Force Structure: Capabilities and Cost of Army Modular Force	 
Remain Uncertain (04-APR-06, GAO-06-548T).			 
                                                                 
The Army considers its modular force transformation the most	 
extensive restructuring it has undertaken since World War II.	 
Restructuring the Army from a division-based force to a modular  
brigade-based force will require extensive investments in	 
equipment and retraining of personnel. The foundation of the	 
modular force is the creation of standardized modular combat	 
brigades designed to be stand-alone, self-sufficient units that  
are more rapidly deployable and better able to conduct joint	 
operations than their larger division-based predecessors. GAO was
asked to testify on the status of the Army's modularity effort.  
This testimony addresses (1) the Army's cost estimate for	 
restructuring to a modular force, (2) progress and plans for	 
equipping modular brigade combat teams, (3) progress made and	 
challenges to meeting personnel requirements, and (4) the extent 
to which the Army has developed an approach for assessing	 
modularity results and the need for further adjusting designs or 
implementation plans. This testimony is based on previous and	 
ongoing GAO work examining Army modularity plans and cost. GAO's 
work has been primarily focused on the Army's active forces. GAO 
has suggested that Congress consider requiring the Secretary of  
Defense to provide a plan for overseeing spending of funds for	 
modularity.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-548T					        
    ACCNO:   A50718						        
  TITLE:     Force Structure: Capabilities and Cost of Army Modular   
Force Remain Uncertain						 
     DATE:   04/04/2006 
  SUBJECT:   Army personnel					 
	     Cost analysis					 
	     Defense capabilities				 
	     Defense conversion 				 
	     Financial analysis 				 
	     Military forces					 
	     Military policies					 
	     Policy evaluation					 
	     Strategic planning 				 
	     Cost estimates					 
	     Transparency					 
	     Army Future Combat Systems 			 

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GAO-06-548T

     

     * Summary
     * Background
     * Lack of Clarity in Army's Cost Estimate for Modularity Limit
     * Although the Army Is Well Under Way in Its Active Modular Co
          * Army Facing Difficulty Meeting Its Goals for Equipping Activ
          * Equipment Shortages Include Key Equipment the Army Identifie
          * National Guard Faces Significant Equipping Challenges
          * To Mitigate Equipment Shortages, Army Plans to Rotate Equipm
     * The Army Faces Challenges in Managing Personnel Requirements
     * The Army Has Objectives and Time Frames for Modularity but L
          * Army Lacks Performance Metrics to Measure the Results of Mod
          * Army Lacks a Long-term Plan for Comprehensively Evaluating M
     * Concluding Remarks
     * Contacts and Acknowledgments
          * Order by Mail or Phone

Testimony

Before the Subcommittee on Tactical Air and Land Forces, Committee on
Armed Services, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery Expected at 2:00 p.m. EDT

Tuesday, April 4, 2006

FORCE STRUCTURE

Capabilities and Cost of Army Modular Force Remain Uncertain

Statement of Janet St. Laurent Director, Defense Capabilities and
Management

GAO-06-548T

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here to discuss our ongoing work on the Army's plans
for restructuring into a modular brigade-based force. In 2004, the Army
began its modular force transformation to restructure itself from a
division-based force to a modular brigade-based force-an undertaking it
considers the most extensive reorganization of its force since World War
II. This restructuring will require a significant investment of billions
of dollars at a time when the Army is developing other high-cost
capabilities, such as the Future Combat Systems.1 For example, the
administration requested $6.6 billion for modularity as part of its fiscal
year 2007 budget request. The foundation of the modular force is the
creation of standardized modular brigade combat teams designed to be
stand-alone, self-sufficient units that are more rapidly deployable and
better able to conduct joint and expeditionary operations than their
larger division-based predecessors. The Army plans to achieve its modular
restructuring without permanently increasing its active component end
strength above 482,400 soldiers, primarily by eliminating some noncombat
positions in which military personnel currently serve, and transferring
these positions to its operational combat forces.2 The February 2006
Quadrennial Defense Review (QDR) specified that the Army would create 70
modular combat brigades in its active component and National Guard. This
represents a 7-brigade reduction from the Army's original plan of having
77 modular combat brigades. However, according to Army officials,
resources from the 7 brigades subtracted from the original plan will be
used to increase support units in the reserve component, and Department of
Defense (DOD) officials believe that 70 brigades will be sufficient to
execute the defense strategy.

For this hearing, you asked us to update our March 2005 testimony before
this committee, in which we provided preliminary observations on the
Army's plan to implement and fund modular forces.3 At that time we
observed that because the Army is undertaking this effort while executing
operations in Iraq, Afghanistan, and elsewhere and developing other new
capabilities, such as the Future Combat Systems, DOD may face some
long-term affordability challenges as it moves forward with these and
other initiatives. Since that hearing, in September 2005 we issued a
report on the costs of modularity, and we are drafting a report on the
Army's plans for modularity, which we expect to issue this spring.4
Specifically, my testimony today will address (1) the Army's cost
estimates for restructuring to a modular force, (2) the Army's progress
and plans for equipping modular combat brigades, (3) progress made and
challenges to managing personnel requirements of the modular force, and
(4) the extent to which the Army has developed an approach for assessing
implementation of modularity and for further adjusting designs or
implementation plans.

1 Future Combat Systems is a program that consists of a family of systems
composed of advanced network combat and sustainment systems, unmanned
ground and air vehicles, and unattended sensors and munitions.

2 Army personnel assigned to noncombat positions provide management,
administrative, training, and other support. Operational combat forces
include personnel assigned to the Army's combat, combat support, and
combat service support units, including the modular brigade combat teams.

3 GAO, Force Structure: Preliminary Observations on Army Plans to
Implement and Fund Modular Forces, GAO-05-443T (Washington, D.C.: Mar. 16,
2005).

My testimony is based on both our September 2005 report on cost issues and
on our past and ongoing work examining the Army's plans for implementing
modularity. For our ongoing work, we interviewed officials and obtained
documents from Headquarters, Department of the Army; U.S. Army Training
and Doctrine Command; and U.S. Army Forces Command to determine the Army's
modular force implementation plans, organizational design requirements and
supporting analysis, equipment and personnel requirements for the brigade
combat teams, and plans for equipping and staffing modular brigade combat
teams to the required levels. We visited the first three Army divisions
undergoing modular conversions to obtain information on the plans for
organizing, staffing, and equipping the modular brigades and discussed
modular force support requirements with officials from the U.S. Army
Center for Army Analysis. To assess the Army's cost estimates, we updated
our September 2005 report with information from the fiscal year 2007
President's Budget request and discussions with Army officials about
implications of the QDR on the cost of modular restructuring. To address
equipment plans and status, we analyzed Department of the Army data on
selected equipment the Army identified as essential for achieving the
modular combat brigades, required operational capabilities and reviewed
unit readiness reports from those brigades that had completed or were in
the process of completing their modular conversion as of February 2006. To
assess personnel plans, we discussed the implications of force structure
changes and plans for eliminating noncombat positions with officials from
the Department of the Army Deputy Chiefs of Staff for Personnel (G1) and
Intelligence (G2). Finally, to assess the framework for assessing
modularity implementation, we examined key Army planning documents and
discussed objectives, performance metrics, and testing plans with
appropriate officials in the Department of the Army Headquarters,
especially officials from the Deputy Chief of Staff for Operations and
Training (G3) and the Training and Doctrine Command. In addition, we
relied on our past reports assessing organizations undertaking significant
reorganizations. We conducted our work from May 2005 through March 2006 in
accordance with generally accepted government auditing standards and
determined that the data used were sufficiently reliable for our
objectives.

4 GAO, Force Structure: Actions Needed to Improve Estimates and Oversight
of Costs for Transforming Army to a Modular Force, GAO-05-926 (Washington,
D.C.: Sept. 29, 2005).

                                    Summary

The Army is making progress converting active Army combat units to the new
modular structure at a time of war. The Army's goals for increasing combat
power while introducing predictability in deployments for its soldiers are
important, and the Army leadership in headquarters, military and civilian
staffs, and operational and support units throughout the Army have
dedicated considerable attention, energy, and time to achieving these
goals under tight time frames. However, the Army faces significant
challenges in executing its modularity plans to fully achieve planned
capabilities within the time frames it established. In short, because of
uncertainties in cost, equipment, and personnel plans and the absence of a
comprehensive approach for assessing modularity results, we do not believe
decision makers have sufficient information to assess the capabilities,
costs, and risks posed by the transformation to a modular force. I will
now turn to our four main issues.

First, the lack of clarity in the Army's cost estimates for modularity may
limit the Secretary of Defense and Congress's ability to weigh competing
funding priorities. The Army's cost estimate through fiscal year 2011 has
increased from an initial rough order of magnitude estimate of $28 billion
in 2004 to $52.5 billion currently. Of this $52.5 billion estimate, $41
billion, or 78 percent, has been allocated to equipment, with the
remaining $11.5 billion allocated to military construction, facilities,
sustainment, and training. Although the estimate has grown, the Army's
rationale for allocating dollar amounts to specific aspects of modularity
has not become more transparent. For example, it is not clear how the Army
will distinguish between costs associated with modularity and the costs
associated with modernizing equipment or restoring equipment used during
ongoing operations. In addition, despite recent force structure changes,
schedule changes, and design refinements, the Army has not updated its
cost estimate or funding plan. Moreover, the Army may seek additional
funding after 2011 to buy equipment required for modular restructuring. In
short, it is not clear what level of capability the Army will achieve with
the $52.5 billion it plans to spend on its modular restructuring through
fiscal year 2011. As a result, decision makers may not have adequate
information on which to weigh competing demands for funding.

Second, while the Army is well under way in creating active component
modular combat brigades, it is not meeting its equipping goals for these
brigades and is still developing its equipping strategy, raising
considerable uncertainty as to the levels of equipment they will have in
both the near term and longer term. Although active modular combat
brigades are receiving considerable quantities of equipment, they will
initially lack required quantities of items such as communications systems
that are key for providing the enhanced intelligence, situational
awareness, and network capabilities needed to help match the combat power
of the Army's former brigade structure. The Army will likely face even
greater challenges fully equipping 28 planned National Guard modular
combat brigades since the National Guard has historically been
underequipped. To mitigate equipment shortages, the Army is developing an
equipping strategy that will provide varying levels of equipment to
brigades depending on their phase of readiness-that is, whether the
brigades are available for deployment, training for deployment, or
returning from deployment. However, the Army has not yet defined specific
equipping plans for brigades in each of the various readiness phases.
Until the Army completes development of its equipping strategy, the
Secretary of Defense and Congress will not be in a good position to assess
the Army's equipment requirements and the level of risk associated with
the Army's plans.

Third, while the Army has made some progress meeting modular personnel
requirements in the active component by shifting positions from its
noncombat force to its operational combat force, it faces significant
challenges in meeting its goal to reduce its overall active end strength
to 482,400, as specified by the QDR, while increasing the size of its
modular combat force. The Army has developed initiatives to reduce and
realign its end strength, but some of these initiatives may not meet the
Army's initial expectations. In addition, the Army does not plan to fill
some key intelligence positions required by its new modular force
structure design in part because of the requirement to reduce overall end
strength. Without continued, significant progress in meeting personnel
requirements, the Army may need to accept increased risk in its ability to
conduct operations and support its combat forces or it may need to seek
support for an end strength increase from DOD and Congress.

Finally, the Army lacks a comprehensive and transparent approach to
effectively measure progress against stated modularity objectives, assess
the need for further changes to its modular unit designs, and monitor
implementation plans. GAO and DOD have identified the importance of
establishing objectives that can be translated into measurable metrics,
which in turn provide accountability for results. The Army has identified
objectives for modularity, but metrics for assessing the Army's progress
on modularity-specific goals are extremely limited. In 2004, the Army's
Training and Doctrine Command (TRADOC) conducted a wide-ranging baseline
analysis of the modular design using measures of effectiveness; however,
the Army does not have a long-term plan to conduct similar analysis so
that it can compare the performance of actual modular units with the
TRADOC-validated design. Without performance metrics and a comprehensive
testing plan, neither Army nor congressional leaders will be able to
assess the capabilities of and risks associated with the modular force as
it is currently organized, staffed, and equipped.

                                   Background

The Army's conversion to a modular force encompasses the Army's total
force-active Army, Army National Guard, and Army Reserve-and directly
affects not only the Army's combat units, but related command and support
organizations. A key to the Army's new modular force design is embedding
within combat brigades battalion-sized, reconnaissance, logistics, and
other support units that previously made up parts of division-level and
higher-level command and support organizations, allowing the brigades to
operate independently. Restructuring these units is a major undertaking
because it requires more than just the movement of personnel or equipment
from one unit to another. The Army's new modular units are designed,
equipped, and staffed differently than the units they replace; therefore
successful implementation of this initiative will require changes such as
new equipment and a different mix of skills and occupational specialties
among Army personnel. By 2011, the Army plans to have reconfigured its
total force-to include active and reserve components and headquarters,
combat, and support units-into the modular design. The foundation of the
modular force is the creation of modular brigade combat teams-combat
maneuver brigades that will have a common organizational design and will
increase the rotational pool of ready units. Modular combat brigades will
have one of three standard designs-heavy brigade combat team, infantry
brigade combat team, and Stryker brigade combat team.

Until it revised its plans in March 2006, the Army had planned to have a
total of 77 active component and National Guard modular combat brigades by
expanding the existing 33 combat brigades in the active component into 43
modular combat brigades by 2007, and by creating 34 modular combat
brigades in the National Guard by 2010 from existing brigades and
divisions that have historically been equipped well below requirements. To
rebalance joint ground force capabilities the 2006 QDR determined the Army
should have a total of 70 modular combat brigades-42 active brigades and
28 National Guard brigades. Also in March 2006, the Army was in the
process of revising its modular combat brigade conversion schedule; it now
plans to convert its active component brigades by fiscal year 2010 instead
of 2007 as previously planned, and convert National Guard brigades by
fiscal year 2008 instead of 2010. As of March 2006 the Army had completed
the conversion of 19 active component brigades to the modular design and
was in the process of converting 2 active and 7 National Guard brigades.
Table 1 shows the Army's schedule as of March 2006 for creating active
component and National Guard modular combat brigades.

Table 1: Army Schedule for Creating Active Component and National Guard
Modular Combat Brigades as of March 2006

                                FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Total 
Active component combat         2   11    8   14    3    2    1    1    42 
brigades                                                             
National Guard combat           -    -    7    7    7    7    -    -    28 
brigades                                                             
Total                           2   11   15   21   10    9    1    1    70 

Source: GAO analysis of Army data.

According to the Army, this larger pool of available combat units will
enable it to generate both active and reserve component forces in a
rotational manner that will support 2 years at home following each
deployed year for active forces. To do this, the Army has created a
rotational force generation model in which units rotate through a
structured progression of increased unit readiness over time. Units will
progress through three phases of operational readiness cycles, culminating
in full mission readiness and availability to deploy.

The Army's objective is for the new modular combat brigades, which will
include about 3,000 to 4,000 personnel, to have at least the same combat
capability as a brigade under the current division-based force, which
range from 3,000 to 5,000 personnel. Since there will be more combat
brigades in the force, the Army believes its overall combat capability
will be increased as a result of the restructuring, providing added value
to combatant commanders. Although somewhat smaller in size, the new
modular combat brigades are expected to be as capable as the Army's
existing brigades because they will have different equipment, such as
advanced communications and surveillance equipment, and a different mix of
personnel and support assets. The Army's organizational designs for the
modular brigades have been tested by its Training and Doctrine Command's
Analysis Center against a variety of scenarios, and the Army has found the
new designs to be as capable as the existing division-based brigades in
modeling and simulations.

 Lack of Clarity in Army's Cost Estimate for Modularity Limits Decision Makers'
                      Ability to Weigh Funding Priorities

The Army's cost estimate for modularity has continued to evolve since our
September 2005 report.5 As we reported, the Army's cost estimate for
transforming its force through fiscal year 2011 increased from $28 billion
in the summer of 2004 to $48 billion in the spring of 2005. The latter
estimate addressed some of the shortcomings of the initial rough order of
magnitude estimate and included lessons learned from operations in Iraq.
For example, it included costs of restructuring the entire force, to
include 77 brigade combat teams, as well as the creation of support and
command units. However, it excluded some known costs. For example, the $48
billion estimate did not include $4.5 billion in construction costs the
Army plans to fund through business process engineering efficiencies,
which historically have been difficult to achieve. The Army added these
costs when it revised its cost estimate in March 2006, bringing the most
recent total to $52.5 billion. As shown in table 2, most of the planned
funding for modularity-$41 billion, or about 78 percent-will be used to
procure equipment, with the remaining funds divided between military
construction and facilities and sustainment and training. In addition,
Army leaders have recently stated they may seek additional funds after
2011 to procure additional equipment for modular restructuring.

5 GAO-05-926 .

Table 2: Modular Force Cost Estimates for the Entire Army by Function

Dollars in billions                                             
                          2005 2006 2007 2008 2009 2010 2011 Total Percentage 
Equipping              $4.7 $5.8 $5.4 $5.9 $6.5 $6.7 $6.0 $41.0         78 
Military construction/  0.3  0.0  0.5  0.5  1.5  1.5  1.5   5.8         11 
facilities                                                      
Sustainment and         0.0  0.7  0.7  1.2  1.1  1.0  1.0   5.7         11 
training                                                        
Total                  $5.0 $6.5 $6.6 $7.6 $9.1 $9.2 $8.5 $52.5        100 

Source: GAO analysis of Army data.

In our September report, we highlighted uncertainties related to force
design, equipment, facilities, and personnel that could drive costs
higher. Some of these uncertainties have been clarified. For example, we
noted that costs in equipment and facilities would increase significantly
if the Secretary of Defense decided to add 5 brigades to the Army's active
component to create a total of 48 brigade combat teams-a decision that was
scheduled to be made in fiscal year 2006. The decision about the number of
brigades was made based on the QDR. Instead of a 5 brigade combat team
increase, the report stated that the Army would create a total of 42 such
brigades in the active component, a 1 brigade combat team reduction from
the Army's plan. In addition, the number of National Guard brigade combat
teams was reduced from 34 to 28. In sum, the QDR decisions reduced the
number of planned brigade combat teams from 77 to 70. However, Army
officials stated that the Army plans to fully staff and equip these units.
Moreover, Army officials told us that the Army plans to use resources
freed up by this decision to increase support units in the reserve
component and to fund additional special operations capability in the
active component. We also noted in our September 2005 report that the Army
had not completed designs for all the support units at the time the
estimate was set. According to Army officials, these designs have been
finalized. Despite these refinements to the design and changes to the
planned number of combat and support brigades, the Army has not made
revisions to its $52.5 billion cost estimate or funding plan based on
these changes.

Moreover, as I will discuss shortly, uncertainty remains in the Army's
evolving strategy for equipping its modular combat brigades. As a result,
based on discussions with Army officials, it remains unclear to what
extent the $41 billion will enable the Army to equip units to levels in
the Army's tested design. In addition, it is not clear how the Army will
distinguish between modularity, costs associated with restoring equipment
used in operations, or modernizing equipment. In estimating its equipment
costs for modularity, the Army assumed that some equipment from ongoing
operations would remain in operational condition for redistribution to new
and restructured modular units. To the extent equipment is not returned
from operations at assumed rates, it is not clear how this will affect
equipping levels of modular units or how the Army would pay for such
equipment. As a result, the Secretary of Defense and Congress may not be
in a sound position to weigh competing demands for funding and assess
whether the Army will be able to fully achieve planned capabilities for
the modular force by 2011 within the planned funding level.

    Although the Army Is Well Under Way in Its Active Modular Combat Brigade
    Conversions, Its Ability to Meet Its Equipping Goals by 2011 Is Unclear

The Army has made progress in creating active component modular combat
brigades, but it is not meeting its equipping goals for these brigades and
is still developing its overall equipping strategy, which raises concerns
about the extent to which brigades will be equipped in the near and longer
term. While active brigades are receiving significant amounts of new
equipment, Army officials indicated that they may seek additional funding
for equipment beyond 2011. Moreover, brigades will initially lack key
equipment, including items that provide enhanced intelligence, situational
awareness, and network capabilities needed to help the Army achieve its
planned capabilities of creating a more mobile, rapidly deployable, joint,
expeditionary force. In addition, because of existing equipment shortages,
the Army National Guard will likely face even greater challenges providing
the same types of equipment for its 28 planned modular combat brigades. To
mitigate equipment shortages, the Army plans to provide priority for
equipment to deploying active component and National Guard units but
allocate lesser levels of remaining equipment to other nondeploying units
based on their movement through training and readiness cycles. However,
the Army has not yet determined the levels of equipment it needs to
support this strategy, assessed the operational risk of not fully
equipping all units, or provided to Congress detailed information about
these plans so it can assess the Army's current and long-term equipment
requirements and funding plans.

Army Facing Difficulty Meeting Its Goals for Equipping Active Modular Combat
Brigades

The Army faces challenges meeting its equipping goals for its modular
brigades both in the near and longer term. As of February 2006, the Army
had converted 19 modular combat brigades in the active force. According to
the Army Campaign Plan, which established time frames and goals for the
modular force conversions, each of these units individually is expected to
have on hand at least 90 percent of its required major equipment items
within 180 days after its new equipment requirements become effective.6 We
reviewed data from several brigades that had reached the effective date
for their new equipment requirements by February 2006, and found that all
of these brigades reported significant shortages of equipment 180 days
after the effective date of their new equipment requirements, falling well
below the equipment goals the Army established in its Campaign Plan.
Additionally, the Army is having difficulty providing equipment to units
undergoing their modular conversion in time for training prior to
operational deployments, and deploying units often do not receive some of
their equipment until after their arrival in theater. At the time of our
visits, officials from three Army divisions undergoing modular conversion
expressed concern over the lack of key equipment needed for training prior
to deployment.

The Army already faced equipment shortages before it began its modular
force transformation and is wearing out significant quantities in Iraq,
which could complicate plans for fully equipping new modular units. By
creating modular combat brigades with standardized designs and equipment
requirements, the Army believed that it could utilize more of its total
force, thereby increasing the pool of available and ready forces to meet
the demands of sustained rotations and better respond to an expected state
of continuous operations. Also, by comparably equipping all of these units
across the active component and National Guard, the Army further believes
it will be able to discontinue its practice of allocating limited
resources, including equipment, based on a system of tiered readiness,7
which resulted in lower-priority units in both active and reserve
components having significantly lower levels of equipment and readiness
than the higher priority units. However, because of the need to establish
a larger pool of available forces to meet the current high pace of
operational commitments, the Army's modular combat brigade conversion
schedule is outpacing the planned acquisition or funding for some
equipment requirements. The Army has acknowledged that funding does not
match its modular conversion schedule and that some units will face
equipment shortages in the early years of transformation. The Army says it
will manage these shortfalls; however, according to Army officials, the
Army may continue to seek modular force equipment funding beyond 2011 and
may exceed its $52.5 billion modularity cost estimate.

6 The Army defines this in its Campaign Plan as the effective date on
which the new modular organizational designs' equipment requirements
formally apply to converting brigades. The Army calls this a Modified
Table of Organization and Equipment, which documents the specific types
and amounts of equipment Army units are authorized to have.

7 Under this model, which the Army calls its tiered readiness system, high
priority or first to deploy units in the active component received much
higher levels of resources than lower priority or later deploying active
and reserve component units. While some units maintained high levels of
readiness, a large part of both the active and reserve components were in
a low state of readiness with the expectation that there would be
sufficient time to add the required resources prior to deployment.

Equipment Shortages Include Key Equipment the Army Identified as Essential for
Achieving Modular Force Capabilities

Active modular combat brigades will initially lack required numbers of
some of the key equipment that Army force design analyses determined
essential for achieving their planned capabilities. Army force designers
identified a number of key organizational, personnel, and equipment
enablers they determined must be present for the modular combat brigades
to be as lethal as the division-based brigades they are replacing, achieve
their expected capabilities, and function as designed. Essential among
these is the equipment that will enable the modular combat brigades to
function as stand-alone, self-sufficient tactical forces, capable of
conducting and sustaining operations on their own if required without also
deploying large numbers of support forces. They include battle command
systems to provide modular combat brigades the latest command and control
technology for improved situational awareness; advanced digital
communications systems to provide secure high-speed communications links;
and advanced sensors, providing modular combat brigades their own
intelligence-gathering, reconnaissance, and target acquisition
capabilities.

We reviewed several command and control, communications, and
reconnaissance systems to determine the Army's plans and timelines for
providing active modular combat brigades some of the key equipment they
need to achieve their planned capabilities and function as designed.
According to Army officials responsible for managing the distribution and
fielding of equipment, in 2007 when 38 of 42 active component modular
combat brigades are to complete their modular conversions, the Army will
not have all of this equipment onhand to meet the new modular force design
requirements. These shortfalls are due to a range of reasons, but
primarily because the modular conversion schedule is outpacing the planned
acquisition or funding. For example, the Army does not expect to meet
until at least 2012 its modular combat brigade requirements for Long-Range
Advanced Scout Surveillance Systems, an advanced visual sensor that
provides long-range surveillance capability to detect, recognize, and
identify distant targets. In addition, because of an Army funding
decision, the Army only plans to meet 85 percent of its requirements
across the force for Single Channel Ground and Airborne Radio Systems, a
command and control network radio system that provides voice and data
communications capability in support of command and control operations.
Finally, a recent DOD decision could set back the Army's schedule for the
acquisition of Joint Network Node, a key communications system that
provides secure high-speed computer network connection for data
transmission down to the battalion level, including voice, video, and
e-mail. According to Army officials, DOD recently decided to require the
Army to have Joint Network Node undergo developmental and operational
testing prior to further acquisition, which could delay equipping active
and National Guard modular combat brigades.

National Guard Faces Significant Equipping Challenges

In addition to the challenges the Army faces in providing active component
modular combat brigades the equipment necessary for meeting expected
capabilities, the Army will face greater challenges meeting its equipping
requirements for its 28 planned National Guard combat brigades. The Army's
modular force concept is intended to transform the National Guard from a
strategic standby force to a force that is to be organized, staffed, and
equipped comparable to active units for involvement in the full range of
overseas operations. As such, Guard combat units will enter into the
Army's new force rotational model in which, according to the Army's plans,
Guard units would be available for deployment 1 year out of 6 years.
However, Guard units have previously been equipped at less than wartime
readiness levels (often at 65 to 75 percent of requirements) under the
assumption that there would be sufficient time for Guard forces to obtain
additional equipment prior to deployment. Moreover, as of July 2005, the
Army National Guard had transferred more than 101,000 pieces of equipment
from nondeploying units to support Guard units' deployments overseas. As
we noted in our report last year on National Guard equipment readiness,8
National Guard Bureau officials estimated that the Guard's nondeployed
units had only about 34 percent of their essential warfighting equipment
as of July 2005 and had exhausted inventories of 220 critical items.
Although the Army says it plans to invest $21 billion into equipping and
modernizing the Guard through 2011, Guard units will start their modular
conversions with less and much older equipment than most active units.
This will add to the challenge the Army faces in achieving its plans and
timelines for equipping Guard units at comparable levels to active units
and fully meeting the equipping needs across both components. Moreover,
the Army National Guard believes that even after the Army's planned
investment, the Army National Guard will have to accept risk in certain
equipment, such as tactical wheeled vehicles, aircraft, and force
protection equipment.

8 GAO, Reserve Forces: Plans Needed to Improve Army National Guard
Equipment Readiness and Better Integrate Guard into Army Force
Transformation Initiatives, GAO-06-111 (Washington, D.C.: Oct. 4, 2005).

To Mitigate Equipment Shortages, Army Plans to Rotate Equipment among Units
Based on Their Movement through Training, Readiness, and Deployment Cycles

Because the Army realized that it would not have enough equipment in the
near term to simultaneously equip modular combat brigades at 100 percent
of their requirements, the Army is developing a new equipping strategy as
part of its force rotation model; however, it has not yet determined
equipping requirements for this new strategy. Under the force rotation
model, the Army would provide increasing amounts of equipment to units as
they move through training phases and near readiness for potential
deployment so they would be ready to respond quickly if needed with fully
equipped forces. The Army believes that over time, equipping units in a
rotational manner will enable it to better allocate available equipment
and help manage risk associated with specific equipment shortages.

Under this strategy, brigades will have three types of equipment sets-a
baseline set, a training set, and a deployment set. The baseline set would
vary by unit type and assigned mission and the equipment it includes could
be significantly reduced from the amount called for in the modular brigade
design. Training sets would include more of the equipment units will need
to be ready for deployment, but units would share the equipment that would
be located at training sites throughout the country. The deployment set
would include all equipment needed for deployment, including
theater-specific equipment, high-priority items provided through
operational needs statements, and equipment from Army prepositioned stock.
With this cyclical equipping approach, the Army believes it can have from
12 to 16 active combat brigades and from 3 to 4 Army National Guard combat
brigades equipped and mission ready at any given time.

However, the Army has not yet determined equipping requirements for units
as they progress through the rotational cycles. While the Army has
developed a general proposal to equip both active and Army National Guard
units according to the readiness requirements of each phase of the
rotational force model, it has not yet detailed the types and quantities
of items required in each phase. We noted in our October 2005 report on
Army National Guard equipment readiness9 that at the time of the report,
the Army was still developing the proposals for what would be included in
the three equipment sets and planned to publish the final requirements in
December 2005. However, as of March 2006 the Army had not decided on
specific equipping plans for units in the various phases of its force
rotation model.

Because the Army is early in the development of its rotational equipping
strategy and has not yet defined specific equipping plans for units as
they progress through rotational cycles, the levels of equipment the
deploying and nondeploying units would receive are currently not clear.
Therefore, it is difficult to assess the risk associated with decreasing
nondeploying units' readiness to perform other missions or the ability of
units in the earlier stages of the rotational cycle to respond to an
unforeseen crisis if required.

The Army Faces Challenges in Managing Personnel Requirements for Its New Modular
                                Force Structure

The Army has made some progress meeting modular personnel requirements in
the active component by shifting positions from its noncombat force to its
operational combat force but faces significant challenges reducing its
overall end strength while increasing the size of its modular combat
force. The Army plans to reduce its current end strength of 512,400, based
upon a temporary authorized increase,10 to 482,400 soldiers by 2011 in
order to help fund the Army's priority acquisition programs.
Simultaneously, the Army plans to increase the number of soldiers in its
combat force from approximately 315,000 to 355,000 in order to meet the
increased personnel requirements of its new larger modular force
structure. The Army plans to utilize several initiatives to reduce and
realign the Army with the aim of meeting these planned manpower levels.

For example, the Army has experienced some success in converting
nonoperational military positions into civilian positions, thereby freeing
up soldiers to fill modular combat brigades' requirements. During fiscal
year 2005, the Army converted approximately 8,000 military positions to
civilian-staffed positions within the Army's institutional force. However,
officials believe additional conversions will be more challenging to
achieve. In addition to its success with the military-to-civilian
conversions, the Army has been given statutory authority to reduce active
personnel support to the National Guard and Reserves by 1,500.11 However,
the Army must still eliminate additional positions, utilizing these and
other initiatives, so it can reduce its overall end strength while filling
requirements for modular units.

9 GAO-06-111 .

10 The National Defense Authorization Act for Fiscal Year 2006, Pub. L.
No. 109-163, S: 401 (Jan. 6, 2006), sets the end strength level for the
Army at 512,400 but stipulates costs of active duty personnel of the Army
for that fiscal year in excess of 482,400 shall be paid out of funds
authorized to be appropriated for that fiscal year for a contingent
emergency reserve fund or as an emergency supplemental appropriation.

While the Army is attempting to reduce end strength and realign positions
to the combat force via several initiatives, it may have difficulty
meeting its expectations for some initiatives. For example, the Army
expected that the Base Realignment and Closure (BRAC) decisions of 2005
could free up approximately 2,000 to 3,000 positions in the institutional
Army, but the Army is revisiting this assumption based upon updated
manpower levels at the commands and installations approved for closure and
consolidation. Army officials believe they will be able to realign some
positions from BRAC, but it is not clear whether the reductions will free
up 2,000 to 3,000 military personnel. In the same vein, Army officials
expected to see reductions of several hundred base support staff resulting
from restationing forces currently overseas back to garrisons within the
United States. However, Army officials are still attempting to determine
if the actual savings will meet the original assumptions.

In addition, the Army's new modular force structure increases requirements
for military intelligence specialists, but according to Army officials the
Army will not be able to fully meet these requirements. The modular force
requires the Army to adjust the skill mix of its operational force by
adding 8,400 active component intelligence specialist positions to support
its information superiority capability-considered a key enabler of modular
force capabilities. However, the Army plans to fill only about 57 percent
of these positions by 2013 in part because of efforts to reduce overall
end strength. According to Army officials, despite these shortfalls,
intelligence capability has improved over that of the previous force;
however, shortfalls in filling intelligence requirements have stressed
intelligence specialists with a high tempo of deployments. However, since
intelligence was considered a key enabler of the modular design-a
component of the new design's improved situational awareness-it is unclear
how this shortage in planned intelligence capacity will affect the overall
capability of modular combat brigades.

11 The Ronald W. Reagan National Defense Authorization Act for Fiscal Year
2005, Pub. L. No. 108-375, S: 515 (Oct. 28, 2004) reduces the minimum
number of active component advisors required to be assigned to units of
the selected reserve from 5,000 to 3,500.

If the Army is unable to transfer enough active personnel to its combat
forces while simultaneously reducing its overall end strength, it will be
faced with a difficult choice. The Army could accept increased risk to its
operational units or nonoperational units that provide critical support,
such as training. Alternatively, the Army could ask DOD to seek an end
strength increase and identify funds to pay for additional personnel.
However, DOD is seeking to reduce end strength in all the services to
limit its personnel costs and provide funds for other priorities.

  The Army Has Objectives and Time Frames for Modularity but Lacks Performance
                          Metrics to Measure Progress

The Army lacks a comprehensive and transparent approach to effectively
measure its progress against stated modularity objectives, assess the need
for further changes to its modular unit designs, and monitor
implementation plans.

Army Lacks Performance Metrics to Measure the Results of Modularity

GAO and DOD, among others, have identified the importance of establishing
objectives that can be translated into measurable, results-oriented
metrics, which in turn provide accountability for results. In a 2003
report we found that the adoption of a results-oriented framework that
clearly establishes performance goals and measures progress toward those
goals was a key practice for implementing a successful transformation.12
DOD has also recognized the need to develop or refine metrics so it can
measure efforts to implement the defense strategy and provide useful
information to senior leadership.

The Army considers the Army Campaign Plan to be a key document guiding the
modular restructuring. The plan provides broad guidelines for modularity
and other program tasks across the entire Army. However,
modularity-related metrics within the plan are limited to a schedule for
creating modular units and an associated metric of achieving unit
readiness goals for equipment training and personnel by certain dates
after unit creation. Moreover, a 2005 assessment by the Office of
Management and Budget identified the total number of brigades created as
the only metric the Army has developed for measuring the success of its
modularity initiative. Another key planning document, the 2005 Army
Strategic Planning Guidance, identified several major expected advantages
of modularity, including an increase in the combat power of the active
component force by at least 30 percent, an increase in the rotational pool
of ready units by at least 50 percent, the creation of a deployable
joint-capable headquarters, a force design upon which the future
network-centric developments can be readily applied, and reduced stress on
the force through a more predictable deployment cycle. However, these
goals have not translated into outcome-related metrics that are reported
to provide decision makers a clear status of the modular restructuring as
a whole. Army officials stated that unit creation schedules and readiness
levels are the best available metrics for assessing modularity progress
because modularity is a reorganization encompassing hundreds of individual
procurement programs that would be difficult to collectively assess in a
modularity context.

12 GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers
and Organizational Transformations, GAO-03-669 (Washington, D.C.: July 2,
2003).

While we recognize the complexity of the modular restructuring, we also
note that without clear definitions of metrics, and periodic communication
of performance against these metrics, the Secretary of Defense and
Congress will have difficulty assessing the impact of refinements and
enhancements to the modular design, such as changes in the number of
modular combat and support brigades reported in the QDR and any changes in
resource requirements that may occur as a result of these changes.

Army Lacks a Long-term Plan for Comprehensively Evaluating Modular Designs

In fiscal year 2004, TRADOC's Analysis Center concluded that the modular
brigade combat team designs would be more capable than division-based
units based on an integrated and iterative analysis employing
computer-assisted exercises, subject matter experts, and senior observers.
This analysis culminated in the approval of modular brigade-based designs
for the Army. The assessment employed performance metrics such as mission
accomplishment, units' organic lethality, and survivability, and compared
the performance of variations on modular unit designs against the existing
division-based designs. The report emphasized that the Chief of Staff of
the Army had asked for "good enough" prototype designs that could be
quickly implemented, and the modular organizations assessed were not the
end of the development effort.

Since these initial design assessments, the Army has been assessing
implementation and making further adjustments in designs and
implementation plans through a number of venues, to include

           o  unit readiness reporting on personnel, equipment, and training;
           o  modular force coordination cells to assist units in the
           conversion process;
           o  modular force observation teams to collect lessons during
           training; and
           o  collection and analysis teams to assess units' effectiveness
           during deployment.

           TRADOC has approved some design change recommendations and has not
           approved others. For example, TRADOC analyzed a Department of the
           Army proposal to reduce the number of Long-Range Advanced Scout
           Surveillance Systems, but recommended retaining the higher number
           in the existing design in part because of decreases in units'
           assessed lethality and survivability with the reduced number of
           surveillance systems.

           Army officials maintain that ongoing assessments provide
           sufficient validation that the modularity concept works in
           practice. However, these assessments do not provide a
           comprehensive evaluation of the modular design as a whole.
           Further, the Army does not plan to conduct a similar overarching
           analysis to assess the modular force capabilities to perform
           operations across the full spectrum of potential conflict. In
           November 2005, we reported that methodically testing, exercising,
           and evaluating new doctrines and concepts is an important and
           established practice throughout the military, and that
           particularly large and complex issues may require long-term
           testing and evaluation that is guided by study plans.13 We believe
           the evolving nature of the design highlights the importance of
           planning for broad-based evaluations of the modular force to
           ensure the Army is achieving the capabilities it intended, and to
           provide an opportunity to make course corrections if needed. For
           example, one controversial element of the design was the decision
           to include two maneuver battalions instead of three in the brigade
           combat teams.14 TRADOC's 2004 analysis noted that the brigade
           designs with the two maneuver battalion organization had reduced
           versatility compared to the three maneuver battalion design, and
           cited this as one of the most significant areas of risk in the
           modular combat brigade design. Some defense experts, to include a
           current division commander and several retired Army generals, have
           expressed concerns about this aspect of the modular design. In
           addition, some of these experts have expressed concerns about
           whether the current designs have been sufficiently tested and
           whether they provide the best mix of capabilities to conduct
           full-spectrum operations. In addition, the Army has recently
           completed designs for support units and headquarters units. Once
           the Army gets more operational experience with the new modular
           units, it may find it needs to make further adjustments to its
           designs. Without another broad-based evaluation, the Secretary of
           Defense and congressional leadership will lack visibility into the
           capabilities of the brigade combat teams as they are being
           organized, staffed, and equipped.

           The fast pace, broad scope, and cost of the Army's restructuring
           to a modular force present considerable challenges for the Army,
           particularly as it continues to be heavily involved in fighting
           the Global War on Terrorism. These factors pose challenges to
           Congress as well to provide adequate oversight of the progress
           being made on achieving modularity goals and of funds being
           appropriated for this purpose. In this challenging environment, it
           is important for the Army to clearly establish and communicate its
           funding priorities and equipment and personnel requirements and
           assess the risks associated with its plans. Moreover, it is
           important for the Army to clearly establish a comprehensive
           long-term approach for its modular restructuring that reports not
           only a schedule of creating modular units, but measures of its
           progress toward meeting its goal of creating a more rapidly
           deployable, joint, expeditionary force. Without such an approach,
           the Secretary of Defense and Congress will not have the
           information needed to weigh competing funding priorities and
           monitor the Army's progress in its over $52 billion effort to
           transform its force.

           Mr. Chairman and members of the subcommittee, this concludes my
           prepared remarks. I would be happy to answer any questions you may
           have.

           For future questions about this statement, please contact Janet
           St. Laurent at (202) 512-4402. Other individuals making key
           contributions to this statement include Gwendolyn Jaffe, Assistant
           Director; Margaret Best; Alissa Czyz; Christopher Forys; Kevin
           Handley; Joah Iannotta; Harry Jobes; David Mayfield; Sharon
           Pickup; Jason Venner; and J. Andrew Walker.

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13 GAO, Military Readiness: Navy's Fleet Response Plan Would Benefit from
a Comprehensive Management Approach and Rigorous Testing, GAO-06-84
(Washington, D.C.: Nov. 22, 2005).

14 Brigades are made up of battalions; battalions made up of companies.

                               Concluding Remarks

                          Contacts and Acknowledgments

(350831)

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[email protected].

Highlights of GAO-06-548T , a testimony before the Subcommittee on
Tactical Air and Land Forces, Committee on Armed Services, House of
Representatives

April 4, 2006

FORCE STRUCTURE

Capabilities and Cost of Army Modular Force Remain Uncertain

The Army considers its modular force transformation the most extensive
restructuring it has undertaken since World War II. Restructuring the Army
from a division-based force to a modular brigade-based force will require
extensive investments in equipment and retraining of personnel. The
foundation of the modular force is the creation of standardized modular
combat brigades designed to be stand-alone, self-sufficient units that are
more rapidly deployable and better able to conduct joint operations than
their larger division-based predecessors.

GAO was asked to testify on the status of the Army's modularity effort.
This testimony addresses

(1) the Army's cost estimate for restructuring to a modular force,

(2) progress and plans for equipping modular combat brigades, (3) progress
made and challenges to meeting personnel requirements, and (4) the extent
to which the Army has developed an approach for assessing modularity
results and the need for further adjusting designs or implementation
plans.

This testimony is based on previous and ongoing GAO work examining Army
modularity plans and cost. GAO's work has been primarily focused on the
Army's active forces. GAO has suggested that Congress consider requiring
the Secretary of Defense to provide a plan for overseeing spending of
funds for modularity.

Although the Army is making progress creating modular units, it faces
significant challenges in managing costs and meeting equipment and
personnel requirements associated with modular restructuring in the active
component and National Guard. Moreover, the Army has not provided
sufficient information for the Department of Defense and congressional
decision makers to assess the capabilities, costs, affordability, and
risks of the Army's modular force implementation plans. The Army's cost
estimate for completing modular force restructuring by 2011 has grown from
an initial rough order of magnitude of $28 billion in 2004 to $52.5
billion currently. Although the Army's most recent estimate addresses some
shortcomings of its earlier estimate, it is not clear to what extent the
Army can achieve expected capabilities within its cost estimate and
planned time frames for completing unit conversions. Moreover, according
to senior Army officials, the Army may request additional funds for
modularity beyond 2011.

Although modular conversions are under way, the Army is not meeting its
near-term equipping goals for its active modular combat brigades, and
units are likely to have shortfalls of some key equipment until at least
2012. The Army plans to mitigate risk in the near term by providing
priority for equipping deploying units and maintaining other units at
lower equipping levels. However, it has not yet defined specific equipping
plans for units in various phases of its force rotation model. As a
result, it is unclear what level of equipment units will have and how well
units with low priority for equipment will be able to respond to
unforeseen crises.

In addition, the Army faces significant challenges in implementing its
plan to reduce overall active component end strength from 512,400 to
482,400 soldiers by fiscal year 2011 while increasing the size of its
modular combat force from 315,000 to 355,000. This will require the Army
to eliminate or realign many positions in its noncombat force. The Army
has made some progress in reducing military personnel in noncombat
positions through military civilian conversions and other initiatives, but
some of its goals for these initiatives may be difficult to meet and could
lead to difficult trade-offs. Already the Army does not fully plan to fill
some key intelligence positions required by its new modular force
structure.

Finally, the Army does not have a comprehensive and transparent approach
to measure progress against stated modularity objectives and assess the
need for further changes to modular designs. The Army has not established
outcome-related metrics linked to many of its modularity objectives.
Further, although the Army is analyzing lessons learned from Iraq and
training events, the Army does not have a long-term, comprehensive plan
for further analysis and testing of the designs and fielded capabilities.
Without performance metrics and a comprehensive testing plan, neither the
Secretary of Defense nor congressional leaders will have full visibility
into the capabilities of the modular force as it is currently organized,
staffed, and equipped.
*** End of document. ***