communications, satellite intelligence, Global Positioning System, imagery, weather, missile warning, and other space-based capabilities in every aspect of planning and operations. We are working diligently with the joint and interagency space community to ensure that Army and joint space systems continue to provide their essential capabilities now and for the Objective Force.

Aviation Transformation and Restructuring

Aviation Transformation further demonstrates our hard choices in balancing risk to resource Transformation. Our current interim plan lowers operating and sustainment costs while posturing aviation for arrival of the Objective Force by 2010. Apache modernization is an integral part of the plan. The AH-64D Longbow will enhance domination of the maneuver battlespace and provide the ground commander with a versatile, long-range weapon system against a range of fixed and moving targets. The RAH-66 Comanche program is on track to field a helicopter with stealth qualities in FY 2009 to provide Armed Reconnaissance and Close Combat support to our Objective Force FCS formations. The UH-60 Blackhawk continues to be the assault workhorse of Army Aviation, executing over 40% of The Army's annual flying hours. We are extending the life of the UH-60 while providing it with capabilities required of the future battlespace. Similarly, we are fully committed to the CH-47F Chinook program. The CH47 was the primary lift platform in OEF and performed superbly. The Army is committed to improving on this capability and extending the life of this Army workhorse. As we restructure and standardize attack and lift formations across the force, we will also adjust the stationing and alignment of Reserve Component aviation units to mitigate the nearterm risk.

Army National Guard Aviation comprises almost 50% of our aviation force and is one of our most valuable assets. Essential for successful execution of the Nation's military strategy, the ARNG currently has aviation units deployed in Afghanistan, Kuwait, Bosnia, Europe, and Saudi Arabia, as well as Central and South America.

Army Guard Restructuring Initiative (AGRI)

ARNGRI seeks to transform a sizeable portion of ARNG combat structure into more deployable, flexible fighting forces to support Army requirements at home and abroad. ARNGRI will introduce two new organizations into the force structure: Mobile Light Brigades (MLB) and Multi-Functional Divisions (MFD). These organizations will provide full spectrum capabilities in support of Combatant Commanders. MLB will operate as subordinate units to MFD, which will also contain two combat support / service support brigades capable of supporting either major combat or homeland security operations.

Army Reserve Transformation Initiatives

Army Reserve initiatives ensure the USAR is missioned, organized, and equipped to provide interoperability across the full spectrum of military operations. Transformational

organizations include experimentation forces, information operations, joint augmentation, network security, and interagency units. The Readiness Command and Federal Reserve Restructuring Initiatives will help the USAR fulfill these new mission requirements. Regional Readiness Commands will focus on readiness, leader development, and training, which will demand a new personnel system that achieves holistic life-cycle management for Reserve Soldiers.

Institutional – Enhancing the Way We Do Business

We cannot accelerate Army Transformation without transforming the way The Army does business from transformation of logistics and acquisition to personnel and installation transformation. Changing The Army is first about changing the way we think, and better business practices represent practical application of common sense initiatives that best serve.

Transformation of Installation Management (TIM)

Recognizing the requirement to enhance support to commanders, The Army restructured the management of Army installations under the Installation Management Agency (IMA) a new field-operating agency of the Assistant Chief of Staff for Installation Management. Its mission is to provide equitable, efficient, and effective management of Army installations worldwide to support readiness; enable Well-Being; improve infrastructure; and preserve the environment. This new management approach eliminates the migration of base operations funds to other operational accounts below the HQDA level. It also enables the development of multi-functional installations to support evolving force structure and Army Transformation.

Barracks and the Family Housing programs significantly increase the well being of our Soldiers and their families. We established the Barracks Upgrade Program (BUP) in the late 1990's to improve single Soldiers' housing conditions. Through 2002, we have upgraded or funded-for-upgrade 70% of our permanent party barracks to Soldier suites that consist of two single bedrooms with a shared bath and common area. We will continue the BUP until all permanent party barracks achieve this standard.

We established the Residential Communities Initiative for our families. This program capitalizes on commercial expertise and private capital to perform a non-core function for The Army-family housing management. The program provides greater value to us by eliminating the housing deficit at our first eleven sites, while leveraging a $209M Army investment into $4.1B of initial private development. Pending OSD and Congressional approval, 28 projects are planned through 2006 that will impact over 72,000 housing units or 80% of Army Family Housing in the United States. By the end of 2007, we will have the programs and projects in place to meet the OSD goal of eliminating inadequate family housing. We will accomplish this goal through RCI and increased Army investment in family housing construction at non-privatized installations. The Reserve Component (RC) enhances RCI through real property exchange authority that is only available to the RC. This legislative authority allows the exchange of RC owned property

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 (13MP) executes a multi-year, $3.2B 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 13MP 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 $500K 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. MRI supports both the current forces and the Stryker Brigades, and is the bridge to the Objective Medical Force. Business Initiatives Council (BIC)

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.