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with public or private entities and has a tremendous potential to improve future RC infrastructure at no governmental cost

The Army has also aggressively reduced its financial burden and physical footprint by disposing of 34% of its facilities from a 1990 high of 116 billion square feet. The Army anticipates that the Congressional FY 2005 Base Realignment and Closure (BRAC) authority will permit additional appropriate reductions. BRAC will enable us to dispose of excess infrastructure and realign the remaining facilities with the requirements of the transforming Army and the Objective Force. BRAC will also allow us to re-allocate resources from closed or realigned installations to other high priority requirements.

The Army continues to improve its utilities infrastructure by divesting non-core utility systems' operation and maintenance through privatization. As of December 2002, we had privatized 64 of the 351 systems in the program, and we have an additional 104 presently under negotiation.

As part of our Army Knowledge Management, we are modernizing our Installation Information Infrastructure - infostructure - to support a net-centric, knowledge-based Army. The Installation Information Infrastructure Modernization Program (I3MP) executes a multi-year, S3.2B program for upgrades to optical fiber and copper cable, installation of advanced digital equipment, and upgrades to Defense Global Information Grid gateways. This program will ensure worldwide, high-speed data connectivity at Army installations. To date, we have completed 22 of 95 CONUS installations and initiated upgrades at four installations outside of the continental United States. We plan to complete I3MP in 2009.

Acquisition Transformation

The Army is leading the way in acquisition reform within DoD's broad transformation of defense acquisition policies and procedures. Our FCS program may prove to be the largest DoD acquisition effort that fully embraces evolutionary concepts of acquisition and spiral development - leveraging the potential of rapid advancement within individual technologies by allowing changes within programs as technologies mature.

The FCS program is evolutionary in its design and incorporates periodic blocked improvements within its 19 systems and 540 spirally developing technologies - the Objective Force Soldier and 18 manned and unmanned systems. The Army's use of a Lead System Integrator enables a "best of the best" approach to selection from competing industry efforts. Our unprecedented partnership with DARPA ensures the FCS effort leverages that agency's DoD-wide perspective and resources to produce the best capability and value for the Joint Force.

The Army continues to revise its acquisition policies and applicable regulatory guidance. The Army transferred control of all acquisition program management to the Army Acquisition Executive and eliminated duplication of effort in two major Army commands. Subsequently, twelve Program Executive Officers (PEO) report to the Army Acquisition Executive, and their subordinate PEOs assumed management of all Army acquisition programs, regardless of Acquisition Category. The plan ensures a single chain of authority for acquisition programs within The Army, and clearly holds Program Managers responsible and accountable for life cycle program management.

Another initiative is the Army Contracting Agency (ACA) that realigns our previously decentralized installation and information technology contracting processes into one organization. Responsible for all contracts over S500K and tasked to eliminate redundant contracts, ACA leverages Army-wide requirements to achieve economies of scale. ACA supports Army Transformation efforts by aligning all base support contracting into a single organization; acts as the single coordinating element and forms the base from which to deploy contingency-contracting, operational support to the warfighting commands; and will continue to support small business awards.

Logistics Transformation

Designing the right logistics architecture is fundamental to success. The Army's Logistics Transformation will focus on creating an overarching corporate logistics enterprise that employs industries' best business practices. Our mobility and deployability goals for the Objective Force are to deploy a combat brigade within 96 hours after lift off, a division on the ground in 120 hours, and a five-division corps in theater in 30 days. To achieve this strategic responsiveness, the Army Strategic Mobility Program serves as a catalyst to bring about force projection changes both in The Army's and in our Sister Services' lift programs. Platforms like the Intra-Theater Support Vessel and Inter-Theater Shallow Draft High Speed Sealift provide transformational capabilities for operational and strategic maneuver and sustainment of Army formations.

Army Prepositioned Stocks ashore and afloat continue to be a critical component of Army power projection. The Army is currently participating in a Joint Staff led Worldwide Prepositioning Study to determine if location, mix, and capabilities in existing stocks require adjustments to meet the Defense Strategy more effectively.

The Objective Force requires The Army to optimize its logistics footprint through the leverage of technology and innovative sustainment concepts. We are already developing and integrating key enablers to provide a transformed, corporate logistics enterprise, including embedded diagnostics and prognostics, tactical logistics data digitization, serial number tracking, and the Global Combat Service Support - Army (GCSS-A) system that utilizes a commercial Enterprise Resource Planning solution. The ERP approach changes our logistics automation systems strategy from one of custom code development for unique Army requirements to adoption of a commercial off-the-shelf product.

The selective use of the Logistics Civil Augmentation Program to augment military logistics force structure provides commanders with the flexibility to reallocate manpower, resources, and materiel by adding contractors to the equation of logistics support. In addition to providing services and some supply support, these contractors can quickly deploy to establish base camps, receive and process Soldiers as they begin arriving in theater, and reverse the process on return.

Advanced Medical Technology

The Army is the lead agent for DoD vaccine, drug, and development programs for medical countermeasures to battlefield threats. This includes vaccines against naturally occurring infectious diseases of military significance, combat casualty care, military operational medicine, and telemedicine research. The program also funds Food and Drug Administration requirements for technology transition to advanced development.

The medical force provides the requisite medical intervention and care for the Joint Force deployed around the globe. With its Medical Reengineering Initiative, The Army Medical Department has transformed 28% of its force structure to promote scalability through tailored, capabilities-based packages that result in improved tactical mobility, reduced footprint, and increased modularity for flexible task organization. MR] supports both the current forces and the Stryker Brigades, and is the bridge to the Objective Medical Force.

Business Initiatives Council (B1C)

In June 2001, the Secretary of Defense established the DoD Business Initiatives Council with a goal to improve business operations and processes. We aggressively explored ways to improve internal business practices, and established The Army BIC. The Secretary of the Army has approved a total of 35 initiatives under the ABIC. We submitted a number of the initiatives through the formal DoD BIC process for implementation across the Services and other DoD activities. The BIC process has helped to create a culture of innovation and inter-service cooperation as a result of cooperation across the military departments, the Joint Staff and OSD.

A COMMITMENT TO THE FUTURE

With the continued strong support of the Administration, the Congress, our Soldiers', and our civilians, and the greatest industrial base and science and technology communities in the world, The Army will field the Objective Force - this decade. By 2010, we will have fielded the first operationally capable Objective Force unit equipped with the Future Combat Systems. Our Stryker Brigade Combat Teams will be providing Combatant Commanders capabilities not currently available - enhanced strategic responsiveness and the ability to operate in a distributed, non-linear battlespace. Through selective recapitalization and modernization of today's systems that enable our Soldiers to preserve our legacy, we will have sustained a decisive-win capability at a high state of readiness as an integral part of the Joint Force. We will have significantly improved the well being of our people and sustainment of Army infrastructure.

REPORT OF THE SECRETARY OF THE NAVY

Introduction

The past year has been one of tremendous accomplishment for our Navy and Marine Corps. Our men and women operating in the air, on and under the sea, and on the ground are at the leading edge of the Global War on Terrorism (GWOT). Forward deployed, combat ready Naval Forces - sustained by naval and civilian shipmates around the world- are proving every day the unique value of sovereign, independent Forces projecting power from the sea.

Guided by the President's National Security Strategy and the Secretary of Defense's (SECDEF) Defense Planning Guidance, we continue to maintain superiority over a broad range of innovative and determined enemies. Our vision and our way ahead - Naval Power 21 and the Naval Transformation Roadmap - provide the framework to align, organize, and integrate our Naval Forces to meet the wide array of challenges that lie ahead. This will require accelerating operational concepts and technologies to improve war-fighting effectiveness and enhance homeland defense; shaping and educating our force to operate tomorrow's Fleet; sustaining readiness; and harvesting efficiencies to invest in the transformation of our Navy and Marine Corps.

Our FY 2004 Budget consolidates performance management goals of the President's Management Agenda (PMA) with the FY 2001 Quadrennial Defense Review (QDR) goals. It also designates metrics the Department of Defense (DoD) will use to track associated performance results. Consistent with Government Performance and Results Act (GPRA) guidance, these results can be found in the Department of the Navy (DON) FY 2004 Budget Highlights Book (February 2003). Our efforts are summarized below and are aligned with SECDEF's balanced scorecard approach to risk management across the four components of Operations, Force Management, Future Challenges and Institutional focus areas.

Operations

We are at war and our orders from the President are to be ready for potential additional hostilities - now and in the future. We will continue to maintain our readiness in responding to global crises while remaining vigilant at home and overseas. Our enemies are widely dispersed, persistent, and innovative and our task is to dissuade, deter or defeat them. Since our Naval Forces are the Nation's "first responders" on the scene, they must be equipped, ready and capable of helping clear the way for quick and forced entry, attack and sustained battle and a gradual, graceful exit. We must continue to organize, equip and train to fight jointly and improve joint war-fighting capabilities.

We have the most combat ready force in our history. Over the past year, our investment in personnel, spare parts, ordnance, and fuel accounts enabled our Naval Forces to answer an early call to action, deploy at a higher state of combat readiness, and build a more responsive surge capability. These investments were vital to sustaining the GWOT and assuring friends and allies with our global response.

During FY 2002, we increased our Battle Group Readiness by improving manning earlier in the pre-deployment cycle. We began the merger of Navy and Marine Corps tactical air power, removing redundancies and creating an anticipated savings of several billion dollars. Our littoral warfare strategy has matured into the Expeditionary Maneuver Warfare (EMW) concept with the Advanced Amphibious Assault Vehicle (AAAV), MV22, Maritime Prepositioning Force (Enhancement) (MPF(E)) and Landing Craft, Air Cushion (LCAC) systems providing the tactical mobility assets to spearhead EMW. We developed the Global Concept of Operations which, when fully implemented, will create Joint Maritime Force Packages, providing 37 Independent Strike Groups vice 19 Groups, to better support the 1-4-2-1 strategy set forth in the QDR. For the Missile Defense Program, we established a path for operational capability by FY 2004 and the test program achieved a third consecutive hit-to-kill intercept. In support of our GWOT, the FY 2002 supplemental budget included S350M to facilitate the re-manufacture of 440 Tomahawk missiles.

As we optimize the resources given to the DON by the Congress and American taxpayer, we are revamping the ways we use our people to improve their efficiency and effectiveness. On our ships, the Optimal Manning Experiment is seeking to develop a more efficient model for shipboard manning in the 21st century. Sea Swap, a plan to deploy a single ship for 18 months by rotating three crews, intends to capitalize on operational savings by avoiding the four-to-six-week transit times normally required for CONUS-based ships to reach Persian Gulf destinations. Finally, we created the new Marine Corps' Anti-Terrorism Expeditionary Brigade (4,h MEB) to support our GWOT.

Force Management

Last year, we targeted resources at retaining, recruiting, and training our Sailors and Marines to create an environment that promotes personal and professional growth while providing the kind of war fighters needed for our 21" Century Naval Force. Most importantly, we developed a more responsive Force — one that surged forward with the right people, to the right place, at the right time to fulfill our national security requirements. We developed manpower policies that provided a more optimum total force mix of people (active, reserve, civilian and contractor) and skill sets for our future programs and systems. We sustained our Quality-of-Service programs to be competitive with Corporate America, including: state-of-the-art tools and training; performance-based compensation and promotion opportunities; efficient health care; and reasonable OPTEMPO and PERSTEMPO. Overall, during FY 2002, we witnessed continued

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