SECRETARY OF DEFENSE ROBERT M. GATES
OPENING STATEMENT
MONDAY, APRIL 6, 2009

Today, I am announcing the key decisions I will recommend to the president with respect
to the fiscal year 2010 defense budget. The president agreed to this unorthodox approach –
announcing the department’s request before the White House submits a budget to the Congress –
because of the scope and significance of the changes. In addition, the president and I believe that
the American people deserve to learn of these recommendations fully and in context, as the
proposed changes are interconnected and cannot be properly communicated or understood in
isolation from one another. Collectively, they represent a budget crafted to reshape the priorities
of America’s defense establishment. If approved, these recommendations will profoundly
reform how this department does business.

In many ways, my recommendations represent the cumulative outcome of a lifetime
spent in the national security arena and, above all, questions asked, experience gained, and
lessons learned from over two years of leading this department – and, in particular, from our
experience in Iraq and Afghanistan. I reached the final decisions after many hours of
consultations with the military and civilian leadership of the department. I have also consulted
closely with the president. But, I received no direction or guidance from outside this department
on individual program decisions. The chairman and vice chairman of the Joint Chiefs of Staff
are in complete accord with these recommendations. The chairman is traveling abroad but he
has provided a statement that we will distribute at the end of the briefing.

My decisions have been almost exclusively influenced by factors other than simply
finding a way to balance the books or fit under the “top line” – as is normally the case with most
budget exercises. Instead, these recommendations are the product of a holistic assessment of
capabilities, requirements, risks and needs for the purpose of shifting this department in a
different strategic direction. Let me be clear: I would have made virtually all of the decisions
and recommendations announced today regardless of the department’s top line budget number.
The decisions have three principal objectives:

• First, to reaffirm our commitment to take care of the all-volunteer force, which, in my
  view represents America’s greatest strategic asset;
• Second, we must rebalance this department’s programs in order to institutionalize and
  enhance our capabilities to fight the wars we are in today and the scenarios we are
  most likely to face in the years ahead, while at the same time providing a hedge
  against other risks and contingencies.
• Third, in order to do this, we must reform how and what we buy, meaning a
  fundamental overhaul of our approach to procurement, acquisition, and contracting.

People
With regard to the troops and their families, I will recommend that we:
1. Fully protect and properly fund the growth in military end strength in the base budget.
This means completing the growth in the Army and Marines while halting reductions in
the Air Force and the Navy. Accomplishing this will require a nearly $11 billion increase
above the FY09 budget level.
2. Continue the steady growth in medical research and development by requesting $400
million more than last year.
3. Recognize the critical and permanent nature of wounded, ill and injured, traumatic brain
injury, and psychological health programs. This means institutionalizing and properly
funding these efforts in the base budget and increasing overall spending by $300 million.
The department will spend over $47 billion on healthcare in FY10.
4. Increase funding by $200 million for improvements in child care, spousal support,
lodging, and education.

Many of these programs have been funded in the past by supplementals. We must move
away from ad hoc funding of long-term commitments. Thus, we have added money to each of
these areas and all will be permanently and properly carried in the base defense budget.
Together they represent an increase in base budget funding of $13 billion from last year.

A Home for the Warfighter
As I told the Congress in January, our struggles to put the defense bureaucracies on a war
footing these past few years have revealed underlying flaws in the priorities, cultural preferences,
and reward structures of America’s defense establishment – a set of institutions largely arranged
to prepare for conflicts against other modern armies, navies, and air forces. Programs to directly
support, protect, and care for the man or woman at the front have been developed ad hoc and
funded outside the base budget. Put simply, until recently there has not been an institutional
home in the Defense Department for today’s warfighter. Our contemporary wartime needs must
receive steady long-term funding and a bureaucratic constituency similar to conventional
modernization programs. I intend to use the FY10 budget to begin this process.

1. First, we will increase intelligence, surveillance and reconnaissance (ISR) support for the
warfighter in the base budget by some $2 billion. This will include:

• Fielding and sustaining 50 Predator-class unmanned aerial vehicle orbits by FY11
  and maximizing their production. This capability, which has been in such high
  demand in both Iraq and Afghanistan, will now be permanently funded in the base
  budget. It will represent a 62 percent increase in capability over the current level and
  127 percent from over a year ago.
• Increasing manned ISR capabilities such as the turbo-prop aircraft deployed so
  successfully as part of “Task Force Odin” in Iraq.
• Initiating research and development on a number of ISR enhancements and
  experimental platforms optimized for today’s battlefield.

2. We will also spend $500 million more in the base budget than last year to increase our
capacity to field and sustain more helicopters – a capability that is in urgent demand in
Afghanistan. Today, the primary limitation on helicopter capacity is not airframes but
shortages of maintenance crews and pilots. So our focus will be on recruiting and
training more Army helicopter crews.

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

4. To grow our special operations capabilities, we will increase personnel by more than
2,800 or five percent and will buy more special forces-optimized lift, mobility, and
refueling aircraft.
We will increase the buy of Littoral Combat Ships (LCS) – a key capability for presence,
stability, and counterinsurgency operations in coastal regions – from two to three ships in FY
2010. Our goal is to eventually acquire 55 of these ships.

5. To improve our inter-theater lift capacity, we will increase the charter of Joint High
Speed Vessel (JHSV) ships from two to four until our own production program begins
deliveries in 2011.

6. We will stop the growth of Army Brigade Combat Teams (BCT) at 45 versus 48 while
maintaining the planned increase in end strength of 547,000. This will ensure that we
have better-manned units ready to deploy, and help put an end to the routine use of stop
loss. This step will also lower the risk of hollowing the force.

Conventional and Strategic Modernization
Even as we begin to shift resources and institutional weight towards supporting the
current wars and other potential irregular campaigns, the United States must still contend with
the security challenges posed by the military forces of other countries – from those actively
hostile to those at strategic crossroads. Last year’s National Defense Strategy concluded that
although U.S. predominance in conventional warfare is not unchallenged, it is sustainable for the
medium term given current trends. This year’s budget deliberations focused on what programs
are necessary to deter aggression, project power when necessary, and protect our interests and
allies around the globe. To this end, I will recommend new or additional investments and shifts
in several key areas:

1. To sustain U.S. air superiority, I am committed to building a fifth generation tactical
fighter capability that can be produced in quantity at sustainable cost. Therefore, I will
recommend increasing the buy of the F-35 Joint Strike Fighter from the 14 aircraft
bought in FY09 to 30 in FY10, with corresponding funding increases from $6.8 billion to
$11.2 billion. We would plan to buy 513 F-35s over the five-year defense plan, and,
ultimately, plan to buy 2,443. For naval aviation, we will buy 31 FA-18s in FY10.

2. We will retire 250 of the oldest Air Force tactical fighter aircraft in FY10.

3. We will end production of the F-22 fighter at 187 – representing 183 planes plus four
recommended for inclusion in the FY 2009 supplemental.

4. To better protect our forces and those of our allies in theater from ballistic missile attack,
we will add $700 million to field more of our most capable theater missile defense
systems, specifically the terminal High Altitude Area Defense (THAAD) System and
Standard Missile 3 (SM-3) programs.

5. We will also add $200 million to fund conversion of six additional Aegis ships to provide
ballistic missile defense capabilities.

6. To improve cyberspace capabilities, we will increase the number of cyber experts this
department can train from 80 students per year to 250 per year by FY11.

7. To replace the Air Force’s aging tanker fleet, we will maintain the KC-X aerial re-fueling
tanker schedule and funding, with the intent to solicit bids this summer.

8. With regard to our nuclear and strategic forces:

• In FY10, we will begin the replacement program for the Ohio class ballistic missile
  submarine program.
• We will not pursue a development program for a follow-on Air Force bomber until
  we have a better understanding of the need, the requirement, and the technology.
• We will examine all of our strategic requirements during the Quadrennial Defense
  Review, the Nuclear Posture Review, and in light of Post-START arms control
  negotiations.

9. The healthy margin of dominance at sea provided by America’s existing battle fleet
makes it possible and prudent to slow production of several major surface combatants
and other maritime programs.

•  We will shift the Navy Aircraft Carrier program to a five-year build cycle placing it
  on a more fiscally sustainable path. This will result in 10 carriers after 2040.
• We will delay the Navy CG-X next generation cruiser program to revisit both the
  requirements and acquisition strategy.
• We will delay amphibious ship and sea-basing programs such as the 11th Landing
  Platform Dock (LPD) ship and the Mobile Landing Platform (MLP) SHIP to FY11 in
  order to assess costs and analyze the amount of these capabilities the nation needs.

10. With regard to air lift, we will complete production of the C-17 airlifter program this
fiscal year. Our analysis concludes that we have enough C-17s with the 205 already in
the force and currently in production.

Acquisition and Contracting Reform
In today’s environment, maintaining our technological and conventional edge requires a
dramatic change in the way we acquire military equipment. I believe this needed reform requires
three fundamental steps.

First, this department must consistently demonstrate the commitment and leadership to
stop programs that significantly exceed their budget or which spend limited tax dollars to buy
more capability than the nation needs. Our conventional modernization goals should be tied to
the actual and prospective capabilities of known future adversaries – not by what might be
technologically feasible for a potential adversary given unlimited time and resources. I believe
the decisions I am proposing accomplish this step.

Second, we must ensure that requirements are reasonable and technology is adequately
mature to allow the department to successfully execute the programs. Again, my decisions act
on this principle by terminating a number of programs where the requirements were truly in the
“exquisite” category and the technologies required were not reasonably available to affordably
meet the programs’ cost or schedule goals.

Third, realistically estimate program costs, provide budget stability for the programs we
initiate, adequately staff the government acquisition team, and provide disciplined and constant
oversight.

We must constantly guard against so-called “requirements creep,” validate the maturity
of technology at milestones, fund programs to independent cost estimates, and demand stricter
contract terms and conditions. I am confident that if we stick to these steps, we will significantly
improve the performance of our defense acquisition programs. But it takes more than mere
pronouncements or fancy studies or reports. It takes acting on these principles by making tough
decisions and sticking to them going forward.

I welcome the legislative initiative of Senators Levin and McCain to help address some
of these issues and look forward to working with the Congress in this regard.
This budget will support these goals by increasing the size of defense acquisition
workforce, replacing 11,000 contractors with 9,000 government acquisition professionals by
2015 – beginning with 4,100 in FY10.

Fully reforming defense acquisition also requires recognizing the challenges of today’s
battlefield and constantly changing adversary. This requires an acquisition system that can
perform with greater urgency and agility. We need greater funding flexibility and the ability to
streamline our requirements and acquisition execution procedures.

The perennial procurement and contracting cycle – going back many decades – of adding
layer upon layer of cost and complexity onto fewer and fewer platforms that take longer and
longer to build must come to an end. There is broad agreement on the need for acquisition and
contracting reform in the Department of Defense. There have been enough studies. Enough
hand-wringing. Enough rhetoric. Now is the time for action.

First, I recommend that we terminate the VH-71 presidential helicopter:

• This program was originally designed to provide 23 helicopters to support the
  president at a cost of $6.5 billion. Today, the program is estimated to cost over $13
  billion, has fallen six years behind schedule, and runs the risk of not delivering the
  requested capability.
• Some have suggested that we should adjust the program by buying only the lower
  capability “increment one” option. I believe this is neither advisable nor affordable.
  Increment One helicopters do not meet requirements and are estimated to have only a
  five- to 10-year useful life. This compares to the current VH-3 presidential
  helicopters that are 30 to 40 years old.
• We will promptly develop options for an FY11 follow-on program.

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

Third, we will terminate the $26 billion Transformational Satellite (TSAT) program, and
instead will purchase two more Advanced Extremely High Frequency (AEHF) satellites as
alternatives.

Fourth, in the area of missile defense:

• We will restructure the program to focus on the rogue state and theater missile threat.
• We will not increase the number of current ground-based interceptors in Alaska as
  had been planned. But we will continue to robustly fund continued research and
  development to improve the capability we already have to defend against long-range
  rogue missile threats – a threat North Korea’s missile launch this past weekend
  reminds us is real.
• We will cancel the second airborne laser (ABL) prototype aircraft. We will keep the
  existing aircraft and shift the program to an R&D effort. The ABL program has
  significant affordability and technology problems and the program’s proposed
  operational role is highly questionable.
• We will terminate the Multiple Kill Vehicle (MKV) program because of its
  significant technical challenges and the need to take a fresh look at the requirement.
• Overall, the Missile Defense Agency program will be reduced by $1.4 billion.

Fifth, in this request, we will include funds to complete the buy of two navy destroyers in
FY10. These plans depend on being able to work out contracts to allow the Navy to efficiently
build all three DDG-1000 class ships at Bath Iron Works in Maine and to smoothly restart the
DDG-51 Aegis Destroyer program at Northrop Grumman’s Ingalls shipyard in Mississippi.
Even if these arrangements work out, the DDG-1000 program would end with the third ship and
the DDG-51 would continue to be built in both yards.

If our efforts with industry are unsuccessful, the department will likely build only a single
prototype DDG-1000 at Bath and then review our options for restarting production of the DDG-
51. If the department is left to pursue this alternative, it would unfortunately reduce our overall
procurement of ships and cut workload in both shipyards.

Sixth, and finally, we will significantly restructure the Army’s Future Combat Systems
(FCS) program. We will retain and accelerate the initial increment of the program to spin out
technology enhancements to all combat brigades. However, I have concluded that there are
significant unanswered questions concerning the FCS vehicle design strategy. I am also
concerned that, despite some adjustments, the FCS vehicles – where lower weight, higher fuel
efficiency, and greater informational awareness are expected to compensate for less armor – do
not adequately reflect the lessons of counterinsurgency and close quarters combat in Iraq and
Afghanistan. The current vehicle program, developed nine years ago, does not include a role for
our recent $25 billion investment in the MRAP vehicles being used to good effect in today’s
conflicts.

Further, I am troubled by the terms of the current contract, particularly its very
unattractive fee structure that gives the government little leverage to promote cost efficiency.
Because the vehicle part of the FCS program is currently estimated to cost over $87 billion, I
believe we must have more confidence in the program strategy, requirements, and maturity of the
technologies before proceeding further.

Accordingly, I will recommend that we cancel the vehicle component of the current FCS
program, re-evaluate the requirements, technology, and approach – and then re-launch the
Army’s vehicle modernization program, including a competitive bidding process. An Army
vehicle modernization program designed to meet the needs of the full spectrum of conflict is
essential. But because of its size and importance, we must get the acquisition right, even at the
cost of delay.

A final recommendation that will have a significant impact on how defense organizations
are staffed and operated. Under this budget request, we will reduce the number of support
service contractors from our current 39 percent of the workforce to the pre-2001 level of 26
percent and replace them with full-time government employees. Our goal is to hire as many as
13,000 new civil servants in FY10 to replace contractors and up to 30,000 new civil servants in
place of contractors over the next five years.

So these are the principal recommendations I will make to the president. There are a
number of others that I have not mentioned, including classified programs. This is a reform
budget, reflecting lessons learned in Iraq and Afghanistan yet also addressing the range of other
potential threats around the world, now and in the future. I know that in the coming weeks we
will hear a great deal about threats, and risk and danger – to our country and to our men and
women in uniform – associated with different budget choices. Some will say I am too focused
on the wars we are in and not enough on future threats. The allocation of dollars in this budget
definitely belies that claim. But, it is important to remember that every defense dollar spent to
over-insure against a remote or diminishing risk – or, in effect, to “run up the score” in a
capability where the United States is already dominant – is a dollar not available to take care of
our people, reset the force, win the wars we are in, and improve capabilities in areas where we
are underinvested and potentially vulnerable. That is a risk I will not take.

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

I will close by noting that it is one thing to speak generally about the need for budget discipline and acquisition and contract reform. It is quite another to make tough choices about specific systems and defense priorities based solely on the national interest and then stick to those decisions over time. To do this, the president and I look forward to working with the Congress, industry, and many others to accomplish what is in the best interest of our nation as a whole.

Thank you.