66 billion bridge fund appropriated in October, would bring total FY-09 war costs to roughly $145 billion -- should be sent to lawmakers within the next two weeks.

The reason for the hold-up: Gates, according to the defense official, wants to hear one more time from Gen. David Petraeus, commander of U.S. Central Command, on how much will be required this fiscal year to execute a new strategy in Afghanistan, and ensure the amount is included in the request.

Looking Ahead
By Christopher J. Castelli
December 4, 2008 at 5:00 AM

Today's issue of Inside the Pentagon is packed with news on the transition, so let's get right to it.

We have an exclusive interview with Defense Department industrial policy official Gary Powell, who gives his take on challenges facing the next administration.

Also, President-elect Barack Obama's DOD transition team is expanding and we have all the details.

Don't miss our timely coverage of the Project on National Security Reform's brand new recommendations for Obama.

This group's full report just went online.

In addition, Vice President-elect Joe Biden yesterday praised a new report issued by the Commission on the Prevention of WMD Proliferation and Terrorism. We examine the panel's proposal to shift budget authority for anti-WMD programs from the Pentagon to the White House.

Plus, we have detailed coverage of the panel's other recommendations.

The commission’s full report is available online.

Assets and Liabilities
By John Liang
December 4, 2008 at 5:00 AM

Just as big defense contractors like Lockheed Martin and Boeing release an annual financial report to their shareholders, summarizing their income and outflows as well as projections for the following year, the Defense Department this week did the same thing.

The "FY 2008 DOD Agency Financial Report (AFR)," has a cover letter dated Nov. 17 and written by Deputy Defense Secretary Gordon England. In it, England writes:

At the end of each fiscal year, the Department of Defense (DOD) provides an accounting to the American people for the funds appropriated by act of Congress and signed into law by the president during the previous budget cycle.

The Agency Financial Report (AFR) is a concise and easy-to-understand summary of DOD's use of those tax dollars to maintain and modernize America's defenses -- including expenditures to pay, train, equip, and supply the men and women who wear the nation's uniform, and to cover the costs of the Global War on Terror and other military operations.

Some notable passages from the report include:

The Department’s total resources primarily consist of carried forward budget authority of $112.0 billion for unfilled commitments from FY 2007 and received additional appropriations of $736.4 billion in FY 2008 to support the Global War on Terror (GWOT), train and equip our warfighters, and ensure broad national security priorities are met.

Of the $736.4 billion, the report sports a pie chart that breaks down that figure, with 25 percent of that amount ($186.8 billion) going toward the GWOT, 24 percent ($175.5 billion going toward "strategic modernization," 19 percent ($143.4 billion) going toward "operations, readiness & support," 18 percent ($129.2 billion) going for "military pay and benefits," 10 percent ($73.1 billion) for "military retirement benefits," 3 percent ($20.2 billion) for "family housing & facilities," and 1 percent ($8.1 billion) for "civil works and cemeterial." Additionally:

Most ($1.0 trillion or 91%) of the total budgetary resources for FY 2008 were spent or reserved for specific purposes. The remaining resources relate to receipt of multi-year appropriations and supplemental funding that were received late in the fiscal year with insufficient time to fully obligate and outlay. The Department’s total FY 2008 obligations incurred are in support of present and future initiatives such as establishing the Africa Command (AFRICOM), building partnership capacity with foreign partners, realigning the ballistic missile defense sites in Europe, and strengthening cyberspace security. Obligations incurred presented in Figure 1-6 are shown separate between mandatory and discretionary funding.

Additionally, the report states that DOD owned assets worth $1.7 trillion during fiscal year 2008, having increased by 13 percent from the previous year. "This increase is largely attributable to increases in Fund Balance with Treasury (FBWT), Investments, and Military Equipment," the report states.

As for liabilities (emphasis added):

In contrast, the Department has significant unfunded liabilities consisting primarily of actuarial liabilities related to military retirement pension and health care benefits. While the liability presents the Department with a negative financial position, the majority of the unfunded portion will come from annual appropriations outside the Department’s budget. The FY 2008 actuarial liability estimate totaled $2.0 trillion of which $1.3 trillion will come from the U.S. Treasury to cover liabilities existing at inception of the programs. Approximately $378.9 billion is currently covered with invested U.S. Treasury securities. Due to the significant growth in liability in recent years, the Board of Actuaries accelerated the liquidation of the initial unfunded liabilities by reducing the amortization period thus increasing the annual contribution amounts from the U.S. Treasury.

Gates Goes Forth
By Dan Dupont
December 4, 2008 at 5:00 AM

Bush Defense Secretary Robert Gates, soon to be Obama Defense Secretary Robert Gates, has a neatly timed article in Foreign Affairs that was just made available.

The title: "A Balanced Strategy: Reprogramming the Pentagon for a New Age."

Thirty-six years ago, my old CIA colleague Robert Komer, who led the pacification campaign in Vietnam, published his classic study of organizational behavior, Bureaucracy Does Its Thing. Looking at the performance of the U.S. national security apparatus during the conflict in Vietnam, both military and civilian, he identified a number of tendencies that prevented institutions from adapting long after problems had been identified and solutions proposed: a reluctance to change preferred ways of functioning, the attempt to run a war with a peacetime management structure and peacetime practices, a belief that the current set of problems either was an aberration or would soon be over, and the tendency for problems that did not fit organizations' inherited structures and preferences to fall through the cracks.

I mention this study not to relitigate that war or slight the enormous strides the institutional military has made in recent years but simply as a reminder that these tendencies are always present in any large, hierarchical organization and that everyone must consistently strive to overcome them.

I have learned many things in my 42 years of service in the national security arena. Two of the most important are an appreciation of limits and a sense of humility. The United States is the strongest and greatest nation on earth, but there are still limits on what it can do. The power and global reach of its military have been an indispensable contributor to world peace and must remain so. But not every outrage, every act of aggression, or every crisis can or should elicit a U.S. military response.

We should be modest about what military force can accomplish and what technology can accomplish. The advances in precision, sensor, information, and satellite technologies have led to extraordinary gains in what the U.S. military can do. The Taliban were dispatched within three months; Saddam's regime was toppled in three weeks. A button can be pushed in Nevada, and seconds later a pickup truck will explode in Mosul. A bomb dropped from the sky can destroy a targeted house while leaving the one next to it intact.

But no one should ever neglect the psychological, cultural, political, and human dimensions of warfare. War is inevitably tragic, inefficient, and uncertain, and it is important to be skeptical of systems analyses, computer models, game theories, or doctrines that suggest otherwise. We should look askance at idealistic, triumphalist, or ethnocentric notions of future conflict that aspire to transcend the immutable principles and ugly realities of war, that imagine it is possible to cow, shock, or awe an enemy into submission, instead of tracking enemies down hilltop by hilltop, house by house, block by bloody block. As General William Tecumseh Sherman said, "Every attempt to make war easy and safe will result in humiliation and disaster."

Much more in the full piece.

F-22 Concerns 'Overblown?'
By John Liang
December 3, 2008 at 5:00 AM

Wall Street analysts Cai von Rumohr and Gautam Khanna are upgrading their Lockheed Martin rating to "outperform," confident that company growth is "still likely under ((the)) new administration" even with possible defense budget cuts, according to an SG Cowen research note issued this morning.

"Higher F-22 cancellation risk an overblown concern," Von Rumohr and Kanna write. Although President-elect Obama's decision to have Defense Secretary Robert Gates to continue in the latter's job "boosts odds that F-22 output (~ 60 of LMT's PS) will end, since he's criticized the fighter for 'next waritis' . . . the current multiyear contract extends thru 2011 (for targeted 183 units). Early termination would be uneconomic; and there's $8 billion in potential updates to bring early F-22 models up to current capability."

The Air Force is in the midst of preparing an official F-22A requirement number and a major Air Combat Command study that could fuel future decisions will be completed next fall, Inside the Air Force reported last week. The Office of the Secretary of Defense directed the service to include $554 million to cover F-22A production shut-down costs in its internal six-year spending plan, according to a summary of Pentagon budget decisions reviewed by ITAF.

Not only that, ITAF learned that OSD's recent decision to fund long-lead item purchases for only four F-22A fifth-generation fighters could result in the cost-per-jet increasing by as much as $35 million:

A 20-plane Raptor buy could end up costing $700 million more than what the Air Force is currently paying for the advanced fighter jets should the incoming Obama administration decide it wants to purchase F-22As in fiscal year 2010, according to information provided by an official close to the program. The best-case scenario shows the Air Force paying $20 million more per plane.

Even if the F-22 line were to shut down, other aeronautical gains are likely through 2011, according to the SG Cowen note. "F-16/C-130 sales are apt to ramp in 2009-10 and hold in 2011 even if the Obama administration has tighter foreign arms sales controls," the analysts write. "Pluses are (1) firm backlogs into 2011, (2) broad order potential (esp. mideast), & (3) further slip of competing ((Airbus)) A400M. F-35 sales are slated to ramp thru 2015."

While the Air Force's "proposed F-35 ((Joint Strike Fighter)) acceleration seems unlikely, DOD is unlikely to both end F-22 in 2011 and slow F-35, especially given its large export potential," von Rumohr and Khanna continue.

The analysts forecast returns on the company's pension fund will improve in 2010, and predict that company earnings per share will grow by 6 percent in 2009 and 2010 "even with slips." With the exception of the F-22 and F-35 product lines, Lockheed "has a broad mix with (1) no Iraq drawdown risk, (2) foreign upside (F-16, C-130J, UAE Patriot/THAAD), (3) #1 services play (22 percent of ((earnings before interest and taxes))) & (4) US. new biz. (LCS, JLTV, CSAR-X, TSAT). Cash redeployment & GOES-R win offer upside."