GEORGE LITTLE: Thanks to those of you who stayed behind. Wanted to -- I'll let my colleagues introduce themselves in a minute, but this is a backgrounder on the Strategic Choices and Management Review. And my colleagues will be on background as senior defense officials. Would all of them go ahead and introduce --
SENIOR DEFENSE OFFICIAL: (off mic)
SENIOR DEFENSE OFFICIAL: (off mic)
SENIOR DEFENSE OFFICIAL: (off mic)
MR. LITTLE: Great. So with that, I don't think we have any opening remarks. I think we have about 20 minutes, a hard stop at 4 o'clock for some other meetings. So why don't we go straight to questions? Go ahead.
Q: The -- one of the options for the size of the Army that was covered in this review was 420,000 to 450,000, I believe. It said that the -- it had been determined that the strategy could be carried out with that sized Army. Does that mean that, regardless of what happens with sequestration, the Army is likely to fall to that level?
SENIOR DEFENSE OFFICIAL: So, I mean, I think it's fair to say that, just as the secretary said in his -- in his remarks, that coming out of the war in Afghanistan, this is a -- this is an opportunity to relook at the force that we need. And one area that we do think we can look at is the size of the ground force. And so we've asked the Army to take a look at what size they can achieve within the fiscal guidance that we have given them, as they build their budget. And so that'll determine what level we come out at.
Q: So the -- the Army's assessment will determine that level?
SENIOR DEFENSE OFFICIAL: Well, the Army will bring in a proposed budget and a proposed level that they can operate in, and then we will do an assessment in the fall where we look to see what the impacts are, what were the tradeoffs that they made, if they preserved structure. What were the other things they did within their budget to trade off against that?
Q: So I don't understand, though, what in the opening statement that that meant. Because that 420,000 to 450,000 to five tactical squadrons and C-130s of the Air Force seem to be presented separately from the two choices under the sequester. So it seems like -- I read that as, going forward, we have to look at -- that there will be a cut, and we don't know where between 420,000 and 450,000 it will be, but it will be somewhere between those numbers, which is a substantial cut from 490,000. So is that correct? The future will be somewhere between 420,000 and 450,000, as opposed to 490,000?
SENIOR DEFENSE OFFICIAL: Yeah, I mean, that's certainly what we expect to come out of the budget. It's been part of the deliberation that we did in the Strategic Choices and Management Review. It's certainly conversations we've had with the Army, as they looked at that themselves and what they would have to live with, with a smaller budget. So I think that's our expectation it's where they will -- they will be.
And, again, the reason those were called out separately is the first thing we did was to try to live with all of the tenets that are currently in the defense strategic guidance and -- and so what we did was we asked, are there any places in the budget where we can find either forces or some modernization efforts that we don't need? And what we identified was we thought we could take some -- reduce some of the -- of the ground forces and the tactical aircraft.
Q: (off mic) what areas of risk did you identify going from 490,000 down to 450,000, or areas, missions that we wouldn't likely do under the lower scenario?
SENIOR DEFENSE OFFICIAL: So, actually, as -- (inaudible) -- pointed out, that level is really most closely aligned with the current strategy. And in the current strategy already, we're looking at level of COIN in the future and coming out of large-scale, irregular warfare COIN, where you do require large numbers or sustained -- over many years -- large-scale rotations. So really coming out, that's -- that's really where it's -- it's aligning more closely with the strategy we have.
Q: (off mic) Is it a reflection that the Army would be less of a player in the pivot/rebalance to Asia than the Air Force or the Navy?
SENIOR DEFENSE OFFICIAL: I wouldn't say that that's necessarily true. I think it's more reflective, as -- (inaudible) -- I think both indicated, it's more reflective of trying to refine the alignment between the joint force and the defense strategic guidance that came out a year-and-a-half ago that did -- you know, we've gotten out of Iraq. We're drawing down in Afghanistan. As -- (inaudible) -- said, we don't envision doing large-scale, multi-year stability operations.
So it's more reflective of that than it would be, you know -- I think, you know, we would -- we would say we're -- we've just put in a four-star, you know, Army commander in Asia Pacific and we anticipate having them a role, most of the Asian nations have substantial ground forces, and we think the Army can make a good contribution there.
Q: When you were looking at this review, you said that you were looking at, you know, immediate things we could do with force structure that were excess now, as well as modernization programs. The fact that you didn't call out any specific programs for cancellation, does that mean that you didn't find any weapons programs that were bloated, you know, or unnecessary or -- or that could be done without or redundant?
SENIOR DEFENSE OFFICIAL: Right, we looked at -- we looked at -- we looked for any redundancy, certainly, within our program set. And so I won't deny that there are programs that are -- that look very similar in both the Air Force and Navy, but they do support different mission sets. And so it's not -- it's not a redundancy, so much as a very similar program being developed in multiple services for very good reasons.
So -- and I would say, yes, we did not find any particular capabilities that we thought we could do away with under the current strategy. It's a pretty -- still a pretty ambitious strategy that we've set for ourselves.
Q: How is sequestration being implemented with '14? I mean, cutting 10 percent across, are you doing targeted cuts? How are you going to get that implemented? Because the secretary keeps saying it's the law, it's the law, so you're doing it, right?
SENIOR DEFENSE OFFICIAL: So -- so that's -- that's still to be determined. That is -- that is, what -- what does our FY '14 budget actually look like under execution? Our undersecretary for comptroller is working closely with the services now to understand how we would execute that. A lot of that depends on what the rule sets are, which we don't know yet, as -- (inaudible) -- said. There's still tremendous amount of uncertainty.
Under sequestration, in FY '13, it was a very simplistic, across-the-board cut. We did exclude military personnel from those cuts. And so the -- we'll have a rule set for FY '14. If there's more flexibility, we won't take across-the-board cuts. And in fact, the letter that the secretary sent over to Chairman Levin and Senator Inhofe does talk about the fact that we'd like flexibility to distribute the cuts a little bit --
Q: Does the '15 budget reflect sequestration? Or -- or --
SENIOR DEFENSE OFFICIAL: We haven't -- we haven't built the '15 budget yet.
MR. LITTLE: And just to clarify for people, the Strategic Choices and Management Review looked at FY '15 to '19, not at FY '14 execution under sequestration.
Q: On force structure, could you sort of explain the -- the reasoning behind reducing C-130 fleets, the fleet size?
SENIOR DEFENSE OFFICIAL: It's -- it's a question purely of what's required. We looked very closely at their day-to-day requirements. We looked at warfighting requirements under the different operating plans that we have, the different scenarios that we expect to have, and we just ask, is there sufficient capacity? Are there other opportunities to cut? And what we have identified within the SCMR was there were opportunities to take reductions here.
Q: (off mic) you look at more specific -- I mean, is this related to the drawdown of the war in Afghanistan and -- and what exactly went into your thinking, in terms of that specific (off mic)
SENIOR DEFENSE OFFICIAL: So I -- I think to a great extent, and I know -- (inaudible) -- worked more closely in this area during the review, but even with the demand signals that we have today, there's excess capacity within the C-130 fleet. And we could -- we could take reductions there.
So it's not that we are looking at -- you know, there will be -- we do expect future reductions. But even modeling the demand signals that we have today, there's excess.
Q: So one last question. I know that this isn't a definite decision, but when do you foresee those reductions happening?
SENIOR DEFENSE OFFICIAL: It's all part of the budget process, and the '15 budget would give the first glimpse as to what our decisions are. Again, these aren't -- none of these are decisions. I want to emphasize that. This is to give the secretary a sense of -- and the deputy secretary a sense of the choices that they could make and to try to meet different fiscal targets. And so you'd have to wait until the '15 budget to see what our -- what we actually do in that area.
Q: Can I clarify one figure that the secretary laid out? He talked about this $30 billion to $35 billion shortfall in the first five years of sequestration. Is that every year, $30 billion to $35 billion? Or is that cumulative over five years?
SENIOR DEFENSE OFFICIAL: It's -- it's $30 billion to $35 billion in '14 and '15. It gets a little bit better as we continue through the BCA period. And toward the end of it, we find a sufficient savings to actually close on the full sequestration number.
SENIOR DEFENSE OFFICIAL: Based on the -- based on the SCMR --
SENIOR DEFENSE OFFICIAL: Based on the SCMR.
SENIOR DEFENSE OFFICIAL: -- which is what we're talking about today.
Q: So in '14 and -- and '15, say the target's $55 billion. Even if you did the most draconian cuts, you'd still only save like $15 billion? You'd have in excess of $35 billion in each year? Is that --
SENIOR DEFENSE OFFICIAL: That's what -- yeah, so it's $15 billion to $20 billion, I think, roughly the numbers that we would see in '14 and '15. And, again, that's partly because -- and the secretary emphasized this point -- the strategic choices that we make, the drawdown in forces, whether it's Army or naval forces, does take time to deliver savings. And so those savings accrue much later. Even some of the compensation savings can -- there are cumulative effects that make the total savings larger. So what we see in the near years is that the strategic decisions we just begin on provide very small numbers of savings.
SENIOR DEFENSE OFFICIAL: But we have to separate, again, the SCMR from '14 and what might happen with a continuing resolution or some other (off mic)
SENIOR DEFENSE OFFICIAL: That's right, yes.
Q: So if I -- if I hear you right, even if you do the worst case, you're going to save maybe $15 billion for '14, $15 billion for '15, and you've got this remaining $30 billion to $35 billion that you have to account for somewhere in your force? That's -- that's the issue?
SENIOR DEFENSE OFFICIAL: That's the -- that's the shortfall that he was referring to, right. So it's -- so the Strategic Choices and Management Review, the options that we teed up, totaled in those -- in those first couple of years only $15 billion to $20 billion. And so the rest will -- and it's not actually very different than what we're seeing in FY '13, some of the same cuts.
Q: (off mic)
Q: (off mic)
MR. LITTLE: About five more minutes.
Q: On the strategic choices, I never quite understood the previous responses. Is the rebalance to the Pacific, is that in jeopardy in a worst-case scenario?
SENIOR DEFENSE OFFICIAL: We -- as you all know, the rebalance to Asia Pacific is central to our strategy. And we are committed to sustaining that effort in a very significant way. Under, you know, the worst case, sequestration becomes permanent over a 10-year period, the SCMR, I think, points us in the direction that it would be very challenging to implement that exactly as how it was originally conceived. But we are prioritizing the rebalance as we -- as we went through FY '13, as we look to FY '14 execution. We are prioritizing that to -- because we think it's such an essential part of our strategy.
Q: Can I just ask you to follow up on the question of the tactical air squadrons? I mean, if you -- how -- can you walk us through your thinking on having excess capacity there at a time when, you know, Russia and China are known to be developing their own fifth-generation fighters? You know, there's been a lot of discussion with that. How would that unfold if you're going to reduce tactical air squadrons? I mean, what do you take out? And is -- you know, and how do you justify that, given the threat that we're always hearing about?
SENIOR DEFENSE OFFICIAL: Do you want to take (off mic)
SENIOR DEFENSE OFFICIAL: I can -- I can address that. Even despite sequestration, we've continued to always refine the strategy. The strategy we have now, the defense strategic guidance, has a defeat and a deny aspect to it. And as we review Air Force -- U.S. Air Force capability, we look at how many squadrons are required to execute that strategy. We continue to refine that.
As we've worked through it and as we've looked at what is required to defend the homeland, what is required by our best projection to counter the threat, we do believe there is some room for some reductions. Again, that's always risk when you take reductions, as you work through. But as we assessed it and as we looked at it, that was one area where we thought we could minimize the risk and still squeeze some force structure.
Q: How does that -- how do you --
MR. LITTLE: I think (off mic)
Q: How does the F-35 --
MR. LITTLE: (off mic) I've got -- I've got limited time here for other folks. Kate?
Q: With the consolidation of combatant commands, could you identify which combatant commands make the most sense for consolidation under sequestration? And does any consolidation make sense, even without sequestration?
SENIOR DEFENSE OFFICIAL: (off mic) do you want that?
SENIOR DEFENSE OFFICIAL: Yeah, I can -- I can take that, as well. We're -- we're still working through if it makes sense, to borrow your words, to consolidate, and the secretary and the chairman definitely want some options brought forward. We haven't completed our review, but we have to look at the missions and how we would adjust and align missions first.
We need to work through, are there real savings there? And we've got an ongoing effort to take a look at infrastructure, for example, in Europe to see what -- what is there and what could be consolidated.
But part of it, as well, is not just the joint combatant command, but the subordinate commands under it. And we've asked the services to take a hard look at that as they build their -- their POMs to come into the department. We've asked them to take a really hard look at, where could they consolidate and streamline those three- and four-star commands to get savings?
Q: So have you guys looked at the active-reserve component force mix? And where is the most efficient way to place the key equipment by service, TACAIR, stuff like that?
SENIOR DEFENSE OFFICIAL: Yeah, so -- very much the active-reserve mix was part of what we did. The analysis took into account the mix that we currently have today and what it might look like under reduced structure. Of course, we get different access to those, so were able to model the access rates to the different components, as well.
And, I mean, both components play a role across all the services and by force elements. They all play different roles, when I look at the -- the active versus the guard and reserve.
So the mix question is a complicated question. There's certainly cost elements to that, there's -- but there's also access. There's training, their ability to respond, all of which play into that. And so I think the short answer really is that we're going to continue to look at the proper balance between the active and reserve, even under reduced fiscal levels, because it's a way we have to get to a balanced budget.
Q: But to follow up on that, on the ground forces, it does sound like what the secretary said today indicates a potential recalibration of less active-duty. He didn't note any cuts to the reserve component. Is that fair to say, that it looks like -- that the active-duty will take potentially a brunt of the cuts?
SENIOR DEFENSE OFFICIAL: I would say at this point, all options are on the table. In fact, in the Strategic Choices and Management Review, we teed up reductions in both components for the secretary to think about.
MR. LITTLE: We've got time for one or two more questions. Yes, sir?
Q: On civilian workforce, I know you've got the 20 percent reduction in headquarters components. Did you get any more specific on reshaping or resizing the civilian workforce in any more detailed way? Is there a target, either civilians or contractors?
SENIOR DEFENSE OFFICIAL: I'm not sure -- (inaudible) -- go ahead.
SENIOR DEFENSE OFFICIAL: I mean, we looked at a wide range of options, and we still are looking at a wide range of options. There are several ideas out there that could generate some savings. One of them is to take a look at our civilians and see if there's any opportunities to put some downward pressure on matching -- or make sure we're matching the appropriate seniority to the job at hand. So we're taking a look at some of that.
We're also taking a look at paying compensation just like we are for military. And, you know, are there areas where we could actually generate some savings for -- on the civilian side? And as we -- as we work through, depending on the level of budget we have, we'll have to work through whether we'll be required to push harder on the overall size of our civilian workforce.
MR. LITTLE: (off mic) questions.
Q: Back to the guard and reserve, on the five TACAIR squadrons and C-130s, did you look at which -- which component those cuts would come from? And on the tactical squadrons, did you look at which airframes those could possibly be?
SENIOR DEFENSE OFFICIAL: I imagine we made specific choices because we had to cost these, as well. Again, that's now over to the -- over to the Air Force, over to the services to think about what's the proper balance, what's the proper choice, as they look at drawing down. And, again, it's up to five -- I think the secretary announced -- tactical aircraft reductions, but it's not -- not our decision yet, not in finality in the -- in the budget.
SENIOR DEFENSE OFFICIAL: And the SCMR was -- to answer the first part of your question, the SCMR was not specific about which units we were aggregating the assessment.
MR. LITTLE: And final question goes to (off mic)
Q: Can you elaborate on how far into the future you'd have to backload the cuts to make them strategically executable? And also, what's the way ahead for the QDR?
SENIOR DEFENSE OFFICIAL: You want to (off mic) (Laughter.)
SENIOR DEFENSE OFFICIAL: Yeah, so we didn't -- we didn't attempt to come up with an optimal profile that would give us the best strategic outcome over -- over a 10-year period or a 20-year period for the department. You know, what -- we looked at fundamentally those three budget profiles. And the president's budget does very much align well with the defense strategic guidance, and the sequestration clearly does not.
The in-between budget was purely just a look at, you know, is there -- is there something in between? But there are impacts. I mean, we talk -- we call it bending the strategy, but there are certainly elements of the strategy that are affected, not to the point that we would consider it a break, but it's -- I wouldn't -- I don't want to call that optimal in any sense. But that was not the goal of the strategic choices review, was to come up with any sort of optimal profile.
MR. LITTLE: All right. Thank you, everyone. Speaking of --
Q: On the QDR?
MR. LITTLE: Oh, QDR, okay.
SENIOR DEFENSE OFFICIAL: As the secretary said, we will be -- I think the QDR is a lot -- will build on the SCMR process. It's going to be starting in early fall. And that will be a place where we will be able to look in more detail at how to shape those recommendations that we would bring forward to the president, as the secretary talked about, in terms of, you know, we -- we don't yet have a certainty on what the resource picture will look at, so we will be, I think, using the QDR process to look more -- you know, we looked at sort of the illustrative options in the SCMR, and the QDR will be a chance to sort of look at that in more detail and develop recommendations for the president, as he thinks about the '15 budget and beyond.
MR. LITTLE: Thanks for your time, everyone. Appreciate it.