# Authorization and Appropriations for FY2004: Defense

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/crs%3ARL31805

## Record

- **Collection:** Congressional research report
- **Document type:** CRS Report
- **Published:** December 9, 2003
- **Citation:** RL31805

## Text

Order Code RL31805

CRS Report for Congress
Received through the CRS Web

Authorization and Appropriations
for FY2004: Defense

Updated December 9, 2003

name redacted
Specialist in National Defense
Foreign Affairs, Defense, and Trade Division
name redacted
Specialist in National Defense
Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

Appropriations are one part of a complex federal budget process that includes budget
resolutions, appropriations (regular, supplemental, and continuing) bills, rescissions,
and budget reconciliation bills. The process begins with the President’s budget
request and is bounded by the rules of the House and Senate, the Congressional
Budget and Impoundment Control Act of 1974 (as amended), the Budget
Enforcement Act of 1990, and current program authorizations.
This report is a guide to one of the 13 regular appropriations bills that Congress
passes each year. It is designed to supplement the information provided by the House
and Senate Appropriations Subcommittees on Energy and Water. It summarizes the
current legislative status of the bill, its scope, major issues, funding levels, and
related legislative activity. The report lists the key CRS staff relevant to the issues
covered and related CRS products.
NOTE: A Web version of this document with active links is
available to congressional staff at:
[http://www.crs.gov/products/appropriations/apppage.shtml].

Authorization and Appropriations
for FY2004: Defense
Summary
With passage of the FY2004 DOD Authorization Act by the House on
November 7 and by the Senate on November 12, 2003, Congress completed action
on this year’s defense authorization (H.R. 1588/H.Rept. 108-384). The President
signed the bill on November 24, 2003 (P.L. 108-384). On September 30, just in time
for the new fiscal year, the President signed H.R. 2658, the FY2004 DOD
Appropriations Act (P.L. 108-87), completing action on FY2004 defense
appropriations.
The recently enacted FY2004 DOD authorization bill provides a total of $401.3
billion for defense programs, including funds in the DOD and military construction
appropriations as well as several other defense-related programs funded in other
appropriations measures. The total authorized for these defense and defense-related
programs that make up the national defense function is $1.5 billion above the
Administration’s request and $9.3 billion above the FY2003 enacted level.
The conference version of the FY2004 DOD authorization is the culmination
of months of negotiation about several contentious issues: Buy American provisions,
the Air Force’s controversial tanker lease proposal, a new concurrent receipt benefit
for military retirees, a new National Security Personnel System, a new health benefit
for reservists, and special exemptions for DOD to certain environmental regulations.
Substantial differences about these issues between the houses and with the
Administration had stymied completion of the authorization bill.
In conference, Buy American restrictions mandating that DOD rely exclusively
on U.S. suppliers for certain items were dropped in favor of provisions that require
DOD to assess the U.S. industrial base and possibly provide incentives to certain
U.S. producers. In the case of the Boeing 767 tanker aircraft, DOD accepted a
Senate-proposed compromise allowing them to lease 20 and buy 80 rather than
lease100 aircraft.
After the Administration dropped its veto threat, Congress passed a new
concurrent receipt benefit that is expected to provide about 200,000 military retirees
with both their military retirement and disability benefits, reversing a prohibition in
effect for over 100 years. DOD also received new authority to design and implement
its own civilian personnel system and new exemptions to certain environmental rules.
The bill also provides access to DOD’s TRICARE health care to unemployed, nondeployed reservists and maintains current higher levels of imminent danger pay and
family separation allowance for eligible military personnel through December 2004.
The FY2004 DOD Appropriations Act provides appropriations totaling $368.7
billion for the defense programs it covers. That total is $3.5 billion below the
Administration’s request and $4.0 billion above last year’s enacted level. The
programmatic impact of the cut is cushioned, however, because the bill receives
credit for $3.5 billion rescinded from funds provided in the $62.6 billion FY2003
supplemental appropriations bill that Congress approved in April 2003.

Key Policy Staff
Area of Expertise
Acquisition
Aviation Forces
Arms Control
Arms Sales
Base Closure
Defense Budget
Defense Industry
Defense R&D
Ground Forces
Health Care; Military
Intelligence
Military Construction
Military Personnel
Military Personnel;
Reserves
Missile Defense
Naval Forces
Nuclear Weapons
Peace Operations
Radio Frequency,
Military
Readiness
Space, Military
War Powers

Name
Valerie Grasso
(name redacted)
Amy Woolf
Richard Grimmett
David Lockwood
(name redacted)
(name redacted)
Jeff Chamberlin
Gary Pagliano
Daniel Else
Michael Davey
John Moteff
Edward Bruner
Steven Bowman
Richard Best
Richard Best
Al Cumming
Daniel Else
David Burrelli
Robert Goldich

Telephone

E-Mail

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[redacted]@crs.loc.gov
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(name redacted)

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Steven Hildreth
(name redacted)
Ronald O’Rourke
Jonathan Medalia
Nina Serafino

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Lennard Kruger

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[redacted]@crs.loc.gov

(name redacted)
Marcia Smith
David Ackerman
(name redacted)
Richard Grimmett

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[redacted]@crs.loc.gov
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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Major Issues in the FY2004 DOD Authorization Act . . . . . . . . . . . . . . . . . . . . . . 2
Buy American Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Concurrent Receipt Adopted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Tanker Lease Compromise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
New Personnel System for DOD Civilians . . . . . . . . . . . . . . . . . . . . . . . . . 10
Environmental Exemptions for DOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
TRICARE For Non-Deployed Reservists . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Lifting the Ban on Research on Low-Yield Nuclear Weapons . . . . . . . . . . 18
Maintaining Current Levels of Imminent Danger Pay and
Family Separation Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Major Action On FY2004 DOD Appropriations Bills . . . . . . . . . . . . . . . . . . . . . 19
Major Funding In FY2004 DOD Appropriations Act . . . . . . . . . . . . . . . . . 20
Military Construction Appropriations Bills . . . . . . . . . . . . . . . . . . . . . . . . . 22
Overview of Administration Request and Budget Trends . . . . . . . . . . . . . . . . . . 22
Annual Growth for DOD Slows In Later Years in FY2004
Budget Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Trends in DOD Spending Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
DOD Receives $103.1 Billion in Supplemental Appropriations
Since September 11 Attacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Major Themes in the Administration’s FY2004 Request . . . . . . . . . . . . . . . . . . 32
Investment and Other Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Proposed Acquisition and Organizational Changes . . . . . . . . . . . . . . . . . . . 33
Affordability and Mix of DOD’s FY2004 Investment Programs . . . . . . . . 34
Personnel Pay and Benefits Issues and Readiness Issues . . . . . . . . . . . . . . . 61
Basing Structure, Role of the Reserves, and Force Mix Issues . . . . . . . . . . 66
Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Congressional Budget Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Defense Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Defense Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

List of Tables
Table 1A. Status of FY2004 Defense Authorization: H.R. 1588 and S. 1050 . . . 3
Table 1B. Status of FY2004 Defense Appropriations: H.R. 2658 and S. 1382 . . 20
Table 2. FY2004 DOD Appropriations: Congressional Action . . . . . . . . . . . . . . 20
Table 3. National Defense Budget Function and DOD Budget,
FY1999-FY2008, Administration Projections . . . . . . . . . . . . . . . . . . . . . . . 24
Table 4. Status of FY2004 Budget Resolution (H.Con.Res. 95,
S.Con.Res. 23) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Table 5. FY2004 Budget Resolution: National Defense Request and
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Table 6. Administration Request: National Defense Budget Function
by Title, FY2001-FY2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Table 7. Flexibility in DOD’s Supplemental Funding Since
September 11 Attacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Table 8A. House and Senate Action on Major Army Acquisition Programs:
Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Table 8B. House and Senate Action on Major Army Acquisition Programs:
Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Table 9A. House and Senate Action on Major Navy Acquisition Programs:
Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Table 9B. House and Senate Action on Major Navy Acquisition Programs:
Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Table 10A. House and Senate Action on Major Aircraft Programs:
Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Table 10B. House and Senate Action on Major Aircraft Programs:
Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Table 11: House and Senate Action on Missile Defense Funding . . . . . . . . . . . . 53
Table 12. Estimates of the Cost of Concurrent Receipt and TRICARE
for Reservists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Authorization and Appropriations for
FY2004: Defense
Most Recent Developments
On November 7, 2003, the House passed the conference report on H.R. 1588,
the FY2004 DOD authorization, by a vote of 362 to 40, after the conference report
was filed early Thursday morning. The Senate passed the bill by 95 to 3 on
November 12. On November 24, the President signed the bill (P.L. 108-136).
Compromises were reached on the main issues that had held up the conference for
several months: Buy American provisions, the Air Force lease of Boeing KC767
aircraft, a new National Security Personnel System, concurrent receipt, and
TRICARE for non-deployed reservists.
The conference version (H.Rept. 108-283) of H.R. 2658, the FY2004
Department of Defense (DOD) appropriations bill, provided $368.7 billion in
funding. It passed the House on September 23, 2003, and the Senate on the
following day, in both cases quickly and with little debate. On September 30, 2003,
the President signed the bill into law (P.L. 108-87).
The FY2004 DOD Authorization Act included several contentious issues, which
were settled only after long negotiations. On domestic preference restrictions in the
Buy American Act and the Berry Amendment, the DOD authorization added
provisions to assess the U.S. defense industrial base and the extent of U.S. reliance
on foreign suppliers but dropped proposals to require DOD to purchase certain items
only from American suppliers. In the case of the tanker lease, DOD agreed to a
proposal by Senator Warner to lease 20 and buy 80 Boeing KC767 tankers rather
than lease 100 aircraft, a proposal less costly than the original lease but more costly
than a straight multiyear buy. The fate of the deal remains uncertain in light of
Boeing’s recent firing of high-level officials for improprieties and an ongoing
investigation by the DOD Inspector General.
Compromises were also brokered on other contentious issues on which the
Administration had threatened a veto. The Administration agreed to a new benefit
that provides concurrent receipt of military retirement and disability payments to all
military retirees with disability ratings of 50% or higher as well as an expansion of
those eligible under the “Purple Hearts Plus” program enacted last year that provides
benefits to military retirees with combat or combat-related disabilities. The
Administration also agreed to a 15-month pilot program to offer access to TRICARE
to non-deployed reservists who are unemployed or do not qualify for health benefits
offered by their employer.

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H.R. 1588 also authorizes the Secretary of Defense to develop a new National
Security Personnel System for DOD’s civilian employees, gives DOD special
exemptions to certain environmental statutes, and lifts the current ban on
development of low-yield nuclear weapons.
Both the House and Senate versions of H.R. 1588, the authorization bill, provide
$400.5 billion for national defense programs, about $1.5 billion above the request of
$399.7 billion that the Administration submitted in February. The authorization
covers not only defense programs funded in the defense appropriations bill but also
programs funded in the military construction, energy and water, and some other
appropriations measures.
The FY2004 DOD appropriations bill provides a total of $368.7 billion for the
defense programs it covers, $500 million less than the $369.2 billion that was
included in both the House and Senate versions. The total in the conference
agreement is slightly below the amounts provided for defense by the budget
committees under Section 302(b) allocations of the Congressional Budget Act and
$3.1 billion below the request. This decrease freed up the same amount for other
appropriations bills while staying within the cap on discretionary spending
established by the FY2004 budget resolution (H.Con.Res. 95). Final funding for
DOD could also be affected by a $1.8 billion rescission included in the conference
version of the FY2004 Omnibus Appropriations bill (H.R. 2673) that was passed by
the House on December 8 but is unlikely to be considered by the Senate until January
2004.
The final version of DOD’s FY2004 appropriations cushioned the programmatic
impact of the $3.5 billion cut to the request by making an offsetting rescission of $3.6
billion from the $62.6 billion in FY2003 supplemental appropriations that Congress
approved in April. Under budget scoring rules, rescissions are counted as a credit in
the year when they are enacted, even though prior year monies — in this case,
FY2003 — are cut. This allowed the appropriators to meet their FY2004 targets
without reducing funding for FY2004 programs by $3.5 billion.

Major Issues in the FY2004
DOD Authorization Act
After a conference that spanned over five months, the conferees reached
agreement and filed a report on November 7, 2003, on H.R. 1588, the FY2004 DOD
Authorization Act (H.Rept. 108-354). The bill was passed by the House by a vote
of 362 to 40 on that same day and by the Senate by a vote of 95 to 3 on November
12, the following week. The President signed the bill on November 24, 2003 (P.L.
108-136).
On May 22, the House and the Senate passed their respective versions of the
FY2004 DOD Authorization bills after several days of floor debate. The House
version, H.R. 1588, passed by 361 to 68. Although the Senate passed its version, S.
1050, by 98 to 1 on the same date, the Senate adopted a unanimous consent
agreement on the next day providing for consideration of several specific

CRS-3
amendments. On June 4 after the Memorial Day recess, the Senate adopted
amendments on concurrent receipt and expedited immigration approval for selected
reservists and their families during wartime and rejected an amendment to cancel the
2005 round of base closures before passing the bill again by voice vote and
appointing its conferees (see Table 1A).1 Debate in the House took place on May 20
and May 21, and in the Senate on May 19, 20, 21, 22, and June 4, 2003.
On May 13, the Senate Armed Services Committee (SASC) reported S. 1050,
after completing markup on May 9 (S.Rept. 108-46). The bill as reported did not
include the DOD proposal to redesign its civilian personnel system. The House
Armed Services Committee (HASC) reported its bill on May 16 after completing
markup on May 14 (H.Rept. 108-106). On May 21, the House adopted a rule (H.Res.
245) that limited general debate to two hours and amendments to those specified in
the rule. The Senate rule required that all amendments be considered relevant by the
Parliamentarian. The House bill included much of DOD’s legislative proposal for a
new civilian personnel system as initially marked up by the House Government
Reform Committee (H.R. 1836).2

Table 1A. Status of FY2004 Defense Authorization:
H.R. 1588 and S. 1050
Subcommittee
Markup

Conference
House House Senate Senate Conf. Report Approval
Public Law
Report Passage Report Passage Report
House Senate
House Senate

5/16/03
5/13/03
5/22/03
5/14/03 5/9/03 H.Rept.
S.Rept.
(361-68)
108-106
108-46

6/4/03
(voice
vote)a

11/6/03
11/7/03 11/12/03 11/24/03
H.Rept.
(362-0) (95-3) P.L. 108-136
108-354

a. The Senate initially passed S. 1050 by 98 to 1 on May 22, 2003, but then adopted a unanimous
consent agreement on May 23, 2003, to continue debate on selected amendments after the
recess; see Congressional Record, p. S7115. Those amendments were considered on June 4, and
the bill was then passed by voice vote.

1

Congressional Record, May 23, 2003, p. S7115 and Congressional Record, June 4, p.
S7280-S7295.
2

For a comparison of all the Administration’s proposed legislative provisions compared to
current law, see CRS Report RL31916, Defense Department Transformation Proposal:
Original DOD Proposal Compared to Existing Law, by (name redacted), (name redacted),
(name redacted), and (name redacted). Other bills that would reform the current civil
service system are S. 129 (introduced by Senator Voinovich) and H.R. 1601 (introduced by
Representative JoAnn Davis). For a review of these measures, see CRS Report RL31516,
Civil Service Reform Proposals: A Side-by-Side Comparison of S. 129 and H.R. 1601 (108th
Congress) with Current Law, by (name redacted)
and (name redacted).

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The conference report reached compromises on seven major issues that held up
the authorization bill for several months:
Buy American restrictions proposed by the House and opposed by
the Senate and the Administration;
! proposals to provide costly concurrent receipt of military retirement
and Veterans Administration (VA) disability benefits;
! proposals to allow the Air Force to initiate acquisition of a $29
billion program to lease and buy 100 Boeing KC767 tanker
airplanes;
! fashioning of the new National Security Personnel System requested
by DOD;
! expanding access to DOD’s TRICARE health system to nondeployed reservists;
! exempting DOD from certain environmental statutes; and
! changing current restrictions on research on low-yield nuclear
weapons.
!

The compromises reached are described below. Details on other conference action,
including RDT&E and weapon system funding, will be included in a later update.

Buy American Restrictions3
In its request, the Administration proposed a series of changes to long-standing
domestic preference restrictions codified in the Buy American Act and the Berry
Amendment in order to give DOD additional flexibility to buy from foreign sources.
Since 1933, the federal government has been required in the Buy American Act to
purchase from American producers unless the head of the agency finds that it is in
the “public interest” to waive the restriction and purchase items from foreign
sources.4
For specific types of items — food, clothing, tents, textiles, specialty metals and
measuring tools — the Berry Amendment requires that DOD buy from U.S. sources
unless the purchases are in support of combat operations outside the United States.5
In the case of other items such as machine tools and ball bearings, DOD can buy
from foreign sources if the foreign country is part of the U.S. national technology and
industrial base (defined as the United States and Canada), if it is in the “national
security interests of the United States,” or if DOD would face unreasonable costs or

3

This section was prepared with the help of CRS analyst Daniel Else.

4

Agencies may also waive the domestic sources preference because of unreasonable cost
or use outside the United States; see CRS Report 97-765A, The Buy American Act:
Requiring Government Procurements to Come from Domestic Sources by John Luckey.
5

CRS Report RL31236, The Berry Amendment: Requiring Defense Procurement To Come
From Domestic Sources, by (name redacted).

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delays. The Secretary of Defense has waived these various domestic preference
restrictions in certain circumstances.6
This year’s debate focused on the extent of DOD’s waiver authorities in terms
of both the criteria and the items that could be covered. The Administration sought
to widen circumstances permitting waivers, whereas the House would have either
required domestic purchase of additional items (such as machine tools) or made it
more difficult for the Secretary of Defense to waive current restrictions.7 For
example, the House bill required DOD to identify and then buy from U.S. sources
items considered to be “critical” to the U.S. defense industrial base as well as assess
the extent of U.S. dependence on foreign suppliers. The House version also would
have prohibited DOD from purchasing from foreign countries who had restricted
sales of military goods or services because of U.S. operations in Iraq, a provision that
could have affected both France and Germany.
The Secretary of Defense had signaled that the Administration would veto the
bill if the House provisions were included. Concerned about the effects of these
provisions on U.S. trade relations, Senator Warner requested the State Department,
the U.S. Trade Representative, and OMB to address the potential effects of the
legislation on trade relationships and cooperative defense relationships.8
Reflecting a compromise between the House’s desire to expand protections for
the defense industrial base and Senate’s concerns about potential effects on U.S.
trade relations, the conference version dropped the new restrictions on certain items
but required DOD to assess potential U.S. vulnerabilities. To meet Senate and
Administration concerns about potential effects on U.S. trade relations, the
conference bill stated that none of the provisions in this industrial base section would
apply if the Secretary of Defense and Secretary of State determine that U.S.
international agreements would be violated.9
To get a better understanding of the extent of DOD dependence on foreign
sources or single domestic sources for critical items or components of military
systems, the Defense Department is to develop a “Military System Essential Item
Breakout List” and identify where these items or components are produced. DOD
is to contract for a study that will define the criteria for “critical” and recommend
items to be included on the list.
To give additional support to domestic producers of critical items, the
conference agreement establishes a new Defense Industrial Base Capabilities Fund
that DOD can use to provide incentive payments to domestic contractors. No funds
are specifically authorized (or appropriated) for this fund in FY2004, however.

6

The relevant statutes are in U.S. Code, Title 41, Section 10a-10b (Buy American), Title
10, Section 2533a (Berry Amendment) and Title 10, Section 2534 (Miscellaneous
restrictions).

7

See H.Rept. 108-354, p. 729 - 730 for provisions not adopted.

8

Congress Daily, “Surprised Warner Seeks Clarification,” September 26, 2003.

9

See Section 811 of H.R. 1588 as enacted and H.Rept. 108-354, p. 722.

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Another new industrial base tool for DOD is authority to give preference in source
selection to domestic producers of machine tools or other capital assets used to make
defense goods. The bill also requires a study of the adequacy of U.S. producers in
meeting defense needs for beryllium industrial base.10
To protect U.S. trade relationships, the conference agreement also softened the
House’s proposed prohibition on buying from countries who opposed U.S. actions
in Iraq. Instead, the Secretary of Defense, in coordination with the Secretary of State,
is to identify foreign countries who now restrict military sales to the United States
because of U.S. counterterrorism or military operations; that list can be revised
periodically. Even for those countries, DOD can purchase goods if the department
has a “compelling and urgent” need for the item.11 Congress agreed to broaden
waivers to Berry Amendment restrictions on purchases of food, clothing, and similar
items from combat operations only to include contingency operations as well.
This issue is likely to resurface in the next year or two. By February 2005,
DOD is required to complete an interim report that assesses which items are deemed
essential and the extent of U.S. dependence on foreign sources for those items. At
that point, the debate could revolve around whether additional protections or
incentives should be provided to domestic producers of those items.12

Concurrent Receipt Adopted
Until recently, the Administration threatened to veto congressional proposals to
provide concurrent receipt of military retirement and VA disability benefits to
military retirees because of concerns about the cost and the precedents for other
benefit programs. Military retirees now must reduce their military retirement on a
dollar-for-dollar basis if they wish to receive tax-exempt disability payments, a type
of offset that is required in many benefit programs.
The conference bill provides new benefits to military retirees with twenty or
more years of service and disability ratings of 50% or higher. The conference bill
also expands those who would be eligible for special compensation under the “Purple
Hearts Plus” program enacted last year for those whose disabilities are due to combat
or combat-related activities. The conference version was reached when the Senate
dropped its proposal for full concurrent receipt and the Administration dropped its
veto threat. In response to Administration concerns, the House had not included a
concurrent receipt in its version of the bill even though support among members was
widespread.

10

See Sections 812, 813, 814, 822, and 824 of H.R. 1588 as enacted and H.Rept. 108-354,
p. 723 - p. 725.
11
12

See Section 821 of H.R. 1588 as enacted and H.Rept. 108-354, p. 724.

Section 812 requires DOD to contract with a federally funded R&D center to assess the
criteria and the items on the military essential list.

CRS-7
Eligibility Criteria and Phase-In of Benefit. Over 200,000 military
retirees are likely to qualify for the new concurrent receipt including military retirees
with 20 years of service if they
have disability ratings of 50% or above;
have any disability ratings as long as they meet the criteria for a
combat-related disability, popularly known as “Purple Hearts Plus;”
! are Guard and Reserve retirees who meet the criteria under “Purple
Hearts Plus” if they have 20 or more years of “creditable” service,
defined as 50 points for performing their annual reserve duties; and
! are disability retirees whose payments exceed their retirement
benefits had they retired under regular retirement.
!
!

The first phase of the new benefits are slated to go into effect on January 1, 2004,
with full concurrent receipt for those eligible by December 31, 2013.13
In the first year, monthly benefits for those eligible will be:
! $100 for those with a 50% disability rating;
! $125 for those with a 60% disability rating;
! $250 for those with a 70% disability rating;
! $350 for those with an 80% disability rating;
! $500 for those with a 90% disability rating; and
! $750 for those with an 100% disability rating.
In the following year, those eligible would receive 10% of the difference between the
benefit for the previous year and the lesser of their monthly retirement benefit or their
monthly disability payment. In each succeeding year, retirees will receive an
additional 10% of that difference until the retiree receives the full amount of both
disability payments and retirement benefits.
Cost of New Benefit. CBO estimates that the new benefit would cost $800
million in FY2004 and $22.1 billion over ten years in outlays for current
beneficiaries. The annual cost would increase steadily to $2 billion by FY2008 and
$3.5 billion by 2013.14 Although DOD does not need to include funds in its budget
to cover the costs because the legislation creates a new entitlement program, the
deficit would increase by annual outlays for current beneficiaries.
Unlike current military retirement, H.R. 1588 does not require that DOD
provide funds to cover the accrual cost of the new benefit for today’s military
personnel, a practice designed to capture fully the cost of military personnel. This
means that general revenues would cover this cost rather than the Defense
Department because DOD would not need to budget for this cost.15

13

See Section 641 of H.R. 1588 as enacted and H.Rept. 108-354, p. 711.

14

Cost estimate provided by CBO, October 22, 2003.

15

Accrual funding puts aside today the estimated amount to cover future benefits and is
intended to ensure that agencies understand the full cost of their personnel.

CRS-8
New Commission on VA Benefits. H.R. 1588 also sets up a 13-member
Veterans Disability Benefits Commission to evaluate and make recommendations
about VA benefits for combat-related disabilities or deaths. The Commission is to
report by February 2005, 15 months after enactment.16
Prospect for Next Year. The concurrent receipt issue could well be
revisited next year because of pressures from those not covered by the new benefit
— i.e. those with disability ratings below 50% whose disability is not due to combat
or combat-related circumstances. Budget impacts would continue to be a concern.
Those concerned with the loss of DOD visibility of the full cost of military personnel
that is part of the current provision could also press to require DOD to budget for the
accrual cost of the benefit for its current military personnel.

Tanker Lease Compromise
Another controversial provision included in the FY2004 DOD Authorization
conference is language that would allow the Air Force to proceed with a plan to lease
20 KC767 Boeing tanker aircraft and subsequently buy an additional 80 aircraft as
proposed by the Senate Armed Services Committee Chairman Warner in early
September.17 Signing of the contract has been held up because of questions of
impropriety by two Boeing officials, Darlene Druyan, formerly in charge of Air Force
acquisition, and Michael Sears, the Chief Financial Officer; Ms. Druyan is alleged
to have discussed employment opportunities with Boeing at a time when she was also
negotiating the tanker deal.18 In the past week, Deputy Secretary of Defense
Wolfowitz asked the DOD Inspector General to review this matter, and Senate
Armed Services Committee Chairman Warner called for a broader review.19
Although the conference bill authorizes the lease 20, buy 80 proposal, there
continues to be controversy between the House and Senate interpretation of what the
language requires: a House colloquy between members says that the Air Force can
use options included in the current contract and a Senate colloquy suggests that the
Air Force must negotiate two new contracts, one for the lease and one for the buy.20

16

See Sections 1501 - 1507 and p. 780 of H.Rept. 108-354.

17

This leasing proposal was originally authorized in Section 8169 of the FY2002 DOD
Appropriations (P.L. 107-117). See hearing and testimony before the Senate Armed Services
Committee on September 4, 2003, for proposal by Senator Warner. For analysis of the
original Air Force proposal, see CRS Report RL32056, The Air Force KC-767 Lease
Proposal: Key Issues For Congress, coordinated by (name redacted),
18

Wall Street Journal, “Boeing Dismisses Two Executives for Violating Ethical Standards,”
November 25, 2003.
19

New York Times, “Air Force Pursued Boeing Deal Despite Concerns of Rumsfeld,”
December 6, 2003; Washington Post, “Pentagon Delays Tanker Contract,” December 3,
2003.
20

For House colloquy, see Congressional Record, November 7, 2003, p. H10986 - H10987,
p. H10993 - H109994; for Senate colloquy, see Congressional Record, November 12, p.
S14482 - S14483, and p. S14485.

CRS-9
One contract could be implemented more quickly but could mean that the Air Force
would pay unnecessary costs associated with the lease.21
The lease 20, buy 80 alternative differs from the Air Force’s original
unprecedented proposal to contract with Boeing to lease and then buy100 aircraft for
a cost of $29 billion over a 15-year period, including support costs. The Air Force
finds leasing attractive because major funding would not be required until 2006, and
the bulk of the funding would not be needed until 2010-2017. The Air Force argues
that this approach would cause less disruption to current Air Force programs than
would a traditional buy. In later years when the program would cost $2 billion to
$3.7 billion annually, however, competition with other Air Force programs could be
substantial.22
It is not clear, however, whether the Air Force will be able to delay paying for
the planes until delivery as proposed by Under Secretary Wolfowitz in a letter to
Senator Warner on November 5, 2003.23 In his confirmation hearing to be Deputy
Under Secretary of Defense for Acquisition, Technology and Logistics, Michael
Wynne suggested that the conference language may require that the Air Force pay for
the aircraft when ordered rather than delaying payment by three years when the
aircraft are delivered. The Air Force has not identified how to fund the tanker within
its current budget plans, which did not anticipate the tanker lease.
This proposal has been controversial because leases are substantially more
expensive than buying: the Air Force, CBO, CRS, and GAO all found that the lease
would cost $5 billion to more than $6 billion more than a multiyear buy of the
aircraft, because the Air Force planned to rely on a special purpose entity to finance
the deal and because congressional agencies and others have suggested that the
proposed lease did not meet the criteria for an operating lease.24
Under the conference agreement that would allow the Air Force to lease 20
Boeing KC767 aircraft and incrementally buy the remaining 80 aircraft, the Air Force

21

Congressional Budget Office (CBO), “Letter to Senator John McCain on cost of two
alternative ways to lease 20 tanker aircraft and buy 80 tanker aircraft,” November 13, 2003;
and CBO, “Letter to Senator Warner with CBO evaluation of alternate strategies for
acquiring 100 KC-767A tanker aircraft,” October 16, 2003; see cost estimates in
[http://www.cbo.gov].
22

For an analysis of the budgetary issues, see “Congressional Oversight and Budgetary
Issues,” by (name redacted) in CRS Report RL32056,
The Air Force KC-767 Lease Proposal:
Key Issues For Congress, coordinated by (name redacted) on p. 53ff. Section 8159 of
the FY2002 DOD Appropriations Act (P.L. 107-117) allows the Air Force to lease up to 100
Boeing KC767 tankers once a new start notification has been approved by the four defense
committees.
23
24

See Congressional Record, November 7, 2003, p. H. 10896 for Wolfowitz letter.

Testimony of Robert A. Sunshine, CBO, before Senate Armed Services Committee,
September 4, 2003; Testimony of (name redacted), CRS, before Senate Commerce
Committee, September 3, 2003; and testimony of Neal P. Curtin before the Senate Armed
Services Committee, September 4, 2003.

CRS-10
still plans to delay the lease funding until 2006 and the buy funding until 2008.25
Although leasing 20 rather than 100 aircraft would be less costly than the original
proposal, the extent of the savings depends on how the Air Force implements the
proposal. According to press reports, the Air Force now plans to use two contracts
— one for the lease and one for the buy — costing a total of $18.3 billion in
acquisition costs. That total would be $3.2 billion less than the previous $21.5
billion contract to lease and buy 100 aircraft but still $3.5 billion more than CBO
estimates a straight multiyear contract would cost.26
In its scoring of the FY2004 DOD Authorization Act, CBO considers the new
proposal to lease and then buy 20 aircraft to be a lease/purchase that would require
that the Air Force provide $3.6 billion in budgetary authority in FY2004, although
none is provided in the Act. Because members did not raise a point of order under
budget rules, however, the funding implied by the bill’s language was not
challenged.27
Although the conference reports includes language permitting incremental
funding of the multiyear contract — which would allow the Air Force to spread out
the payments rather than providing the full amount for each year’s buy as is required
under standard acquisition rules — it is not clear whether the new language permits
that. The Air Force has voiced concerns that the compromise could jeopardize
ongoing defense programs.

New Personnel System for DOD Civilians
As part of its April 10, 2003, bill proposal, the Defense Transformation for the
21st Century, the Defense Department requested broad authority to set up a new
National Security Personnel System (NSPS) governing its 735,000 civilian
employees. DOD requested authority to develop a new personnel system that was
“flexible” and “contemporary,” allowing the Secretary of Defense to define positions,
set pay scales, establish hiring and firing rules, bargain with employees at the national
level, and set separate scales for rewarding senior level employees. Although DOD’s
proposal did not include specifics, Under Secretary of Defense for Personnel and
Readiness David Chu stated that it intended to follow “best practices” for current
personnel projects, including pay banding and the use of numerical ratings to link pay
with job performance.28

25

Congressional Record, October 23, 2003, p. S13113.

26

Seattle Times, “Delay in Tanker Deal Could Put 500 Jobs ‘At Risk,’” December 6, 2003;
CBO, “Letter to Senator Warner with CBO evaluation of alternate strategies for acquiring
100 KC-767A tanker aircraft;” see cost estimates in [http://www.cbo.gov].
27

Conversation with CBO staff. With the tanker lease, the bill would be above the spending
levels allocated to the Senate Armed Services Committee in the FY2004 Budget Resolution
(H.Con.Res. 95) and thus could be subject to a 302(f) point of order under the 1974 Budget
Control and Impoundment Act; that point of order could be waived with 60 votes.
28

Statement of David S.C. Chu, Under Secretary of Defense for Personnel and Readiness
before the House Subcommittee on Civil Service and Agency Organization on April 289,
2003. Washington Post, “Big Changes In Store For Defense Workers Under New Personnel

CRS-11
The chief issues raised about the DOD proposal were
the nature of the proposed new system;
the difficulties in designing an equitable performance rating system
that would be linked to pay;
! the appeals system for employees in case of disputes; and
! the level of bargaining between employees and DOD.
!
!

DOD’s proposal was debated within both the armed services and the
governmental affairs committees with concerns raised by both Members of Congress
and government employee unions about the breadth of authority requested and the
potential effects on government workers. In defending new authority, others cited
long-standing calls for reform of the civil service, the broad personnel management
authorities granted to new Department of Homeland Security, and DOD’s twenty
years of experience with alternative “pay for performance” systems for the 30,000
employees in the national labs.
The conference version of the FY2004 DOD authorization modified many of the
Administration provisions that were included in the House version of H.R. 1588. The
Senate version of the FY2004 DOD Authorization bill did not include any provisions
dealing with a new personnel system, but many of the provisions proposed by the
Senate Governmental Affairs Committee in S. 1166, a bill to establish a National
Security Personnel System, were ultimately adopted in the final version (see CRS
Report RL31954, Civil Service Reform: Analysis of the National Defense
Authorization Act for FY2004 coordinated by Barbara Schwemle).29
Phase-In Period, Collaboration, and Criteria for the New Personnel
System. Although H.R 1588 gives the Secretary of Defense broad discretion to set
up the new system, DOD is required to develop its regulations jointly with the
Director of the Office of Personnel Management and to conform those regulations
with criteria included in the law. In addition, any disputed parts of the new system
could not go into effect until 90 days after the proposed system is presented for
comment to labor organizations representing DOD’s civilian employees.
During that period, labor organizations would have 30 days to review the
proposal, DOD would have 30 days to resolve disputes, and Congress would be
notified of remaining disputes 30 days before implementation.30 After this 90-day
period, the new system could be put into place for up to 300,000 DOD civilian
employees but could not be expanded to the remaining employees until DOD has a
performance management system in place that meets criteria in the law.31

System,” November 25, 2003.
29

See General Counsel, DOD, William J. Haynes III, Letter to Speaker of the House Hastert,
April 10, 2003, for DOD’s proposal; [http://www.defenselink.mil/dodgc/lrs/legispro.html].
S. 1166 was reported from the Senate Governmental Affairs Committee without a written
report.
30

See Section 9902 (f) of H.R. 1588 as enacted.

31

See Section 9902 (b) and (l) of H.R. 1588.

CRS-12
In addition to being consistent with merit system principles and antidiscrimination laws, this new system to hire, assign, transfer, evaluate, and fire
employees is required meet the following criteria:
to be “fair, credible, and transparent;”
to link employee performance to agency plans and include
safeguards to ensure fairness;
! to involve employees, supervisors and managers in the design,
evaluation, and training for the new system;
! to include an “equitable method for appraising and compensating
employees” in the pay-for-performance evaluation system.32
!
!

In report language, the conferees calls on DOD to set up a pay-for-performance
evaluation system that:
groups employees into pay bands with upper and lower bounds
based on position responsibilities and types of work;
! sets up a performance rating system with rating periods and a
feedback process;
! includes a scoring system that is tied to salary changes and a review
process that addresses those failing to meet performance goals; and
! links individual performance factors to agency’s goals and ensures
scoring comparability.
!

Although this conference report language is not binding, it signals legislative intent.33
In hearings, DOD policy makers stated that it intended to design a system like the pay
banding system used by DOD’s laboratories for the past twenty years; the labs are,
however, exempt from the new system until 2008 and beyond that unless the new
system gives them greater flexibility.34 Details about the new personnel system are
likely to emerge in the next year.35
New Appeals Process and Labor Management Relations Systems.
As long as it complies with employment anti-discrimination laws, merit principles,
and due process, DOD can set up a new, internal appeals process for handling
disputes about personnel actions. In designing this system, DOD is to consult with
the Merit System Protection Board, the current government-wide appeals board.
Although employees may appeal the decisions of DOD’s new internal board to the
Merit System Protection Board (MSPB), the government-wide board would only hear

32

See Section 9902 (b) of H.R. 1588 as enacted.

33

See H.Rept. 108-354, p. 759.

34

See Section 9902(c) of H.R. 1588 as enacted; DOD was first given the authority to set
up a flexible personnel management system at the national labs in 1995.
35

DOD Pentagram, “New Pay System for Defense Civilians” by Spc. Joshua McPhie,
November 28, 2003; available online from the Department of the Army’s website at
[http://www.dcmilitary.com/army/pentagram/8_47/national_news/26448-1.html].

CRS-13
cases involving “arbitrary or capricious” actions, violation of due process, or those
not supported by evidence. Decisions by that Board can be reviewed by a court.36
Jointly with the Director of the Office of Personnel Management and in
collaboration with the unions, DOD will also be able to develop its own labor
management system under the new law.37 This “collaborative issue-based approach
to labor management relations” would go into effect 90 days after DOD provides a
written description to unions. During that period, unions have 30 days to review the
proposed system, 30 days to discuss recommended changes, and 30 days of
notification to Congress of disputed areas. To resolve differences, either DOD or
employee representatives can request help from the Federal Mediation and
Conciliation Service.
The new law provides for review of the proposed new system by an unspecified
independent third party. The authority of this new labor-management process
appears to be broad because its decisions can “supercede all other collective
bargaining agreements” in the department if the Secretary of Defense desires [italics
added].38 Unless renewed, however, this new process would only be in effect for a
six-year period. This new system would also not be subject to the collective
bargaining procedures and deadlines that apply to other federal agencies.39
DOD could also continue to bargain with employee unions and follow the
statutory procedures and deadlines for collective bargaining affecting all other
government agencies.40 In another major change, H.R. 1588 gives DOD new
authority to bargain at the national rather than the local level and makes those
decisions binding on all levels. Some critics have raised concerns about how local
circumstances will be taken into account in national decisions. These decisions could
also be reviewed by an unspecified third party.
H.R. 1588 appears to endorse two parallel systems of labor-management
relations: one, a new “collaborative” system, and the other, a traditional collective
bargaining system as defined in current statute. The legislation does not specify what
types of issues would be covered or how responsibilities will be divided between
these two systems. To the extent that the two systems overlap, the law gives
precedence to the new system. The new law appears to adopt a similar approach in
the case of appeals process for employee grievances, allowing DOD to set up its own
board but also permitting a review of those decisions by the Merit System Protection
Board in certain circumstances.

36

See Section 9902 (h) and CRS Report RL31954, p.13 - 16.

37

The law allows the Secretary to collaborate with unions “above the level of exclusive
recognition,” a term that refers to local unions.
38

See Section 9902(m)(8) in H.R. 1588 as enacted.

39

See Section 9902(m) in H.R. 1588; other federal agencies are subject to the labor
management relations in U.S. Code, Chapter 71; see also Section 9902
40

See Section 9902(g) of H.R. 1588 as enacted and U.S. Code, Chapter 71.

CRS-14
Funding Levels and Separation Incentive Authorities. Although
increases for individual employees would be likely to vary from the current system,
the new law calls on DOD to “the maximum extent practicable” to budget the same
amount for civilian employees under the National Security Personnel System as
would be the case under the current system so that overall, employees are not
“disadvantaged.”41 At the same time, the law calls on DOD to give civilian
employees the same pay raises as are received by military personnel. As an
additional workforce management tool, the law allows DOD to give separation
incentives of $25,000 to up to 25,000 civilian employees annually for early
retirement.42
The budgetary implications of the new system are not obvious. It is also not
clear whether these provisions would significantly limit DOD’s current plans to
transfer substantial numbers of military jobs to civilian personnel or contract
employees.
Other Civilian Personnel Changes. The new law also provides several
new authorities that would be available to all federal agencies including authorizing
!
!
!

pay for performance pilot projects;
higher pay caps for Senior Executive Service employees; and
$500 million for a new Human Capital Fund to reward exceptional
performance.43

The appropriators have only provided $1 million for this new fund in the final
version of the FY2004 Omnibus Appropriations Act currently awaiting final
congressional action.

Environmental Exemptions for DOD
As it did last year, DOD requested that military readiness-related activities be
exempted from certain provisions of five federal environmental laws, including the
Clean Air Act, the Endangered Species Act, the Marine Mammal Protection Act, the
Solid Waste Disposal Act, and the “Superfund” law that governs cleanup of
hazardous waste. This year, Congress proved to be receptive to proposals to modify
DOD’s responsibilities to protect endangered species and marine mammals, both
very controversial provisions. H.R. 1588 also gives DOD new authority to use
wetlands mitigation banks and modifies regulations governing Restoration Advisory
Boards that inform citizens about environmental cleanup.
DOD has argued that compliance with environmental requirements significantly
affect military training, and hence readiness, while critics have questioned the extent

41

See Section 9902(k) and 9902(e) in H.R. 1588 as enacted.

42

See Section 9902(i) in H.R. 1588 as enacted; early retirement is defined as at least 50
years of age and 20 years of service; “early-outs” for base closures could be in addition to
the 25,000 employees annually.
43

See Sections 1125, 1126 and 1129 of H.R. 1588 as enacted.

CRS-15
of the impact and DOD’s limited use of current waiver authorities. A recent GAO
report found that environmental restrictions are only one of several factors, including
urban growth and pollution, that affect DOD’s ability to carry out training activities
and that DOD continues to be unable to measure the impact of environmental laws.44
The debate centers on whether or to what extent DOD should be exempt from current
environmental statutes.45
Congressional Action on Endangered Species Act.46 Both the Senate
and the House agreed that DOD needed additional authority to consider military
training requirements as well as wildlife protection in managing land on DOD
installations. For that reason, the new law permits DOD to substitute an Integrated
Natural Resources Management Plan (INRMP), required under the Sikes Act, for a
designation of lands as “Critical Habitat” under the Endangered Species Act, as a
way to protect endangered species.47 The authority to substitute a resource
management plan for a critical habitat designation has been under dispute.
Environmental groups are concerned that protection for endangered species may be
weakened with this change.
Under the Sikes Act, the INRMP, which guides the conservation, protection,
and management of fish and wildlife resources, is prepared by the Secretary of the
military department in cooperation with the U.S. fish and Wildlife Service. The “use
of military installations to ensure the preparedness of the Armed Forces,” or military
readiness, however, takes precedence.48 Under the Endangered Species Act, once
land has been designated as “critical habitat,” federal agencies must “consult”
regarding actions that would destroy or adversely affect those habitats or face
penalties.
The substitution is permitted only if the Secretary of the Interior determines in
writing that DOD’s plan provides a “benefit for the species.”49 Critics have

44

GAO-03-621T, Military Training: DOD Approach to Managing Encroachment on
Training Ranges Still Evolving, April 2, 2003.
45

Hearings were held by the Senate Subcommittee on Fisheries, Wildlife and Water,
Committee on the Environment, May 6, 2003 and by the House Committee on Resources,
May 6, 2003; see also CRS Report RL31415, The Endangered Species Act (ESA), Migratory
Bird Treaty Act (MBTA), and Department of Defense (DOD) Readiness Activities:
Background and Current Law by (name redacted), p. 12-18, and CRS Issue Brief 10072,
Endangered Species: Difficult Choices by (name redacted), (name redacted) and (name
redacted). See also, CRS Issue Brief IB10072,Endangered Species: Difficult Choices by
(name redacted) and (name redacted).
46

This section was prepared with the help of CRS analysts, (name redacted) and (name red
acted). See CRS Report RL31415,The Endangered Species Act (ESA), Migratory Bird
Treaty Act (MBTA), and Department of Defense (DOD) Readiness Activities: Background
and Current Law, by (name redacted).
47

For Sikes Act, see 16 U.S.C., Section 670a.

48

16 U.S. Code, Section 670a (a) (3).

49

See Section 318 of H.R. 1588 as enacted and H.Rept. 108-354, p. 667 and General
Counsel, DOD, William J. Haynes III, Letter to Speaker of the House Hastert, April 10,

CRS-16
questioned, however, whether the criterion of “benefit to the species” is likely to be
adequate and whether implementation of the plans can be enforced since the Sikes
Act does not provide for suits by individuals or citizen groups. The final version also
amends the Endangered Species Act rather than Title 10 of the U.S. Code which
governs DOD activities, a choice that created concern among environmental groups
because of the potential precedent for other exemptions. Other environmental
interests opposed amending Title 10 because doing so may give the Secretary of
Defense rather than the Secretary of Interior the primary role in determining whether
integrated management plans provide adequate protection.
According to the Senate Armed Services Committee, portions of about 150
DOD bases could be designated as critical habitat were this exception not
permitted.50 The conference report suggests that the new language will “provide a
balance between military training requirements and protection of endangered or
threatened species.”51
Congressional Action on the Marine Mammal Protection Act. The
conference agreement adopts two of the Administration’s proposed changes to the
Marine Mammal Protection Act, including new two-year exemption authority and a
new definition of “harassment.” Debate about the implications of both of these
changes was heated.
New Exemption Authority. Under a new provision, the Secretary of
Defense, after consulting with the Secretary of Commerce and the Secretary of the
Interior, could “exempt any action or category of actions” from compliance with the
Marine Mammal Protection Act for two years if the Secretary determines “it is
necessary for national defense.”52 At his discretion and after consultation with the
Commerce and Interior Departments, the Secretary of Defense could renew such
exemptions for additional two-year periods.
The conference report suggested that this national security exemption parallels
that included in other environmental laws, while environmental interests argued that
a “national defense” exemption is broader than that provided in other statutes.53 DOD
has not, in fact, used existing exemption authorities, arguing that the threshold was
too high for most activities. Exemptions under the new law must be reported to the
armed services committees.54
2003, proposing legislation, see Title 10, U.S. Code, new Chapter 101A, Section 2017 in
draft legislation; see [http://defenselink.mil/dodgc/lrs/legispro.html].
50

S.Rept. 108-46, p. 286.

51

H.Rept. 108-354, p. 668.

52

See Sec. 319 of H.R. 1588; language is identical to DOD’s request in General Counsel,
DOD, William J. Haynes III, “Letter to Speaker of the House Hastert,” April 10, 2003, Title
10, Chapter 101A, Section 2019, Subsection(e); see online version on the DOD website at
[http://defenselink.mil/dodgc/lrs/legispro.html.]
53

Other statutes include exemptions for “national security” interests or “paramount interests
of the United States.”
54

H.Rept. 108-354, p. 669.

CRS-17
New Definition of Harassment. The conference agreement also adopted
the Administration proposal to use narrower definitions of harassment of marine
mammals for DOD’s military readiness and scientific activities of federal agencies
than are applied to other agencies. Under current law, the standard requires that
activities be prohibited if they would have a “potential to injure or disturb” marine
mammals.55 The new language defines DOD’s activities as “harassment” only if an
act “injures or has the significant potential to injure” or disturbs the activities of
marine mammals by disrupting “natural behavior patterns”to a point where those
patterns are “abandoned or significantly altered.”[italics added]56 To limit the
application of the exemption, the Act defines readiness as training, combat
operations, and testing, the definition that was included in the FY2003 DOD
authorization. DOD had asked to broaden the application to include support
activities.57
In reaction to a recent court case that limited DOD’s deployment of the lowfrequency SURTASS sonar because of the potential impact on marine mammals, the
FY2004 DOD authorization exempts DOD from complying with current standards
for evaluating the impact on marine mammals based on “specified geographical
regions,” or the “small numbers.” DOD contended that these standards were
inappropriate for marine mammals that migrate over broad expanses of the ocean and
that using a “negligible impact” standard would be a more scientific way to make
decisions rather than on the basis of the number of mammals affected.58
Other Changes and Future Actions. Congress also made other changes
requested by the Administration, including allowing DOD purchase credits from a
mitigation bank to offset those lost on DOD installations, and exempting DOD’s
Restoration Advisory Boards from issuing financial disclosure statements and from
providing notice of their activities in the Federal Register.59 These boards are the
primary avenue through which local communities learn about cleanup decisions on
military lands.
The issue of when and where to carve out exemptions from environmental
statutes for DOD can be expected to re-surface next year as the Administration
continues its efforts to provide special treatment for the department to protect DOD’s
readiness activities. While Congress did not approve DOD’s requested exemptions

55

See Section 318 in Congressional Record, May 21, 2003, p. H4428.

56

See Section 319 of H.R. 1588 as enacted.

57

See Section 319 (a), which cites Section 315(f) of P.L. 107-314, the FY2003 DOD
Authorization Act rather than the Administration’s request, see DOD’s request in General
Counsel, DOD, William J. Haynes III, “Letter to Speaker of the House Hastert,” April 10,
2003, Title 10, Chapter 101A, Section 2015,(b)(B), also available online at
[http://defenselink.mil/dodgc/lrs/legispro.html.]

58

See H.Rept. 108-354, p. 669. For Administration rationale, see DOD’s request in General
Counsel, DOD, William J. Haynes III, “Letter to Speaker of the House Hastert,” April 10,
2003, Title 10, Chapter 101A, Section 2019 and section-by-section analysis at
[http://defenselink.mil/dodgc/lrs/legispro.html.]
59

H.Rept. 108-354, p. 667, H.Rept. 108-106, p. 307.

CRS-18
from other environmental laws, it did require DOD to report by January 31, 2004, on
how environmental statutes and residential development surrounding military bases
affect readiness activities.60

TRICARE For Non-Deployed Reservists
Because of the large number of reservists who have been in Afghanistan, Iraq,
and the United States, Congress considered a number of ways to expand current
benefits and decided to approve a demonstration project to provide access to DOD’s
TRICARE health care system to certain non-deployed reservists. Under current law
and DOD policy, reservists become eligible for TRICARE once they are on active
duty. The FY2004 DOD Authorization Act offers access to TRICARE to nondeployed reservists who receive unemployment compensation or who are not eligible
for coverage offered by an employer. Reservists would be required to pay a premium
set at 28% of the value of the actuarial cost of the plan as is currently required for
civilian employees in the government’s Federal Employees Health Benefits (FEHB)
insurance plan.61 The conference version of the FY2004 DOD authorization bill
provides access to this targeted version of the new benefit through December 31,
2004, three months longer than is provided in the FY2004 supplemental.62
According to the report, CBO estimates that this demonstration project would
cost about $200 million annually compared to the $2 billion annual cost of providing
access to all non-deployed reservists that was proposed in the Senate version of the
bill. Dropped in conference, the Senate proposal had triggered a veto threat from the
Administration. The conferees set a ceiling of $400 million on the cost of the
demonstration project.63
To help Congress assess the health care needs of reservists and their families,
the conference report requires that GAO conduct an evaluation by May 1, 2004.64
With significant numbers of reservists likely to be needed in the next few years for
the occupation of Afghanistan and Iraq, proposals to expand benefits for reservists
are likely to be revisited next year.

Lifting the Ban on Research on Low-Yield Nuclear Weapons
The conferees adopted the Senate version of this change to a ban on R&D of
low-yield nuclear weapons that was enacted in 1989. Rather than modifying the ban

60

See H.Rept. 108-354, Section 320 and p. 670.

61

For more detail, see CRS memo, “Health Care for Military Reservists,” by Dick Best;
available by calling the author at [redacted].
62

See H.Rept. 108-354, Section 702 and p.716.

63

See H.Rept. 108-354, Sections 702 and 706 and p. 716 - 717; Letter from Comptroller
General David Walker to Senators Ted Stevens and John Warner and Representatives C.W.
Bill Young and Duncan Hunter, September 29, 2003, attributes $5 billion annual cost
estimate to DOD; and Table 12 of this report for CBO estimate of cost.
64

See H.Rept. 108-354, Section 705 and p. 716 - p.717.

CRS-19
to apply only to R&D at the engineering and development stage, H.R. 1588 repeals
the ban on R&D but requires specific congressional authorization for the Department
of Energy (which funds this program) to proceed to engineering development of lowyield nuclear weapons or a nuclear earth penetrating weapon (see discussion in
section on nuclear weapons for more detail).
In the conference version of the Energy and Water appropriations bill, funding
for the Robust Nuclear Earth Penetrator was reduced from the $15 million request
to $7.5 million; funding for the Advanced Concepts Initiative, which would fund
concept studies on low-yield nuclear weapons, was set at $6 million.65

Maintaining Current Levels of Imminent Danger Pay and
Family Separation Allowance
One less controversial provision was included in H.R. 1588: maintaining the
higher levels of imminent danger pay and family separation allowance adopted in last
year’s supplemental. The DOD Authorization Act adopts the higher levels for all
eligible service members through December 31, 2004. The FY2004 Emergency
Supplemental continues the higher rates through September 30, 2003. At one point,
the Administration had proposed alternative ways to maintain the higher levels, but
these proposals were not adopted.

Major Action On FY2004
DOD Appropriations Bills
The FY2004 DOD Appropriations Act was signed into law (P.L. 108-87) on
September 30, 2003, at the end of the fiscal year. Conferees resolved their issues,
and the bill was passed on September 23 by the House and September 24 by the
Senate after the two-day hiatus in business caused by Hurricane Isabel. Differences
in funding levels were resolved.

65

See H.Rept. 108-357, p. 156.

CRS-20

Table 1B. Status of FY2004 Defense Appropriations:
H.R. 2658 and S. 1382

Subcommittee
House House Senate Senate Conf.
Markup
Report Passage Report Passage Report

Conference
Report
Approval

House Senate

House Senate

7/9/03
6/18/03

Public Law

7/2/03 7/8/03 7/10/03. 7/17/03 9/24/03 9/24/03 9/25/03 9/30/03
H.Rept. (399-19) S.Rept. (95-0) H.Rept. (405-15) (95-0) P.L. 108-87
108-87b
108-283
108-187a

a. Full committee markup was completed on June 26, 2003; the report was filed on July 2, 2003.
b. Full committee markup was completed on July 9, 2003; the report was filed on July 10, 2003.

Major Funding In FY2004 DOD Appropriations Act
The major changes to the Administration’s request are shown in Table 2.
Further details on the appropriation conference will be provided in a later update.

Table 2. FY2004 DOD Appropriations: Congressional Action
(in billions of dollars)

Title
Military Personnel
Operation and
Maintenancea
Procurement
RDT&E
Revolving & Management
Funds
Other DOD Programs
Related Agencies
General Provisionsa
Iraq Freedom Fund
Rescissionb
Scorekeeping Adjustment
Consolidated
Appropriations
TOTALc

FY2003
Enacted
93.0
112.9

FY2004
Request
98.9
117.0

House
98.3
113.3

Senate
98.9
115.6

70.5
57.9
2.6

72.7
61.8
3.5

73.6
64.6
2.8

17.4
0.5
[-4.0]
0

17.8
0.4
[0.1]
0

0.0
10.0
364.7

Conf. Conf. vs.
Request
98.5
115.9

-.4
-1.1

73.8
63.6
1.7

74.7
65.2
2.7

2.0
3.4
-.8

18.1
0.4
[-4.1]
-2.0

18.3
0.40
[-3.4]
-3.2

18.2
0.4
[-3.5]
-3.5

.4
0
[-3.5]
-3.5

0.1
—

0.0
—

0.0
—

0.0
—

0
na

372.2

369.2

369.1

368.7

-3.5

Sources: H.Rept. 108-187; S.Rept. 108-87, H.Rept. 108-283.
Notes: CRS adjusted title totals for both FY2003 and FY2004 to allocate funding in general
provisions. [ ] Square brackets indicate the total amount of funding for general provisions that is
allocated by title in the table and is not added into the total. For FY2004, see H.R. 2658 and S. 1382.
For FY2003, see P.L. 107-248.

CRS-21
a. Of the $4.0 billion decrease for general provisions in the House version of the FY2004 DOD
appropriations act, H.R. 2658 allocates $2.0 billion to O&M appropriations, and $2 billion is
a rescission to the $15.7 billion provided in the Iraq Freedom Fund for later costs of the war and
occupation in the FY2003 supplemental. According to scoring rules, that decrease counts as a
reduction to FY2004 appropriations. Of the $3.4 billion in reductions from general provisions
in S. 1382, $3.2 billion is from a rescission to the Iraq Freedom Fund. About $1.8 billion of
the deceases in FY2003 that were made in general provisions affected O&M appropriations.
CRS will allocate these general provisions in a later update.
b. The Iraq Freedom Fund is a flexible account set up to cover later costs of the war, which could not
be allocated to specific appropriation accounts.
c. Difference is rounding: total funding is $369.193 billion in the House bill and $3.143 billion in the
Senate bill.

Funding Prohibition And Restrictions On Total Information
Awareness (Terrorist Information Awareness) R&D Program. In the
FY2004 DOD Appropriations Act, the conferees dealt with the controversial Total
Information Awareness (renamed Terrorism Information Awareness) or TIA
program, which was, until recently, run by retired Admiral Poindexter in the Defense
Advanced Research Projects Agency (DARPA). Conferees transferred unspecified
components of the program's classified venues where research can continue but
would be subject to safeguards in the National Foreign Intelligence Program that
restrict the sharing of information on U.S. citizens. Less controversial components
of the program, such as machine translation of languages, remain in DARPA. The
components that were transferred and the amount of funding remaining cannot be
determined because details are in a classified annex.66
This agreement was a compromise between Senate action that prohibited
funding for R&D for the controversial Total Information Awareness R&D program
and the Administration’s objections to cutoff of funding. The TIA program is
designed to develop a system to collect and analyze a wide assortment of information
to detect potential terrorists, and included various restrictions on implementation or
deployment of TIA programs similar to those included in the House version of the
FY2004 DOD Appropriations Act, H.R. 2658. The Administration objected to the
Senate cutoff of funding.67
Similar restrictions on deployment were originally included in the Consolidated
Appropriations Resolution of FY2003 (P.L. 108-7).68 On May 20, 2003, the Defense
Advanced Research Projects Agency (DARPA) avoided a cutoff in funding for TIA
by submitting the report required by P.L. 108-7. On August 29, 2003, retired

66

Statement by Senator Inouye in Congressional Record, September 25, 2003, p. S11939.
For statutory and conference, see Section 8131 in conference version of H.R. 2658 and p.
H8771, respectively, in Congressional Record, September 24, 2004.
67

OMB, “Statement of Administration Policy on S. 1382, Department of Defense
Appropriations Bill, FY2004,” July 14, 2003; [http://www.whitehouse.gov/omb/
legislative/sap/108-1/s1382sap-s.pdf].

68

See Section 8120 in S. 1382 and Section 8124 in H.R. 2658; for previous language, see
Section 111 of P.L. 108-7. For a discussion of the original controversy about this program,
see CRS Report RL31786, Total Information Awareness Programs: Funding, Composition,
and Oversight Issues by (name redacted).

CRS-22
Admiral Poindexter, the head of the program, resigned, partly in response to recent
controversy about another TIA component, FutureMAP, which was designed to set
up a “market” to collect predictions about potential terrorist or terrorist-related
events.69 That program was cancelled in response to public and congressional
concerns.

Military Construction Appropriations Bills
Several months elapsed between the summer passage of H.R. 2559, the FY2004
military construction appropriations bill, and final conference action on November
22, 2003, an uncharacteristic delay for this bill (P.L. 108-132). The conference bill
provides $9.3 billion, about $100 million more than the request.
The long hiatus between House and Senate action and the final conference
reflected controversy about funding for overseas bases in Europe and Korea, which
was opposed by the Senate because of uncertainties about their future. This issue
was finally resolved by the establishment of an eight-member congressional
commission to review overseas base structure and report back to Congress by
December 31, 2004.70 The Administration had signaled earlier that it plans to
propose substantial changes in overseas bases as part of efforts to “reduce the
footprint” of the U.S. military overseas.71 With initial action on the domestic base
closure process kicking off next year, debate about the future of overseas bases can
be expected next year, perhaps even before the new report.

Overview of Administration
Request and Budget Trends
On February 3, 2003, the Administration submitted its FY2004 budget request
to Congress. The Administration proposed $399.7 billion for the national defense
budget function, about $7 billion above the estimated FY2003 level. (Note: This
includes in the FY2003 total $10 billion that Congress appropriated for DOD in the
FY2003 Consolidated Appropriations Act; most OMB and DOD tables prepared for
the February budget release do not include these additional funds.72 This does not

69

Washington Post, “Poindexter Resigns But Defends Programs,” August 13, 2003; Defense
Advanced Research Projects Agency, Report to Congress Regarding The Terrorism
Information Awareness Program, In Response to Consolidated Appropriations Resolution
2003, P.L. 108-7, Division M, Section 111 (b); see the DARPA website at
[http://www.darpa.mil/body/tia/tia_report_page.htm].

70

H.Rept. 108-342, Section 128 and p. 25.

71

See CRS Report RL31810, Appropriations for FY2004: Military Construction, by (name
redacted).
72

DOD has received $93.1 billion in supplemental funding to combat terrorism since the
September 11 attacks; see below.

CRS-23
include in the FY2003 level, however, $62.6 billion in supplemental defense
appropriations that Congress approved in April for the Iraq war and other costs.73
The FY2004 increase is in addition to substantial increases in FY2002 and
FY2003. The new request is more than $100 billion above the FY1999 level for
defense spending, and it represents an increase over five years of 20% in inflationadjusted constant FY2004 dollars. The FY2004 defense request is almost 25%
higher in real terms than the budget in FY1996 when DOD’s drawdown in spending
and military personnel after the end of the Cold War was completed.
The Administration is proposing continued increases of about $20 billion
annually in the defense budget for the next five years, which would increase national
defense budget authority to $480 billion by FY2008. Table 3 shows the ten-year
FY1999-FY2008 trend in defense spending under the Administration’s plan both for
the national defense budget function and for the Department of Defense budget.74
Of the $399.7 billion requested for national defense in FY2004, $370.6 billion
is for programs covered by the defense appropriations bill, $9.0 billion by the military
construction appropriations bill, $17.3 billion for Department of Energy defenserelated activities funded in the energy and water appropriations bill, and the
remaining $2.8 billion in other appropriations bills.

73

OMB, Fiscal Year 2004 Historical Tables, Table 5.1 (February 2003) and H.Rept. 108-10,
Conference Report on FY2003 Consolidated Appropriations Resolution, p. 1498.
74

The National Defense budget function (050 in OMB budget documents) is made up
primarily of the Department of Defense (051), plus about $18 billion in other defenserelated activities, primarily weapons-related activities in the Department of Energy (see
Table 3 for a breakout of these categories).

CRS-24

Table 3. National Defense Budget Function and DOD Budget, FY1999-FY2008, Administration Projections
(current and constant FY2004 dollars in billions)
Actual
1999
National Defense Budget Function
Budget Authority
Current year dollars
292.3
Constant FY2004 dollars
331.1
Real growth/decline
5.1%
Outlays/b/
Current year dollars
274.9
Constant FY2004 dollars
312.2
Real growth/decline
12.1%
Department of Defense
Budget Authority
Current year dollars
278.6
Constant FY2004 dollars
315.5
Real growth/decline
5.1%
b
Outlays
Current year dollars
261.4
Constant FY2004 dollars
296.9
Real growth/decline
11.7%
Fiscal Year:

Actual
2000

Actual
2001

Actual
2002

Enacted
2003a

Req.
2004

Proj.
2005

Proj.
2006

Proj.
2007

Proj.
2008

304.1
335.8
1.4%

335.5
360.1
7.2%

362.1
378.5
5.1%

392.7
401.8
6.2%

399.7
399.7
-0.5%

420.0
410.4
2.7%

440.0
420.0
2.3%

460.3
429.0
2.1%

480.7
437.5
2.0%

294.5
325.3
4.2%

305.5
327.4
0.6%

348.6
363.4
11.0%

376.3
385.1
6.0%

390.4
390.4
1.4%

410.1
400.9
2.7%

423.2
394.6
-1.6%

436.4
397.3
0.7%

460.5
409.3
3.0%

290.5
320.8
1.7%

319.5
343.0
6.9%

345.0
360.6
5.1%

374.0
382.7
6.1%

379.6
379.6
-0.8%

399.6
390.5
2.9%

419.6
400.5
2.6%

440.3
410.4
2.5%

461.6
420.1
2.4%

281.2
310.7
4.7%

291.0
311.9
0.4%

332.0
346.1
11.0%

358.2
366.5
5.9%

370.7
370.7
1.1%

389.6
380.8
2.7%

402.7
375.5
-1.4%

416.3
379.0
0.9%

441.1
392.1
3.5%

Source: Office of Management and Budget, F2004 Historical Tables, and FY2003 Consolidated Appropriations Resolution (P.L. 108-11).
a. Includes $10 billion in budget authority appropriated to DOD in the FY2003 Consolidated Appropriations Resolution (see P.L. 108-11) but not the outlay effects of that addition
because OMB has not re-estimated outlays. Does not include $62.6 billion in FY2003 supplemental appropriations for defense provided in H.R. 1559, P.L. 108-11.

CRS-25

Annual Growth for DOD Slows In Later Years in FY2004
Budget Resolution
The conference agreement on the FY2004 congressional budget resolution
(H.Con.Res. 95, H.Rept. 108-71), which was passed by both houses on April 11, just
before the April recess, endorses the Administration’s proposed growth of $20 billion
annually for defense over the next five years (see Table 4). Over the following five
years, however, defense would grow by about $10 billion annually; the
Administration does not project beyond FY2008. The chief issue in this year’s
budget resolution was the amount to be provided for tax cuts.

Table 4. Status of FY2004 Budget Resolution
(H.Con.Res. 95, S.Con.Res. 23)
Subcommittee
House House Senate Senate Conf.
Markup
Report Passage Report Passage Report

Conference
Report
Approval

House Senate

House Senate

NAa

NA

Public
Law

4/10/03 3/21/03 3/26/03 3/26/03 4/11/03 4/11/03 4/11/03 NAb
H.Rept. 215-212 (no
56-44 H.Rept. 216-211 51-50
108-37
report)
108-71

Note: Senate substituted S.Con.Res. 23 into H.Con.Res. 95 after passage.
a. Budget resolutions are only marked up in full committee.
b. Budget resolutions guide the action of the authorizing and appropriating committees but are not
signed into law by the President.

Although there has been considerable congressional support for increases in
defense, some observers have questioned whether increases can be sustained in the
future because of high federal budget deficits and the dramatic increases in costs
associated with the retirement of the baby boom generation.75 The FY2004 budget
resolution projects a 40% increase spending on entitlement programs by FY2008 and
an 80% increase by FY2013.76

75

Center for Strategic and Budgetary Assessment, Analysis of the 2004 Defense Budget
Request by Steven M. Kosiak, p. 5-p.7
76

CRS calculations based on table in H.Rept. 108-71, Conference Report on Concurrent
Resolution on the Budget For Fiscal Year 2004, p. 68.

CRS-26

Table 5. FY2004 Budget Resolution: National Defense Request and Congressional Action
(billions of dollars)
FY2003
Est.a

FY2004
Proj.

FY2005
Proj.

FY2006
Proj.

FY2007
Proj.

FY2008
Proj.

FY2004FY2008
Proj.

FY2009FY2013
Proj.

FY2004FY2013
Proj.b

Budget Authority
Administration Request

392.7

399.7

420.0

440.0

460.3

480.7

2,200.8

NA

NA

FY2004 Budget Res.

392.5

400.5

420.1

440.2

460.4

480.9

2,202.0

2556.1

4758.2

Administration Request

30.6

7.0

20.3

20.0

20.3

20.4

88.1

NA

NA

FY2004 Budget Res.

NA

8.1

19.5

20.1

20.3

20.5

88.4

48.5

136.9

Administration Request

8.5%

1.8%

5.1%

4.8%

4.6%

4.4%

NA

NA

NA

FY2004 Budget Res.

NA

2.1%

4.9%

4.8%

4.6%

4.4%

NA

NA

NA

Administration Request

48.8%

47.6%

48.2%

48.6%

48.9%

49.7%

NA

NA

NA

FY2004 Budget Res.

51.5%

50.9%

51.7%

52.2%

52.6%

53.2%

NA

NA

NA

Admin. Requesta

376.3

390.4

410.1

423.2

436.4

460.5

2,120.7

NA

NA

FY2004 Budget Res.

386.2

400.9

414.2

426.0

438.7

462.9

2,142.7

2,515.6

4,658.3

-304.0

-307.0

-208.0

-201.0

-178.0

-190.0

NA

NA

NA

Annual Change In Dollars

Annual Change In Percent

Defense Share Of Discretionary BA

Outlays

Estimates Of The Surplus/Deficit
Administration Request

FY2004 Budget Res.
-282.5
-287.3
-218.1
-169.4
-128.1
-113.9
NA
118.8
-798.1
Source: CRS calculations based on OMB, FY2004 Historical Tables, and DOD, Office of the Secretary of Defense, Comptroller, Briefing, FY2004 Defense Budget (February 6, 2003);
Conference Report on FY2004 Budget Resolution, H.Rept. 108-71, and House report on H. Con. Res. 95, H.Rept. 108-71, p. 6.
a. Administration request does not reflect outlays from the $10 billion enacted in the FY2003 Consolidated Appropriations Resolution.
b. OMB does not project budget authority or outlays beyond five years.

CRS-27
House and Senate Differences about Defense Spending. The final
version of the FY2004 budget resolution projects a five-year total for defense
spending of $2.2 trillion, a level comparable to the Administration projection and
matching levels approved in both houses. In later years, however, the House
projected higher funding for defense than the Senate, and the conference
compromised at $4.758 trillion through FY2013, about the midpoint between the two
houses.77
The conference version of the budget resolution also deleted two provisions
proposed by the Senate:
!

a measure to set aside $100 billion over the next ten years in a
reserve fund to pay for costs associated with the war in Iraq; and

!

a measure to include $182 million in FY2004 and $12.8 billion in
FY2004-FY2013 to cover the cost of phasing in concurrent receipt
benefits for military retirees with disability levels of 60% or higher.

The Senate bill had included a defense reserve fund that decreased by $100
billion the funds set aside for a tax cut in order to provide $10 billion annually to
cover continued costs of military action or reconstruction in Iraq.78 Funding for Iraq
in FY2003 was provided in the FY2003 supplemental, but there is no funding for
occupation costs in the FY2004 budget, which was submitted before the initiation of
hostilities. Nor is there funding in the FY2004 budget to cover the costs of the
continued U.S. presence in Afghanistan.
The Senate version of the resolution also would have allowed all military
retirees whose disabilities are 60% or higher to receive both military retired pay and
Veterans Administration disability benefits, a proposal considered but rejected in the
final version of the FY2003 DOD Authorization Act. Instead, last year, Congress
provided special compensation for military retirees whose disabilities are a result of
combat or combat-related activities in the FY2003 Authorization Act.79 The
conference version of the resolution deleted both provisions. Without an allocation
in the budget resolution, it appears less likely that benefits for military retirees with
disabilities will be expanded.
Scoring Differences Between Congress and the Administration.
CBO scored the cost of DOD’s request as $400.5 billion, $800 million higher than
the Administration’s estimate (see Table 4 and Table 5). The difference between
the two estimates reflects primarily CBO’s assessment that a DOD legislative
proposal to set up a new account, the Refined Petroleum Products transfer account,
77

As passed by the House, H.Con.Res. 95 recommended $4.8 trillion for defense and the
Senate recommended $4.6 trillion with a midpoint of $4.7 trillion; CRS calculation based
on House Budget Committee, Majority staffs, Budget Conference for Fiscal Year 2004:
Side-By-Side Comparison of House and Senate Resolutions, April 2, 2003, p. 11.
78
79

See H.Rept. 108-71, p. 73.

See H.Rept. 108-71, p. 109 and Congressional Record, March 20, 2003, p. S4209 for
S.Amdt. 341.

CRS-28
would cost about $675 million compared to zero expenditures assumed by DOD.
According to DOD, the rationale for setting up this new account with an “indefinite
appropriation” is to allow DOD to cover the difference between the amount budgeted
for fuel costs and actual market prices.80 Since DOD assumes that its estimate is
correct, the Administration provided no funds for the account. CBO, however,
believes that fuel prices in FY2004 are likely to be about $5 higher per barrel than
DOD assumes — $27 a barrel compared to $22 barrel — and scores the likely cost
of the new account at $675 million based on the level of DOD’s annual fuel
purchases.
Although the FY2004 congressional budget resolution adopted CBO’s higher
scoring, it appears that Congress is unlikely to agree to set up the new account.
Neither the House nor the Senate version of the FY2004 DOD Authorization Act
includes funds for the account.81 Instead, both houses transfer that $675 million in
the CBO estimate for that account to other programs. The House and Senate
appropriators also rejected DOD’s proposal for this new fund and eliminated the
$675 million for the account.
DOD’s Appropriations Allocation. A sign of potential pressure on DOD’s
budget top line in the future is the outcome of decisions about the distribution of
funds to the various appropriations subcommittees to guide their markup, a process
known as setting 302(b) allocations.82 The annual congressional budget resolution
sets the total amount of discretionary spending available to the appropriations
committees and recommends spending allocations for each budget function. The
appropriations committees, however, have discretion to set allocations for each
subcommittee.
The conference agreement on the budget resolution allocates $784.7 billion in
discretionary budget authority to the appropriations committees. For several weeks
after the budget resolution was agreed to, committee leaders debated how to allocate
funds among the subcommittees and, especially, how to absorb what they identified
as a $5 to $7 billion gap in spending requirements and amounts available. Departing
from traditional practices where House and Senate Committees work separately on
subcommittee allocations, committee leaders negotiated across both houses with their
leadership and with the White House to establish a common framework within which
to base their initial allocations.
On June 11, House and Senate Appropriations Committee Chairmen announced
an agreed package that would free up sufficient resources to address the funding gap
and remain within the overall FY2004 discretionary budget cap of $784.7 billion. As
80

OMB, Fiscal Year 2004 Appendix to the Budget of the United States, p. 298.

81

The Senate report, S.Rept. 108-46, includes the CBO scoring for the account in its
estimate of the request for working capital funds and then deletes that funding, see p. 10
and p. 298. The House report, H.Rept. 108-106, does not adjust the scoring of working
capital funds and therefore does not include any funding for the new account; see p. 7 and
p. 306.
82

The 302(b) allocation process was established by the Congressional Budget Act of 1974.
For a brief discussion, see CRS Report 98-815, Budget Resolution Enforcement.

CRS-29
approved by all parties, including the President, the appropriations committees
reduced defense spending by $3.1 billion and moved $2.2 billion in FY2004 advance
appropriations to FY2003.

Trends in DOD Spending Plans
Assessing long-term trends in the defense budget is difficult because of the
effect of the large amount of supplemental funding received since September 11,
2001, in the Emergency Terrorism Response supplemental of 2001 and the FY2002
supplemental. That funding, which is included in figures in Table 6, makes
comparisons difficult, particularly for operation and maintenance spending that
received the bulk of supplemental funding (see below).

Table 6. Administration Request: National Defense Budget
Function by Title, FY2001-FY2008
(in billions of dollars)

Military Personnel

Actual Actual Est.
Req. Proj. Proj. Proj. Proj.
2001 2002 2003* 2004 2005 2006 2007 2008
76.9
87.0
95.1
99.0 103.1 107.4 111.0 114.6

Operation &
Maintenance

115.8

133.2

134.8

133.5

139.3

145.2

150.3

157.6

Procurement

62.6

62.7

73.8

74.4

78.6

85.8

96.1

105.3

RDT&E

41.6

48.7

57.5

61.8

67.1

64.3

64.6

67.0

Military
Construction

5.4

6.6

6.3

5.0

6.1

10.4

13.2

12.2

Family Housing

3.7

4.0

4.2

4.0

4.8

5.1

4.8

3.8

Other

13.5

2.7

2.2

2.0

0.6

1.4

0.3

1.2

Subtotal, DOD

319.5

345.0

374.0

379.6

399.6

419.6

440.3

461.6

Atomic Energy
Defense Activities

14.4

15.3

16.6

17.3

17.7

17.7

17.1

16.2

Defense-Related
Activities

1.6

1.8

2.1

2.8

2.8

2.8

2.9

2.9

Total, National
Defense

335.5

362.1

392.7

399.7

420.0

440.0

460.3

480.7

Fiscal Year

Source: Office of Management and Budget, Budget of the U.S. Government, FY2004: Historical
Tables and Budget of the U.S. Government, FY2004: Analytical Perspectives (February 2003), and
H.Rept. 108-10, conference report on FY2003 Consolidated Appropriations Resolution for final
enacted levels, and House Appropriations Committee. OMB figures include DOD’s supplemental
appropriations of $17.3 billion in the FY2001 Emergency Terrorism Response supplemental and $14.0
billion in the FY2002 supplemental.
*Note: Does not include $62.6 billion received by DOD in FY2003 supplemental appropriations.

CRS-30
Figures for FY2003 also include an additional $10 billion provided for DOD in
the FY2003 Consolidated Appropriations Resolution for classified intelligence
programs and for costs associated with the U.S. presence in Afghanistan and the
global war on terrorism. The $62.6 billion provided to DOD in the FY2003
supplemental, however, is not included. DOD’s procurement funding shows little
increase in FY2004. Much of the increase in RDT&E reflects an increase from $7.6
billion to $9.1 billion in DOD’s missile defense program, reflecting DOD’s plan to
begin deployment of 10 land-based interceptors as well as to continue the ramp-up
in R&D. By FY2008, however, DOD plans to increase funding for procurement by
about 40% and RDT&E by over 15% compared to FY2003.

DOD Receives $103.1 Billion in Supplemental Appropriations
Since September 11 Attacks
Since the September 11 attacks, DOD has received $103.3 billion in
supplemental or regular appropriations for the war in Afghanistan, the war in Iraq,
enhanced security at DOD installations, and the global war on terrorism (see Table
7). The most recent supplemental for the Iraq war provides funding for the U.S.
presence in Afghanistan and continued operations in Iraq through FY2003.
The Administration did not include any funding for these costs in its FY2004
budget, however, which suggests that the Administration will propose either a
supplemental or a budget amendment for FY2004. In addition to funding in
supplementals, DOD received $10 billion in the FY2003 Consolidated
Appropriations Resolution to fund the occupation of Afghanistan and
classified/intelligence programs.
In its post-September 11 requests for supplemental funding, DOD has requested
substantial flexibility in its use of funds, citing the uncertainty of estimating the cost
of war and the global war on terrorism. The Administration has reiterated that theme
in its FY2004 request as well, calling for transformation of not only weapon systems
to meet new threats but also transformation of DOD’s business practices and
personnel management systems (see discussion of Major Administration Themes
below).
Although Congress has generally provided the amounts requested by DOD in
its supplemental requests, it has been reluctant to provide the amount of flexibility
requested by DOD. In fact, with each supplemental request, Congress has been less
willing to accept the flexibility proposed by DOD. Congress rejected DOD’s request
that about 95% of the funding be provided in a flexible account, choosing instead to
allocate 45% of the funds in flexible accounts (see below).
Of the $40 billion appropriated in the Emergency Terrorism Response
supplemental (ETR) passed on September 14, 2001, DOD received $17.3 billion,
almost entirely within the Defense Emergency Response Fund, a flexible account.
Of that total, DOD had discretion to allocate funds as long as Congress was
informed. For the remainder, Congress set levels within ten broad categories for
DOD spending. Congress also permitted DOD to move funding into various

CRS-31
appropriation accounts at its discretion in the FY2002 supplemental for the bulk of
the funding requested.
In the most recent supplemental, for FY2003, DOD requested that Congress
provide 95% of the funding in the Defense Emergency Response Fund (DERF) so
that DOD could transfer funds to various accounts as needs arise. Instead Congress
set up an new fund, the Iraq Freedom Fund, and allocated 25% of the funds requested
to that fund but required five-day advance notifications.

Table 7. Flexibility in DOD’s Supplemental Funding Since
September 11 Attacks
(Dollars in Billions)
Funding Level
& Amount of
Flexibility

Emergency
Terrorism
Response
Supplemental
(P.L. 107-38 and
P.L. 107-117)

Total
FY2002
FY2003
ETRSupplemental Supplemental
FY2003
(P.L. 107-206) (P.L. 108-11)
Supp.

Flexible Funda
Request

21.16

11.30

59.86

92.33

Enacted

15.00

11.30

15.68

41.98

Request

0.00

2.72

2.72

5.45

Enacted

2.30

2.08

46.91

51.29

Request

21.16

14.02

62.59

97.77

Enacted

17.30

13.38

62.59

93.27

Request

100.0%

80.6%

95.6%

94.4%

Enacted

86.7%

84.4%

25.1%

45.0%

Request

0.0%

19.4%

4.4%

5.5%

Enacted

13.3%

15.6%

74.9%

55.0%

81.7%

95.4%

100.0%

95.4%

Regular Appropriations

Total Funding

As Percent of Total Funding
Flexible Fund

Regular Appropriations

Total Funding Received
Request vs. Enacted

Source: CRS calculations from CRS Report RL31829, CRS Report RL31005, CRS Report RL31406,
and appropriations conference reports and GAO Report, Defense Budget: Tracking of Emergency
Response Funds for the War on Terrorism, April 2003.
a. In the ETR, DOD funds were appropriated into the Defense Emergency Response Fund (DERF)
except for a small amount of military construction funds, procurement funding, and Pentagon
Renovation Revolving Funds. In the FY2002 Supplemental, DOD funds were appropriated to
the DERF, which was made into a transfer account. In the FY2003 supplemental, funds were
appropriated into a new Iraq Freedom Fund, set up as a transfer account, or into regular
appropriations accounts.

CRS-32

Major Themes in the Administration’s
FY2004 Request
The overarching theme in the Administration’s FY2004 request was a call for
flexibility to transform not only U.S. military doctrine and technology, but also
military and civilian personnel systems and defense acquisition practices. According
to Secretary of Defense Rumsfeld, not only do “our armed forces need to be flexible,
light and agile,” but also “the same is true of the men and women who support them,”
in meeting the “frequent, sudden changes in our security environment,”83 including
the global war on terrorism.
To meet this goal, the Administration delivered a broad ranging legislative
proposal, entitled the “Defense Transformation for the 21st Century Act,” to Congress
on April 10, 2003, shortly before Congress’s two-week April recess. Among other
things, the legislative proposal would have given the Secretary of Defense authority
to redesign the civil service system governing the 700,000 civilian employees in the
Department of Defense, provided additional flexibility in managing senior military
officers, modify certain acquisition requirements, and exempted DOD from certain
environmental statutes.
Some members of Congress expressed concern that DOD had delivered such an
ambitious proposal at a time when Congress was about to recess and shortly before
markup of the defense authorization bill was planned. Although DOD witnesses
discussed their plans to submit the proposal earlier in the year and met with
congressional staff in the preceding couple of months, the specific proposals were not
available before April 1084 (as noted above, CRS compares all of the proposed new
measures with current law in CRS Report RL31916, Defense Department
Transformation Proposal: Side by Side with Current Law, by (name redacted),
(name redacted), (name redacted) , and (name redacted)).
The Administration characterized its proposals as the logical followup to earlier
efforts to transform weapons modernization and operational practices. According to
DOD, the FY2004 budget was the first budget to reflect fully President Bush’s
commitment to “challenge the status quo” and balance the need to meet current
challenges from the global war on terrorism and near-term threats with the need to
transform DOD in the longer term.85 DOD contended that transformation is now
fully underway with new emphasis placed on unmanned vehicles, precision guided
munitions, special operations forces, command, control, and communications, and
missile defense (see discussion on modernization below), as well as the

83

Secretary of Defense Rumsfeld testifying before the Senate Armed Services Committee,
Defense Authorization Request for Fiscal Year 2004 and the Future Years Defense
Program, February 13, 2003, transcript; available from Reuters.
84

Statement of Deputy Secretary of Defense Paul Wolfowitz before the House Committee
on Government Reform, May 6, 2003, p. 4.
85

Secretary of Defense Rumsfeld testifying before the Senate Armed Services Committee,
FY2004 Budget, February 13, 2003; transcript available from Reuters.

CRS-33
establishment of a new command, NORTHCOM, to focus on homeland security, and
changes in training practices to emphasize joint operations.
DOD also argued that its proposals for military pay raises and other benefits and
its funding of operational training will ensure that recruitment and retention remain
high and that readiness goals continue to be met. Over the longer term, DOD plans
to review its current basing strategies in Europe and review the role of reserve forces
but these areas are currently under study and not incorporated in the FY2004 budget.

Investment and Other Issues
The major issues in this year’s congressional debate — for example, DOD’s
request for broad ranging authority to manage its civilian workforce, exemptions for
DOD to certain environmental laws — are discussed above. Other issues raised
include
whether DOD’s investment priorities are transformational,
affordable, and consistent with “lessons learned” from the war in
Iraq;
! revising criteria governing the FY2005 base closure round due to be
initiated next year;
! various organizational and acquisition changes; and
! DOD’s proposed changes for management of military personnel.
!

An update for conference action will be included in a later update.

Proposed Acquisition and Organizational Changes
In its legislative package, DOD included several provisions designed to increase
its flexibility to contract for major defense weapons systems and information
technology programs, receive waivers from Buy America and domestic content
requirements, and buy standardized items.86
Two potentially controversial proposals would allow DOD to contract out for
firefighting and security guards at bases and would allow DOD to count work
performed by contractors at federally owned facilities as part of the 50% minimum
for in-house performance of depot work. Congress has consistently opposed allowing
DOD to hire private security guards and loosening the definition of work that could
be counted as “in-house”.87 A later update will provide the details about conference
action.

86

General Counsel, DOD, William J. Haynes III, letter to Speaker of the House Hastert,
April 10, 2003, Title 10, Sections 201-206; see [http://defenselink.mil/
dodgc/lrs/legispro.html].
87

General Counsel, DOD, William J. Haynes III, letter to Speaker of the House Hastert,
April 10, 2003, Title 10, Sections 211 and 214; see [http://defenselink.mil/
dodgc/lrs/legispro.html].

CRS-34
Other Organizational And Financial Proposals To Increase
Flexibility. Other DOD proposals would give the Secretary of Defense broad
discretion to reorganize the department, transfer personnel, and be exempt from
current personnel caps. To increase financial flexibility, DOD requested that the
limit on transfers between appropriation accounts be raised from the current level of
$2.5 billion to 2.5% of total DOD spending or about $9 billion. (DOD made this
same request in the FY2003 supplemental, and received a higher transfer limit but
not the 2.5%.)88
DOD also proposed changing the standard governing awards of contracts to
government entities versus private companies based on the A-76 competitive
sourcing rules. DOD proposed using a “best value” assessment rather than the
current lowest cost standard. A less controversial proposal, which has been endorsed
by both OPM and DOD, would transfer the DOD civilian personnel currently
performing security investigations to OPM. DOD also proposed eliminating 184
reports to Congress that are currently required, ranging from reports on specialized
topics to more general reports on readiness levels and operation and maintenance
funding.89 A later update will summarize conference action.
Authority To Spend $200 million To Support Foreign Militaries. In
its request, DOD asked Congress to give it permanent authority to allocate up to $200
million to support “coalition forces,” or foreign military forces. Although this
request is similar to the request enacted in the FY2003 supplemental for $1.4 billion
for coalition forces who help the U.S. to combat terrorism, DOD’s request for
permanent authority included no provision for congressional oversight. In the
FY2003 supplemental, Congress required DOD to report by July 1, 2003 on its plan
to allocate funding for coalition forces.90 Final action will be included in a later
update.

Affordability and Mix of DOD’s FY2004 Investment Programs
A perennial issue in defense policy has been whether the Defense Department
will be able to afford all of the major weapons modernization programs that have
been on the drawing boards, particularly toward the end of the decade, when a
number of new programs are planned to be in full scale production. The issue has
been complicated by the Defense Department’s growing commitment to defense
transformation, which implies an effort to accelerate selected programs and perhaps
88

General Counsel, DOD, William J. Haynes III, letter to Speaker of the House Hastert,
April 10, 2003, Title 10, Sections 401-405,411;
[http://defenselink.mil/dodgc/lrs/legispro.html].
89

General Counsel, DOD, William J. Haynes III, letter to Speaker of the House Hastert,
April 10, 2003, Title 10, Sections 404, 405, and 421; see
[http://defenselink.mil/dodgc/lrs/legispro.html].

90

General Counsel, DOD, William J. Haynes III, letter to Speaker of the House Hastert,
April 10, 2003, Title 10, Section 441; see [http://defenselink.mil/dodgc/lrs/legispro.html],
and CRS Report RL31829, Supplemental Appropriations FY2003: Iraq Conflict,
Afghanistan, Global War on Terrorism, and Homeland Security, by (name redacted) and (name
redacted).

CRS-35
add some entirely new ones. During the 2000 presidential election campaign, thenGovernor Bush promised to “skip a generation” of weapons programs in order to free
up funds for more transformational priorities. A full update for conference action will
be in a later update.
Last year, and again this year, the Defense Department has tried to calculate the
amount that is being devoted to modernization programs that it regards as particularly
transformational. According to DOD Comptroller Dov Zakheim, these programs add
up to $24.3 billion in the FY2004 budget and $239 billion over the period of the sixyear FY2004-FY2009 future years defense plan (FYDP). Under Secretary Zakheim
said that DOD made room for these programs in part by cutting about $82 billion
from projected service budgets over the course of the FYDP. The cuts include
termination of a number of Army programs to upgrade current weapons, early
retirement of 26 Navy ships and 259 aircraft and an attendant reduction of 10,000 in
the Navy’s personnel end-strength, and early retirement of 115 Air Force fighter
aircraft and 115 mobility/tanker aircraft, as well as efficiencies.91 Final conference
action will be addressed in a later update.
In the FY2004 budget, the Defense Department requested $74.4 billion for
weapons procurement and $61.8 billion for research, development, test, and
evaluation (RDT&E). Major aspects of the Administration request, and some key
issues include the following.
Army Transformation. In recent years, the Army has been pursuing three
major initiatives simultaneously: (1) upgrades to the current “legacy” force,
including improvements in M1 tanks and Bradley Fighting Vehicles; (2)
development and deployment of an “interim” force made up of six brigades equipped
with Stryker wheeled armored vehicles and designed to be more rapidly deployable
than heavy armored forces; and (3) pursuit of an “Objective Force” include the
“Future Combat System,” a family of new armored vehicles and other systems
designed to fundamentally change the way the Army will fight in the future. In
addition, the Army has been continuing to develop the Comanche helicopter, though
late last year, the Defense Department decided to cut planned total Comanche
procurement by about half.
In the FY2004 budget request, the Defense Department cut back a number of
planned upgrades of Army legacy systems, including high-profile M1 and Bradley
upgrades. In the wake of the Army’s success in the Iraq war, there was extensive
discussion in Congress about the wisdom of these planned cuts. The House Armed
Services Committee-reported version of the authorization adds $727 million to the
request to continue M1 and Bradley upgrades along with some related Army upgrade
programs.
Congressional Action. Table 8A shows action on major Army programs
in the House and Senate defense authorization bills, and Table 8B shows action in

91

Briefing by DOD Comptroller Dov Zakheim, “FY2004 Defense Budget,” February 6,
2003.

CRS-36
the House and Senate versions of the defense appropriations bill. A few issues stand
out.
!

Legacy force modernization: The House authorization adds
$258.8 million for Bradley Fighting Vehicle upgrades and $424
million for M1 tank upgrades (offset by cuts of $140 million in other
M1 projects).
These are among the programs that the
Administration wants to terminate as part of the $82 billion in 6-year
savings that officials announced when the budget was released. The
House appropriations bill adds the same amount for Bradley
upgrades and $155 million for M1 upgrades. The House
appropriators also urged DOD to budget for enough M1 upgrades in
the future to complete equipping the 3rd Armored Cavalry Regiment
with modernized tanks. In effect, the House rejected DOD plans to
cut back on Army “legacy force” upgrades, though House
appropriators also indicated that they may be satisfied once
sufficient upgraded Bradleys and M1s are procured to equip 2 and
1/3 divisions of what the Army calls its “counterattack” force of
heavy armored units.

!

Stryker interim combat brigades: The House appropriations also
added $35 million for long lead items for Stryker armored vehicle
procurement to equip the 5th and 6th Stryker brigades. DOD has, in
the past at least, considered halting the interim combat brigade
program after four brigades are deployed. House appropriators sent
a strong message that they expect DOD to fill out the planned sixbrigade force. The Senate Appropriations Committee also added
$35 million for long lead items for Stryker procurement, though its
report language did not specify that it was for the 5th and 6th brigades.
In addition, Senate appropriators added $100 million in other Army
procurement — for communications and other equipment — to
accelerate Stryker brigade deployment, a strong vote of support for
the Army program.

!

Helicopters: All of the committees add money for UH-60 utility
helicopters, largely for the National Guard, though there are some
differences in how the money is allocated. This is a perennial
congressional addition to proposed budgets. All of the committees
also support continued Comanche helicopter development despite
cost growth and substantial cuts in the planned program.

CRS-37

Table 8A. House and Senate Action on Major Army Acquisition Programs: Authorization
(amounts in millions of dollars)
House
Action

Request
Procurement
#

$

R&D
$

RAH-66 Comanche

—

UH-60 Blackhawk

10

167.0

UH-60 Blackhawk mods.

—

CH-47 Upgrades

Procurement
#

— 1,079.3

$

Senate
Action
R&D
$

Procurement
#

$

Comments

R&D
$

—

—

1,079.3

—

—

1,079.3 —

70.2

19

279.8

70.2

17

237.0

74.1 House adds $112.8 million for 9 aircraft for Army National Guard.
Senate adds $70.7 million for 7 aircraft in accordance with Army
priorities and for air inlet upgrades ($0.8 million) and $3.9 million
for R&D for C2 integration..

138.5

—

—

38.5

100.0

—

38.5

100.0 Both House and Senate transfer $100 million from proc. to R&D
for UH-60M upgrade.

—

516.0

—

—

522.0

—

—

531.0

— House adds $6 million for crashworthy seats. Senate adds $15
million for MH-47G mods.

AH-64 Mods

—

58.9

—

—

74.4

—

—

58.9

— House adds $15.5 million for bladefold kits.

AH-64D Apache Longbow

—

776.7

—

—

776.7

—

—

776.7

—

Bradley Base Sustainment

—

113.3

—

—

372.1

—

—

113.3

— House adds $258.8 million for Bradley M3A2 Operation Desert
Storm ``D+’‘ upgrades.

M1 Abrams Mods/Upgrades

—

361.6

—

—

645.6

—

—

361.6

— House adds $424 million for M1A2 to M1A2 SEP upgrades, cuts
$108 million from new engine program due to delays and $32
million from other upgrades — net add $284 million.

Stryker Interim Armored
Vehicle

301

955.0

46.0

301

955.0

46.0

301

955.0

46.0 —

HIMARS (Rocket Launcher)

24

124.2

87.4

24

124.2

87.4

24

124.2

— Note: C-130 air transportable version of MLRS.

Hellfire Missiles

—

33.1

—

—

33.1

—

—

76.1

— Senate adds $43 million for laser Hellfire II missiles — request was
just for Longbow Hellfires.

Javelin (Anti-Tank Missile)

901

140.7

—

901

140.7

—

901

180.7

— Senate adds $40 million for command launch units for Army
National Guard.

ATACMS Penetrator

—

—

55.1

—

—

55.1

—

—

—

— House urges no obligation of funds until DOD explores more cost
effective options to attack hardened sites; Senate cuts all funds.

CRS-38
House
Action

Request
Procurement
#
Logistic/Theater Support
Vessel

R&D

$

—

Procurement

$
—

#

65.7

1

Senate
Action
R&D

Procurement

$

$

#

33.0

65.7

$
—

Comments

R&D
$

—

73.2 House adds $33 million in proc. for Logistic Support Vessel (Army
now has 8); Senate adds $7.5 million in R&D for composite hull
design Theater Support Vessel to replace LSVs.

Sources: H.Rept. 108-106; S.Rept. 108-46.
Note: Figures reflect committee-reported versions of the bills and not changes made in subsequent floor action.

Table 8B. House and Senate Action on Major Army Acquisition Programs: Appropriations
(amounts in millions of dollars)
House
Action

Request
Procurement
#

$

R&D
$

RAH-66 Comanche

—

UH-60 Blackhawk

10

167.0

UH-60 Blackhawk mods.

—

CH-47 Upgrades

Procurement
#

— 1,079.3

$

Senate
Action
R&D
$

Procurement
#

$

R&D

Comments

$

—

—

1,079.3

—

—

1,079.3 —

70.2

—

279.8

79.2

17

215.7

70.2 House adds $112.8 million in proc. as in House authorization.
Senate adds $70.7 million for 7 aircraft, cuts $20.0 million for
MYP savings and $2.0 million from management costs.

138.5

—

—

38.5

73.0

—

44.4

92.0 House cuts $100 million from proc. and adds $73 million to
R&D for UH-60M upgrade program. Senate cuts $100 million
from proc. and adds $92 million to R&D for UH-60M. Senate
adds $6.0 million for specified units.

—

516.0

—

—

516.0

—

—

474.9

— House rescinds $39.1 million of FY2003 funds. Senate cuts
$41.1 million from unexpended balances and support costs.

AH-64 Mods

—

58.9

—

—

64.9

—

—

64.1

— House adds $15.5 million for bladefold kits. Senate adds $5.2
million for other upgrades.

AH-64D Apache Longbow

—

776.7

—

—

781.0

—

—

766.7

— House adds $4.3 million for radar upgrades earmarked for 2

CRS-39
House
Action

Request
Procurement
#

$

R&D
$

Procurement
#

$

Senate
Action
R&D
$

Procurement
#

$

Comments

R&D
$

South Carolina National Guard AH-64Ds. Senate cuts $10.0
million from support costs.
Bradley Base Sustainment

—

113.3

—

—

372.1

—

—

175.2

— House adds $258.8 million for Bradley M3A2 Operation
Desert Storm ``D+’‘ upgrades. Senate adds $61.9 million for
ODS upgrades for National Guard.

M1 Abrams
Mods/Upgrades

—

361.6

—

—

376.6

—

—

291.6

— House adds $155 million for M1A2 to M1A2 SEP upgrades (vs
$424 million in House authorization), cuts $108 million from
new engine program due to delays and $32 million from other
upgrades — net add $15 million Senate cuts $75 million from
new engine program, adds $3 million for X1100-3B engine and
$2 million for diagnostics.

Stryker Interim Armored
Vehicle

301

955.0

61.4

—

990.0

61.4

301

955.0

61.4 House adds $35 million for long lead items for 5th and 6th
brigades. Senate adds $35 million for long lead items.

HIMARS (Rocket
Launcher)

24

124.2

87.4

—

124.2

87.4

24

124.2

87.4 Note: C-130 air transportable version of MLRS.

Hellfire Missiles

—

33.1

—

—

33.1

—

—

25.1

— No add in House, which follows House authorization. Senate
cuts $8 million from “CAP kits.”

Javelin (Anti-Tank Missile)

901

140.7

—

—

140.7

—

901

140.7

—

Future Combat System

—

— 1,701.3

—

—

1,701.3

—

—

ATACMS Penetrator

—

—

55.1

—

—

2.0

—

—

55.1 House and Senate cut all funds for ATACMS penetrator.
House adds $2 million and Senate adds $4 million for Viper
Strike Munition.

Logistic/Theater Support
Vessel

—

—

65.7

—

—

65.7

—

—

73.2 House does not follow House authorization add. Senate adds
$7.5 million for Theater Support Vessel development,
following Senate authorization.

—

1,701.3 House directs more detailed breakdown of projects in
justification material.

Sources: H.Rept. 108-187; S.Rept. 108-87.
Note: Figures reflect committee-reported versions of the bills and not changes made in subsequent floor action. Note: Future Combat System funding includes PE 0604645A Armored Systems Modernization (ASM)-Eng. Dev. only.

CRS-40
Navy Programs. 92 Key Navy ship-acquisition programs for FY2004 include
the Virginia (SSN-774) class submarine program, the Littoral Combat Ship (LCS)
program, the Arleigh Burke (DDG-51) class Aegis destroyer, the DD(X)
next-generation destroyer program, the San Antonio (LPD-17) class amphibius ship
program, the Lewis and Clark (TAKE-1) auxiliary ship program, the Trident
cruise-missile submarine (SSGN) conversion program, and the Aegis cruiser (CG-47
class) conversion program. The FY2004 budget also includes, among other things,
continued advanced procurement funding for CVN-21, an aircraft carrier to be
procured in FY2007.
One issue in congressional hearings on the FY2004 Navy program concerns the
planned size and structure of the Navy. The 2001 Quadrennial Defense Review
(QDR) revalidated the plan for a 310-ship Navy established by the 1997 QDR, but
also stated that force-structure goals in the 2001 QDR, including the 310-ship goal,
were subject to change pending the maturation of DOD’s transformation efforts.
In February 2003, in submitting its proposed FY2004 defense budget, DOD
officials stated that they had launched studies on future requirements for undersea
warfare and future options for forcibly entering overseas military theaters. These
studies have the potential for changing, among other things, the planned number of
attack submarines and the planned size and structure of the amphibious fleet. Since
attack submarines and amphibious ships are two of the four major building blocks
of the Navy (the others being aircraft carriers and surface combatants), DOD, by
launching these two studies, appears to have taken steps to back away from the
310-ship plan. At the same time, the Secretary of Defense has explicitly declined to
endorse a plan for a 375-ship fleet that has been put forward in recent months by
Navy leaders.
As a result of these events, there is now uncertainty concerning the planned size
and structure of the Navy: DOD may no longer support the 310-ship plan, but neither
has it endorsed the 375-ship plan or any other replacement plan. This uncertainty
over the planned size and structure of the Navy affects surface combatants as well as
submarines and amphibious ships, because the biggest single difference between the
310-ship and 375-ship plans is in the area of surface combatants. The 310-ship plan
includes 116 surface combatants, all of which are cruisers, destroyers, and frigates,
while the 375-ship plan includes 160 surface combatants, including not only cruisers,
destroyers, and frigates, but as many as 60 smaller Littoral Combat Ships as well.
Congressional Action: Senate and House Markup. Table 9A shows
action on major Navy programs in the House and Senate defense authorization bills,
and Table 9B shows House action in the committee-reported version of the defense
appropriations bill. In action on key issues:
!

92

Carrier replacement program: A major budget decision in the
FY2004-FY2009 defense plan was to accelerate the transition to the
next generation of carriers by incorporating more advanced
technology into the next carrier to be fully funded in FY2007 or

This section was written by Ronald O’Rourke.

CRS-41
FY2008. In all, the new carrier is projected to cost almost $12
billion for development and production, of which about $5 billion is
for R&D. All of the congressional defense committees supported
the Administration’s revised carrier development program.
!

Virginia-Class Attack Submarines: The House Appropriations
Committee denied funds requested to sign a multi-year procurement
(MYP) contract for new submarines, saying (1) that the schedule for
delivery of the first submarine remains too uncertain and (2) that the
requirement to buy two submarines each year in FY2007 and
FY2008 may be unaffordable given the $2.6 billion price of each
boat. The Senate Appropriations Committee approved multi-year
procurement of Virginia-Class submarines, but only for 5 boats over
the FY2004-FY2009 planning period rather than the 7 boats that the
Navy had requested. Subsequently, on August 14, the Navy
announced an agreement with contractors on a multi-year
procurement deal for 7 boats, but with an option to reduce
procurement to 5 or 6 boats with some increase in costs per ship.

!

Attack Submarine Refueling Overhaul: The Senate Armed Services
Committee added $248 million to refuel one Los Angeles-class
attack submarine; the Navy did not request funding for any
overhauls. The Senate Approp

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3ARL31805. Public record. Not legal advice.