Defense Secretary Robert Gates Releases Defense Budget


Monday April 6, 2009
CQ Transcripts Wire

SPEAKER: SECRETARY OF DEFENSE ROBERT M. GATES

GENERAL JAMES E. CARTWRIGHT (USMC), VICE CHAIRMAN, JOINT CHIEFS OF STAFF

[*] GATES: Today I'm announcing the key decisions I will recommend to the president with respect to the fiscal year 2010 defense budget.

The president agreed to this unorthodox approach, announcing the department's request before the White House submits a budget to the Congress, because of the scope and significance of the changes.

In addition, the president and I believe that the American people deserve to learn of these recommendations fully and in context, as the proposed changes are interconnected and cannot be properly communicated or understood in isolation from one another.

Collectively, they represent a budget crafted to reshape the priorities of America's defense established. If approved, these recommendations will profoundly reform how this department does business.

In many ways, my recommendations represent a cumulative outcome of a lifetime spent in the national security arena; but above all, questions asked, experience gained and lessons learned from over two years of leading this department, and in particular, from our experience in Iraq and Afghanistan.

I reached the final decisions after many hours of consultations with the military and civilian leadership of the department. I have also consulted closely with the president. But I received no direction or guidance from outside this department on individual program decisions.

The chairman and the vice chairman of the Joint Chiefs of Staff are in complete accord with these recommendations. The chairman is traveling abroad, but he has provided a statement that we will distribute at the end of the briefing along with the text of my remarks.

My decisions have been almost exclusively influenced by factors other than simply finding a way to balance the books or fit under the top line, as is normally the case with most budget exercises.

Instead these recommendations are the product of a holistic assessment of capabilities, requirements, risks and needs for the purpose of shifting this department in a different strategic direction.

GATES: Let me be clear: I would have made virtually all of the decisions and recommendations announced today, regardless of the department's top line budget number.

The decisions have three principal objectives: First, to reaffirm our commitment to take care of the all-volunteer force, which, in my view, represents America's greatest strategic asset.

Second, we must rebalance this department's programs in order to institutionalize and finance our capabilities to fight the wars we are in today and the scenarios we are most likely to face in the years ahead, while at the same time providing a hedge against other risks and contingencies.

Third, in order to do this, we must reform how and what we buy, meaning a fundamental overhaul of our approach to procurement, acquisition, and contracting.

So, first, people: With regard to the troops and their families, I recommend that we first fully protect and properly fund the growth of military end strength in the base budget. This means completing the growth in the Army and the Marine Corps while halting reductions in the Air Force and Navy. Accomplishing this will require a nearly $11 billion increase above the F.Y. '09 budget level.

Second, continue the steady growth in medical research and development by requesting $400 million more than last year. Third, recognize the critical and permanent nature of wounded ill and injured, traumatic brain injury and psychological health programs. This means institutionalizing and properly funding these efforts in the base budget and increasing overall spending by $300 million.

The department will spend over descending the steady growth in medical research and development by requesting for -- contending the state growth in medical research and development by requesting more than $4 million in the coming year. Assisting the wounded from traumatic injury and psychological health programs. This will increase overall spending by $300 million. The department will spend over $47 billion in health care in F.Y. '10.

And, fourth, increase funding by $200 million for improvements in child care, spousal support, lodging and education. Many of these programs have been funded in the past by supplementals. We must move away from ad hoc funding of long-term commitments.

GATES: Thus we have added money to each of these areas and all will be permanently and properly carried in the base budget. Together they represent an increase in the base budget funding of $13 billion from last year.

Second, a home for the war fighter.

As I told the Congress in January, our struggles to put the defense bureaucracies on a war footing these past few years have revealed underlying flaws in the priorities, cultural preferences and reward structures of America's defense establishment, a set of institutions largely arranged to prepare for conflicts against other modern navies, armies and air forces.

Programs to directly support, protect and care for the man and woman at the front have been developed ad hoc and funded outside the base budget.

Put simply, until recently, there has not been an institutional home in the Defense Department for today's war fighter. Our contemporary wartime needs must receive steady, long-term funding and a bureaucratic constituency similar to conventional modernization programs.

I intend to use the F.Y. '10 budget to begin this process. First, we will increase intelligence surveillance and reconnaissance support for the war fighter in the base budget by some $2 billion.

This will include fielding and sustaining 50 Predator and Reaper- class unmanned aerial vehicle orbits by F.Y. '11 and maximizing their production.

This capability, which has been in such high demand in both Iraq and Afghanistan, will now be permanently funded in the base budget. It will represent a 62 percent increase in capability over the current level and 127 percent from a year ago.

We will increase manned ISR capabilities such as the Turboprop aircraft deployed so successfully as part of Task Force Odin in Iraq.

We will initiate and research and development on a number of ISR enhancements and experimental platforms optimized for today's battlefield.

Second, we will also spend $500 million more in the base budget than last year to increase our capacity to field and sustain more helicopters, a capability that is in urgent demand in Afghanistan.

Today, the primary limitation on helicopter capacity is not air frames but shortages of maintenance crews and pilots. So our focus will be on recruiting and training more Army helicopter crews.

Third, to boost global partnership capacity efforts, we will increase funding by $500 million. These initiatives include training and equipping foreign militaries to undertake counterterrorism and stability operations.

GATES: Fourth -- to grow our special operations capabilities, we will increase personnel by more than 2,800, or 5 percent. And we'll buy more special forces optimized lift mobility and refueling aircraft.

Fifth -- we will increase the buy of literal combat ships, a key capability for presence, stability, and counterinsurgency operations in coastal regions, from two to three ships in FY '10. Our goal is eventually to acquire 55 of these ships.

Sixth -- to improve our enter theater lift capacity, we will increase the charter of a joint high-speed vessels from two to four until our own production program begins deliveries in 2011.

Seventh -- we will stop the growth of army brigade combat teams, BCTs, at 45 versus 48, while maintaining the planned increase in "in" (ph) strength of 547,000. This will ensure that we have better manned units ready to employ and help put an end to the routine use of stop- loss. This step will also lower the risk of hollowing the force.

Third -- conventional and strategic modernization. Even as we begin to shift resources and institutional weight towards supporting the current wars and other potential irregular campaigns, United States must still contend with the security challenges posed by the military forces of other countries. From those actively hostile to those at strategic crossroads.

Last year's national defense strategy that, although, U.S. predominance in conventional warfare is not unchallenged, it is sustainable for the medium term, given current trends. This year's budget deliberations focused on what programs are necessary to deter aggression, project power when necessary, and protect our interests and allies around the globe.

GATES: To this end, I will recommend new or additional investments and shifts in several key areas.

First, to sustain U.S. air superiority, I am committed to building a fifth-generation tactical fighter capability that can be produced in quantity at sustainable cost.

Therefore, I will recommend increasing the buy of the F-35 Joint Strike Fighter from the 14 aircraft bought in '09 to 30 in FY '10, with a corresponding funding increase from $6.8 billion to $11.2 billion.

We would plan to buy 530 -- 513 F-35s over the five-year defense plan and ultimately plan to buy 2,443.

For naval aviation, we will buy 31 FA-18s in FY '10.

Second, we will retire 250 of the oldest Air Force tactical fighter aircraft in FY '10.

Third, we will end production of the F-22 fighter at 187, representing 183 planes in the current program, plus four recommended for inclusion in the FY 2009 supplemental.

Fourth, to better protect our forces and those of our allies in theater from ballistic missile attack, we will add $700 million to field more of our most capable theater missile defense systems. Specifically the Terminal High Altitude Area Defense -- THAAD -- and the Standard Missile 3 programs.

Fifth, we will add $200 million to fund the conversion of six additional Aegis ships to provide ballistic missile defense capabilities.

Sixth, to improve cyberspace capabilities, we will increase the number of cyber experts this department can train from 80 students per year to 250 per year in FY '11.

Seventh, to replace the Air Force's aging tanker fleet, we will maintain the KC-X aerial refueling tanker schedule and funding with the intent to solicit bids this summer.

Eighth, with regard to our nuclear and strategic forces, in FY '10, we will begin the replacement program for the Ohio Class Ballistic Missile Submarine program.

GATES: We will not pursue a development program for a follow-on Air Force bomber until we have a better understanding of the need, the requirement, and the technology.

We will examine all of our strategic requirements during the quadrennial defense review, the nuclear posture review and in light of host -- our arms control negotiations.

Ninth -- the healthy margin of dominance at sea provided by America's existing battle fleet, makes it possible and prudent to slow production of several major surface combatants and other maritime programs.

We will shift the Navy aircraft carrier program to a five year build cycle, placing it on a more fiscally sustainable path. This will result in 10 carriers after 2040.

We will delay the Navy CJX next generation cruiser program to revisit both the requirements and acquisition strategy.

We will delay amphibious ship and sea basin programs such as the 11th Landing Platform Dock Ship and the mobile landing platform ship to FY 11 in order to assess costs and analyze the amount of these capabilities the nation needs.

Tenth -- with regard to airlift, we will complete the production of the C-17 airlifter program this fiscal year.

Our analysis concludes that we have enough C-17's with the 205 already in the force and currently in production.

In today's environment -- for acquisition and contracting reform -- in today's environment, maintaining our technological and conventional edge requires a dramatic change in the way we acquire military equipment.

I believe this needed reform requires three fundamental steps.

First, this department must consistently demonstrate the commitment and leadership to stop programs that significantly exceed their budget or with spend limited tax dollars to buy more capability then the nation needs.

Our conventional modernization goals should be tied to the actual and prospective capabilities of known future adversaries -- not by what might be technologically feasible for a potential adversary given unlimited time and resources.

I believe the decision's I am proposing accomplish this step.

Secondly, we must ensure the requirements are reasonable and technology is adequately mature -- to allow the department to successfully execute the programs.

Again, my decisions act on this principle by terminating a number of programs where the requirements were truly in the exquisite category and the technologies required were not reasonably available to affordably meet the program's cost or schedule goals.

GATES: Third, realistically, we must estimate -- we must estimate realistically program costs, provide program stability for the programs we initiate, adequately staff the government acquisition team and provide discipline and constant oversight.

We must constantly guard against so-called requirements creep, validate the maturity of technology at milestones, fund programs to independent cost estimates, and demand stricter contract terms and conditions.

I am confident that if we stick to these steps, we will significantly improve the performance of our defense acquisition programs.

But it takes more than mere pronouncements or fancy studies or reports. It takes acting on these principles by making tough decisions and sticking to them going forward.

I welcome the legislative initiative of Senators Levin and McCain to help address some of these issues, and look forward to working with the Congress in this regard.

This budget will support these goals by increasing the size of defense acquisition workforce, converting 11,000 contractors to full- time government employees, and hiring 9,000 more government acquisition professionals by 2015, beginning with 4,100 in -- in F.Y. '10.

Fully reform defense acquisition also requires recognizing the challenges of today's battlefield and constantly changing adversary. This requires an acquisitions system that can perform with greater urgency and agility.

We need greater funding flexibility and the ability to streamline our requirements and acquisition execution procedures.

The perennial procurement and contracting cycle, going back many decades, of adding layer on layer of cost and complexity onto fewer and fewer platforms that take longer and longer to build must come to an end.

There's broad agreement on the need for acquisition and contracting reform in the Department of Defense. There have been enough studies, enough handwringing, enough rhetoric. Now is the time for action. First, I recommend that we terminate the VH-71 Presidential Helicopter. This program was originally designed to provide 23 helicopters to support the president at a cost of $6.5 billion. Today, the program is estimated to cost over $13 billion, has fallen six years behind schedule, and runs the risk of not delivering the requested capability.

Some have suggested that we should adjust the program by buying lower capability Increment One option. I believe this is neither advisable nor affordable. Increment One helicopters do not meet requirements and are estimate to have only a five to 10-year useful life.

GATES; This compares to the current VH3 presidential helicopters that are 30 to 40 years old. We will promptly develop options for an FY '11 follow-on program.

Second, we will terminate the Air Force Combat Search And Rescue X (ph) helicopter program. This program has a troubled acquisition history and raises the fundamental question of whether this important mission can only be accomplished by yet another single service solution with a single purpose aircraft. We will take a fresh look of the requirement behind this program and develop a more sustainable approach.

Third, we will terminate the $26 billion transformational satellite program, TSAT, and instead will purchase two more advanced, extremely high frequency satellites as alternatives.

Fourth, in the area of missile defense, we will restructure the program to focus on the rogue state in theater missile threat. We will not increase the current number of ground-based interceptors in Alaska as had been planned, but we will continue to robustly fund continued research and development to improve the capability we already have to defend against long-range rogue missile threats, a threat North Korea's missile launch this past weekend, reminds us is real.

We will cancel the second airborne laser prototype aircraft. We'll keep the existing aircraft and shift the program to an R&D effort. The ABL program has significant affordability and technology problems, and the program's proposed operational role is highly questionable. We will terminate the multiple kill vehicle program because of the significant technical challenges, and the need to take if fresh look to the requirement. Overall, the missile defense agency program will be reduced by $1.4 billion.

Fifth, in this request, we will including funds to complete the buy of two Navy destroyers in FY '10. These plans depend on being able to work out contracts to allow the Navy to efficiently build all three DDG-1000 class ships at the Bath Iron Works in Maine, and to smoothly restart the DDG-51 Aegis Destroyer program at Northrop Grumman's Ingalls shipyard in Mississippi.

Even if these arrangements work out, the DDG-1000 program would end with the third ship and the DDG-51 would continue to be built in both yards. If our efforts with industry are unsuccessful, the department will likely build only a single prototype DDG-1000 at Bath Iron Works, and then review our options for restarting production of the DDG-51.

GATES: If the department is left to pursue this alternative, it would unfortunately reduce our overall procurement of ships and cut workload in both shipyards.

Sixth and finally, we will significantly restructure the Army's future combat systems program. We will retain and accelerate the initial increment of the program to spin out technology enhancements to all combat brigades.

However, I have concluded that there are significant unanswered questions concerning the FCS vehicle design strategy.

I'm also concerned that, despite some adjustments, the FCS vehicles, where lower weight, higher fuel efficiency and greater informational awareness are expected to compensate for less armor, do not reflect the lessons of counterinsurgency and close-quarters combat in Iraq and Afghanistan.

The current vehicle program, developed nine years ago, does not include a role for our recent $25 billion investment in the MRAP vehicles being used to good effect in today's conflicts.

Further, I'm troubled by the terms of the contract, particularly in its very unattractive fee structure that gives the government little leverage to promote cost-efficiency.

Because the vehicle part of the FCS program is currently estimated to cost over $87 billion, I believe we must have more confidence in the program strategy, requirements, and maturity of the technologies before proceeding further.

Accordingly, I will recommend that we cancel the vehicle component of the current FCS program, reevaluate the requirements, technology and approach, and then relaunch the Army's vehicle modernization program, including a competitive bidding process.

An Army vehicle modernization program designed to meet the needs of the full spectrum of conflict is essential. But because of its size and importance, we must get the acquisition right, even at the cost of delay.

A final recommendation that will have a significant impact on how defense organizations are staffed an operated: Under this budget request, we will reduce the number of support service contractors from our current 39 percent of the Pentagon workforce to the pre-2001 level of 26 percent, and replace them with full-time government employees. Our goal is to hire as many as 13,000 new civil servants in F.Y. '10 to replace contractors and up to 30,000 new civil servants in place of contractors over the next five years.

So these are the principal recommendations I will make to the president. There are a number of others that I have not mentioned, including classified programs.

This is a reform budget, reflecting lessons learned in Iraq and Afghanistan, yet also addressing the range of other potential threats around the world, now and in the future.

I know that, in the coming weeks, we will hear a great deal about threats and risks and danger to our country and to our men and women in uniform, associated with different budget choices.

Some will say I am too focused on the wars we are in and not enough on future threats. The allocation of dollars in this budget definitively belies that claim.

But it is important to remember that every defense dollar spent to overinsure against a remote or diminishing risk, or in effect to run up the score in a capability where the United States is already dominant, is a dollar not available to take care of our people, reset the force, win the wars we are in, and improve capabilities in areas where we are under-invested and potentially vulnerable.

GATES: That is a risk I will not take.

As I told the Congress in January, this budget represents an opportunity, one of those rare chances to match virtue to necessity, to critically and ruthlessly separate appetites from real requirements, those things that are desirable in a perfect worth from those things that are truly needed in light of the treats America faces and the missions we are likely to undertake in the years ahead, an opportunity to truly reform the way we do business.

I will close by noting that it is one thing to speak generally about the need for budget discipline in acquisition and contract reform. It is quite another to make tough choices about specific systems and defense priorities based solely on the national interest and then stick to those decisions over time.

To do this, the president and I look forward to working with the Congress, industry and many others to accomplish what is in the best interest of the nation as a whole.

General?

CARTWRIGHT: Thanks, Mr. Secretary.

GATES: As we went through this -- this evolution of developing our program, at each step in the way, we looked at each other and tried to understand, why now? And why these choices?

And -- and the belief from the commander's and the service chief's is that we are at a crossroads. We have under our belt, the experiences of 9-11, the war in Iraq, the war in Afghanistan, the emergence of things like cyber, proliferation of weapons of mass destruction.

We all believed that we need the capabilities to prevent conflict or concluded, on terms that are favorable to the nation -- now and in the 21st century.

This submission represents the best balance of the most likely conflicts and the most dangerous conflicts we will face. It has been informed by the war fighters and the challenges they face today and are likely to face as we move to the future.

No one's crystal ball is perfect. But I -- as a warfighter -- believe if we don't change, history will not judge us kindly.

QUESTION: I expect the -- the e-mails are already coming out from Congress complaining about the cuts to programs that various lawmakers support -- a question for both of you -- do you feel like you're walking into a buzz saw here and do you assume that certain parts of this budget program are basically dealing (ph)?

GATES: Well, there's no question that a lot of these decisions will be controversial. My hope is that as we have tried to do here in this building -- that the members of Congress will rise above parochial interests and consider what is in the best interest of the nation as a whole.

I set out here to develop a budget program, really, that I thought best served the national security interest of the United States and I -- I'm -- I frankly decided that I would not take the political issues associated with any of these programs into account.

I would just do what I thought was best for the country and my hope is that in the months ahead that first, the president will approve this budget and then second, that the Congress, after careful deliberation, will support as much of it as possible.

QUESTION: (inaudible) about the analysis leading into these decisions -- even over the weekend there was some criticism that such bold decisions before the (inaudible) before this top to bottom review, perhaps, don't have the analytical framework that would be required?

QUESTION: Can you give us sort of the -- the one-two about how this all was put together?

GATES: Well, first of all, I think that there is a very sound analytical basis for these decisions, because they emanate directly from the national defense strategy, which involved a great deal of analysis on the part of both the Office of the Secretary of Defense and the joint staff and the Joint Chiefs.

So there is a strong analytical base. There are a number of decisions, a number of these programs that I described as being delayed, in many cases are, in fact, going to be programs that are examined in the QDR to see whether there is a -- what the need is going forward.

I mentioned that with respect to our nuclear and strategic delivery capabilities, particularly a follow-on bomber. I mentioned it in terms of our amphibious capability. There's a list out that came out of this exercise of probably 10 or a dozen or more major issues that will be examined in the -- in the QDR.

CARTWRIGHT: I think also the work of the past few years, associated with the conflicts that we have in Iraq and Afghanistan, this department and the DNI have undertook several analytical efforts -- operational availability effort inside the department that starts to get at what Joint Forces Command has developed as a robust lessons learned system, taking those lessons learned, putting them in an analytic framework and then working with them.

On the -- on the intelligence side, the work that we've done with operational research analysts out in the field on our ISR systems -- not just the platforms, but how we move data and how we inform warfighters inside of the decision cycles, these -- these analytic pieces make this as quantitative as ever I have seen in one of these budget developments.

QUESTION: The F-22 decision is going to get scrutinized, now that your budget has emerged from the shadows, so to speak. Can you give a sense of whether this was a close call or a no-brainer? And once -- and why -- why couldn't you have bought more? Why wouldn't -- why wouldn't it fill the role that the Joint Strike Fighter will be filling, that you outlined?

GATES: For me, it was not a close call. And the basic conclusion was that, first of all, we have fulfilled the program. I mean, it's not like we're killing the F-22. We will have 187 of them. That has -- the 183 of that has been the program of record, as I recall, since 2005. So we are completing the F-22 program. And the military advice that I got was that there is no military requirement for numbers of F-22s beyond the 187.

QUESTION: But the Air Force advice. They've been badgering you with all sorts of analysis that they'd need 60 more.

GATES: That was their advice as well.

QUESTION: It was their advice as well...

GATES: Yes.

QUESTION: ... that you didn't need more than 187?

GATES: Yes.

QUESTION: Really? OK.

QUESTION: Mr. Secretary, I wonder if I could ask you to elaborate on one of the things you talked about and clarify a couple of other things.

The $500 million to increase rotocraft capabilities, how is that money going to be spent? Is that -- is that for procurement or is that all crew training?

And then I'd like to ask you (inaudible).

GATES: Well, one question to a customer.

First of all, one of the things that I was most focused on going into this exercise was the need for more helicopters. Everywhere I go, I hear about the need for more helicopters.

What became clear in the analysis that was being done was that the principal shortfall was not in air frames but in crews. And so, as I recall, virtually all of this money, or most of it, is going to go to accelerate the training of helicopter crews and pilots.

QUESTION: That would be for the Army?

GATES: Yes.

QUESTION: Then, just to -- did I understand that you want to re- start the presidential helicopter competition, write new requirements? Or...

GATES: Yes, we will -- we need -- there needs to be a new presidential helicopter. There's still good service life left in the ones that are in the fleet right now, so we have time to do this.

And so, we will begin a review of the requirements with the White House as soon as the F.Y. '10 budget is submitted.

QUESTION: On CSAR-X, is that the same case? Or will you...

GATES: We will -- we are canceling the Air Force program. We will look at whether there is a requirement for a specialized search- and-rescue aircraft along the lines that the Air Force had in mind and -- and whether it should be a joint capability.

QUESTION: Mr. Secretary, you said before that you tried not to allow political considerations, especially from the Hill, to weigh into this calculus.

QUESTION: That said, the last time you spoke at this same venue you talked about the Pentagon's role as a major employer in the country, as a major acquirer in the country. Given the current economic conditions, did you have any hesitation recommending program cancellations given the job losses that will almost certainly result from those decisions?

GATES: No, because, as I mentioned -- I mean, I am concerned for the possibility that -- that these decisions will have an impact on individual companies and workers around the country.

By the same token, as I indicated, there are a number of these programs where we will see increases in the program. And let me just give you an example.

One of the concerns is, particularly with respect to the F-22, well, employment, direct employment, according to the numbers that are available to us, the F-22 is about 24,000 this year. It'll decline to 19,000 in '10, and about 13,000 in FY '11. The last F-22 rolls off the line toward the end of 2011.

But the Joint Strike Fighter, the F-35, in '09 already has 38,000 people working in direct employment. It will go to 64,000 in FY '10 and 82,000 in FY '11.

So -- and these -- these decisions on shipbuilding, I think, do a pretty good job, I think, of taking care of the industrial base there and trying to even out things in terms of employment in the workforce.

But -- so, you know, we cannot be oblivious to the consequences of these decisions, but nonetheless we have to make them as a whole in terms of what's in the best interest of the country.

QUESTION: Dr. Gates, you famously complained about next-war- itis. Does this proposal cure this building of next-war-itis? And if so, how?

GATES: Well, it certainly doesn't cure it. That may be incurable. In reality isn't, and let me put this very crudely. If you broke this budget out, it would probably be about 10 percent for irregular warfare, about 50 percent for traditional, strategic and conventional conflict, and about 40 percent dual purpose capabilities.

So this is not about irregular warfare -- putting the conventional capabilities in the shame -- quite the contrary. This is just a matter, for me at least, of having irregular war constituency have a seat at the table for the first time when it comes to the base budget.

QUESTION: Mr. Secretary, two things -- as (inaudible) ground base missile defense -- it sounds like no more interceptors -- ADL -- you cut it off at the present experimental claim -- there will not be a second tail in Dubai. What about European missile defense -- kinetic energy interceptor and PAK 3's?

GATES: First -- well, why don't you go ahead and take that one?

CARTWRIGHT: Easier for me to start it backwards then...

(LAUGHTER)

CARTWRIGHT: Try the math here.

PAK 3 is in production and continue to be in production -- so that system's working.

The SM3 and the THAD are coming out of their testing and are moving towards full right production -- we need those assets -- you can see just in the past weekend, the value of THAD of having its system.

For the third site in the ground base interceptor at the third site -- the discussion right now is that there is sufficient funds in '09 that can be carried forward to do all of the work that we need to do at a pace that we'll determine as we go through the program review -- the (inaudible) defense review and negotiations with those countries.

QUESTION: On KEI, what is happening there?

GATES: The Kinetic Energy Interceptor -- looking at the boost phase is an area that we're going to do more R&D. Clearly, there is great leverage in working in missile defense in the boost phase, because you catch it before you have the sophisticated threats or capabilities that might emerge -- decoys and things like that.

But we've got to figure out what the right way forward is; what the right balance is between the mid-course and the terminal. We've got now a good mid-course. We've got a good terminal capability. What do we need in the boost phase? What kind of attributes does it have for mobility and location, et cetera. Those are the things that we've got to understand before we go any further with the boost phase.

QUESTION: What is your latest thinking as to how to break this political logjam that's holding up the Air Force's acquisition of aerial refueling aircraft? You say you want to go in and solicit bids this summer. But there's movement in Congress to split up the buy. You've opposed it in the past. What is your latest thinking?

GATES: Well, I had conversations with Congressman Murtha. We've talked about it. I obviously have a lot of respect for him. I still believe that it is not the best deal for the taxpayer to go with a split buy. The only reason that people are pursuing the idea of a split buy is that they think it is the only way we can move forward in getting any kind of a tanker; that the competitors will be in such a place, with respect to Capitol Hill, that we just won't be able to move forward.

My view is, that if we do this right, if we structure this fairly, and we carry out the process by our own rules the way we're supposed to, that even if there is a protest, there is no assurance that, that protests would be upheld by the GAO. After all, in the last time we went through this, the GAO examined about 110 different items in the contract and found problems with, I think, eight.

So if we do this right, there is no reason a protest would be upheld and we could move forward with an approach that is the best deal for the taxpayer and also the best deal for the Air Force, in terms of not having to maintain dual logistics trains, dual trading systems, dual maintenance, all the things that go along with that.

QUESTION: And how (ph) do (ph) you look at the idea of acquiring them more quickly?

Murtha's proposal is to double to 24, I think, a year, the number that would be purchased. Is that consistent...

GATES: Well, we can do that with one tanker, too.

QUESTION: Is that consistent with your thinking to what might be...

GATES: I would be very happy to look at accelerating the bill along those lines.

QUESTION: You mentioned that you only look at threats, not politics. If North Korea's missile test had been more successful, how would it have changed your view on this budget, specifically with missile defense?

GATES: It actually would not have changed it at all. I think that, as General Cartwright said, we had, for -- for the terminal phase, we had the THAAD missiles in Hawaii, prepared to protect Hawaii. And -- and if we had -- if it had been an intercontinental ballistic missile, the ground-based interceptors in Alaska could have taken care of that challenge, as well.

So I think we have in place -- as the general said, we're in a pretty good place, in terms of -- with respect to the rogue missile -- rogue country missile threat, in terms of mid-course and terminal phase.

What we're looking at and going -- continuing the R&D on is the boost phase.

QUESTION: Two items on missile defense.

You mentioned the issue about threats, focusing on threats. NDA has consistently said that they see a threat of multiple incoming warheads around the middle of the next decade, 2015ish.

Does the termination of NKB (ph) call that threat assessment into question?

And then I have a follow-up, as well, on ABL.

CARTWRIGHT: I think it acknowledges the fact that the threat will evolve and become challenging. But it also acknowledges the fact that there's probably greater leverage in the boost phase to go after that type of threat then trying to address it individually in either the mid-course or the terminal phases.

QUESTION: And so, then, along the lines of ABL, the issue of poor program execution being one of the main criteria for some of these program kills, ABL is a classic non-execution program.

What saved the ABL?

And is this a stay of execution until the QDR, or do you expect to really make that into a serious program later in the year?

CARTWRIGHT: Well, the key attribute of ABL is that it's directed energy. And so if it's in the right place at the right time, it has the capability of catching an -- I'm sorry -- ICBM in the boost phase, OK?

But it is, kind of, at the rudimentary level of our understanding of directed energy.

CARTWRIGHT: It is what we have today. It needs to go further. We need to worry on -- work on weight and power and cost, and work off the risks of that technology.

It was our judgment that this technology needs to continue in the R&D phase, but it is not ready for production.

QUESTION: Can I ask you about if you have any estimates about the overall cost savings down the road for these decisions, what the impact will be?

And for both of you on North Korea, do we see this weekend's launch as a significant improvement in their capabilities or do we have any indications that this launch, as we said, as NORTHCOM said, was -- came up short? I mean, did the missile actually explode in air?

GATES: In terms of the cost savings across the FYDP, we will have to -- as I said, there are a number of other decisions, including classified programs, that I've made that I have not talked about here today.

We will have to sit down with all of those. We only handed these decisions to the comptroller last Thursday, and so a lot of this work now has to be done in detail to get the -- the detailed budget to OMB. And I think only when we've done that and they've completed their work and sent the budget to the Hill will we be in a position with some clarity to talk about how much we have either saved or how much more is involved in the five-year defense plan.

(CROSSTALK)

CARTWRIGHT: There's two things that we look at on the North Korean missile. One is their ability to develop an intercontinental ballistic missile capable of carrying a weapon of mass destruction. And their second is their desire to potentially proliferate that and sell it around the world.

On the first, the technology they were seeking after the first two failures was the ability to stage -- in other words, transition from one stage of boost to the next. They failed.

On the idea of proliferation, would you buy from somebody that had failed three times in a row and never been successful?

(LAUGHTER) QUESTION: On the destroyer, Mr. Secretary, sounds like you've put the ball in the industry's court. Can you say in a little more detail what's going to constitute the success they need to get to the full three-ship...

(CROSSTALK)

GATES: Well, I haven't -- I mean, other than the broad decision, I haven't been involved in detail, and certainly haven't talked to -- to the contractors.

GATES: But -- the people here in the building believe that building individual prototypes in two different shipyards with one- offs is as bad as any inefficient and cost and effective approach as you can have.

So if you can put all three of these ships in one shipyard, then we think that the cost actually of all the three would not be -- it would be greater then two being built separately but not the -- not at the equivalent of -- the third would not be as expensive as either of the two -- first two prototypes

So what we think from a shipbuilding standpoint -- that having all three built by the same company and the same shipyard would lead to a much more efficient and cost-effective approach.

That said, if we do that, as I indicated in my remarks, we would then -- this is also contingent on seeing if we can smoothly restart the DDG51 program (inaudible).

QUESTION: Mr. Secretary, if I heard you right the first time -- you, on missile defense, we have all these changes that you're making right now. Do you foresee the regular missile defense acquisition (inaudible) back into the regular acquisition process or will those programs still be having their own special form of buying things?

GATES: The intent will be what -- what -- what the powers are that we gave to missile defense MDA in order to move forward, was the ability to focus on a very narrow area, in this case, ballistic missiles or long range ballistic missiles and to keep that focus in the program and allow them to move forward.

And to let that be the side of the requirements that they worked against -- that won't change. Keeping that focused has really served as well.

QUESTION: What will change?

GATES: What will change is we're going to start to shift and understand in that first phase what the leverage and potential opportunities are in the boost phase, focus on the threats -- remember the idea here was -- protect the homeland, then protect allies, deployed forces in France.

We're going to focus on our deployed forces -- our allies in France. So the systems that are considered operational, SM-3, THAD, Patriot, building them out in quantity so that we can deploy them and move forward quickly there while we start to re-assess what it is we can do in the boost phase (inaudible)

(UNKNOWN): And I just -- and I would just underscore that if there is a shift in emphasis, it is sustaining the work that is going on with the ground based interceptors. In Alaska and the continuing RND and the effort to improve those capabilities overtime.

But, we are adding a significant amount of money in terms of trying to provide tactical or theater missile defense. We are basically maxing out the production lines for the SM-3 and the THAD.

GATES: We are, as I indicated -- we're going to convert six additional Aegis ships to have the ballistic missile defense. So I think that's a real focus here.

QUESTION: Secretary Gates, the South Korean prime minister, this morning, said that South Korea may need to start developing short- range missiles. And the Japanese have talked about developing a preemptive capability. Are you concerned about a new arms race in Asia?

And if I could ask General Cartwright -- did the second stage and the third stage of the rocket fall at the same place in the Pacific?

CARTWRIGHT: You know, one of the questions, it has seemed to me, that both North Korea and Iran ought to consider, as they go forward with their missile and nuclear programs, is whether those programs actually, in the long run, enhance their security or detract from it.

And the reality is, in both cases, that if they spark an arms race on the part of their neighbors because they feel threatened, then I would submit that their security has not been improved but has diminished. And I think that is an aspect of this that they ought to think very carefully about.

GATES: Relative to the second and third stages, we are still going through the data. But what fell to earth wouldn't resemble second and third stages, anyway. We can't tell how much, but they are very close together.

QUESTION: I understand that this budget you have included some military assistance for Mexico to fight the war down south of the border. Can you explain about this support? I understand also that, by the first time the military (inaudible) to participate with military forces from U.S.

GATES: I'm sorry. I could not catch the last part.

QUESTION: I understand there's going to be Mexico, for the first time in history, is going to take part in some military exercises in Florida, I understand?

GATES: Right. I just hosted my counterparts in the Mexican military last week up here. We worked through several areas where we're going to start to cooperate in ways that we have not done the past -- both at the service level for training and then at the operational level with the commander Northcom for support in the drug conflicts that they are working their way through but, also, for their general support in their ability to defend their country.

I think that will be more robust than it has been in the past. The work that, that will be more robust than it has been in the past by a significant amount. The work that the service chiefs are doing, service to service, is very significant, both in helping their government -- Mexican government -- grow their forces, but also make this transition towards what we have talked about here as being a "regular warfare" in the training and the equipping that goes with that, which they need some help with.

QUESTION: On the F-35, you know, you talk on one hand about what to reform the acquisition process, but in accelerating that, didn't the GAO warn recently that you'd be getting ahead of the testing on that, and that would put that program more at risk -- to accelerate it?

GATES: Actually, what we have done, while we are increasing the buy, we have taken a more cautious approach to the ramping up of production over the course of the next five years.

GATES: So we actually -- and the five -- I think I mentioned 513 aircraft by the end of the five-year defense plan. That's actually I think several dozen aircraft fewer than -- than the original planned buy.

We have tried to do this in a way that keeps the numbers at a level that the cost to our allies and partners in this program do not go up. And so, we are very mindful of the -- of the risk of rushing too fast to large-scale production. I don't think people feel concerned about that going from 14 to 30.

CARTWRIGHT: Also, part of the -- part of the increase is to buy more test articles, so there'll be more aircraft available for the test program.

QUESTION: Mr. Secretary, you mentioned that this reform was based on lessons learned in Iraq as well as Afghanistan and that you're concerned about under-investment which could lead to potential vulnerabilities.

Based on that, do you believe that the president achieved all that he could with our allies in Europe, specifically NATO, putting enough troops and money to help us in -- in terms of winning the war in Afghanistan?

GATES: Actually, I think that what came out of -- what came out of the NATO summit in terms of commitments was for me a pleasant surprise. I have -- I have believed for some time that there was not much likelihood of a significant increase in the number of troops.

And I took the approach in Krakow that what we were really interested in with the other defense ministers was civilian expertise and paramilitary police trainers.

And so, for the Europeans to have pledged an additional 3,000 troops plus the trainers, I think was -- was a significant achievement. I think there were some major commitments made in terms of the NATO trust fund to sustain the Afghan force. So I think that the -- I think that the -- I think the summit was actually more successful than I expected in -- in what we were able to get.

QUESTION: (inaudible) when you have mentioned halting the growth, well, going from 48 to 45 Army BCTs, and you talked about the benefits, such as that would reduce the use of stop-loss. Are there trade-offs, such as does it possibly delay the Army's plan to increase dwell time?

GATES: I don't think it will. And -- and -- I mean, we talked about this a lot. And I think, you know -- I would be -- I think the Army does have some concerns about this.

But there's a fundamental logic for me in this process. If you have the -- if the Army has trouble filling some of the units that they already have in terms of deployments, they have problems with dwell and they have problems in terms of -- of the number of people not available to be deployed, it seems to me that if you -- if you keep expanding the force structure with the same number of people, you're going to get thinner in the ranks.

And -- and it seemed to me that, at least as an intermediate stage, let's stop at 45, thicken the ranks, make sure these units have the people that are needed -- that are needed to deploy, along with all those that are out training and doing other things.

GATES: At some point perhaps the Army would resume the increase in the force structure, especially if they got more people or if they got more people out of the institutional Army or out of the categories of people who are individually assigned and so on.

So I'm not saying that that's where the force structure will stay forever, but it seems to me that until we get rid of stop-loss (ph), until we get these ranks thickened, that it makes sense to stop at 45.

QUESTION: (OFF-MIKE) I'm wondering, aside from the Air Force, which was what you discussed last year regarding a nuclear enterprise, I'm wondering what changes will be reflected in the budget dealing with changes you're making to nuclear oversight or stewardship across the DOD enterprise based on the recommendations of the Schlesinger task force's (inaudible) report.

GATES: Correct me on this, but I think that we have an additional $700 million in the budget for nuclear surety.

Is that about -- that's about right, about $700 million for nuclear surety that takes into account all of the things you just described.

Last question?

QUESTION: Secretary, the debate about defense spending has been simplified by this conventional versus unconventional, next-war-itis versus current conflict.

To what extent do you think that's too simplistic and how -- can you just speak a little bit more to how this budget reflects that complexity?

GATES: Well, I think that -- let me -- let me give an answer and then let the -- let the general give an answer.

I think that -- that this debate between conventional and irregular is -- is quite artificial. Most of the people that I talk to are now increasingly talking about, instead of one or the other, a spectrum of conflict in which you may face at the same time a -- an insurgent with an AK-47 and his supporting element with a highly sophisticated ballistic missile, where you -- where you have what we have been calling in the last year or so complex hybrid warfare.

And so you really need to be prepared across a spectrum to deal with these capabilities. And that's why I -- going back to my crude carve-up of the budget of 40 percent dual purpose -- I think we have to be prepared all along that spectrum.

And, again, I think what people have lost sight of us I'm not trying to have irregular capabilities take the place of the conventional capabilities. I'm just trying to get the irregular guys to have a seat at the table and to institutionalize some of the needs that they have so that we can get the need -- so we can get what they need to them faster and so that we don't have to go outside the Pentagon bureaucracy every time there's a need for the war-fighter that has to be met in a relatively short period of time.

CARTWRIGHT: I think probably, maybe three more attributes that I would use to characterize.

The first is lethality. Heretofore we always figured high-end war was more lethal than this low-end war, so to speak.

The reality that we're coming into, because of proliferation and because weapons of mass destruction are getting out into areas that are non-nation-state areas -- so, in other words, we're having to deal at the low end, what was considered the low end of conflict in this spectrum, the reality is the lethality is just as bad down at the low end as it was at the high end in the past.

Point number two is, heretofore, conventional warfare was "I know your home address; I know exactly who we're fighting and we know exactly where."

And the problem is, that's not the case anymore, in cyber warfare and weapons of mass destruction, because there are venues without attribution that we have to deal with as we move to the future.

And the third point is that the reality of hybrid warfare is the reality that you're dealing at the entity level; "I must know who you are; I cannot accept the collateral damage to just know generally where you are."

And that changes the equipping. That changes the mindset of the warfare. It is a much more difficult activity. And yet it is equally lethal.

And so, putting all of that together, you start to understand the challenges of the war fighter across the spectrum. It's just not there is conventional maneuver warfare and there's hybrid, and we're denigrating one for the other. The reality is, they're coming together in ways that heretofore were just not the case.

GATES: Thank you all very much.

END


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