With us mr. John roth performing the duties of the understand secretary of defense for comptroller and the joint staff director for forestructure, resources and assessment. The briefing will be 40 minutes in duration and on the record. Well start off with a few opening comments from both gentlemen, then well open the floor to questions. With that. Thank you eric. Good morning or good afternoon almost here. Good to see you all. I am not going to do a dramatic reading of the book. I promise you. Its there for reference in case i have to go to it. So, again, we will walk through our presentation of the budget here. Between the general and myself, well try to answer your questions as best we can. As you know, today the president , president trump, sent to congress his proposed fy 2018 budget request. What we will do here this afternoon is outline the request for the Defense Department. Go to the first slide, please. The message is really, on the first slide, is the intent is that fy 18 budget request be the next step in rebuilding the u. S. Armed forces. Secretary mattis, from virtually the first day that he was in the building, talked in terms of a threestep process here initially on how to get there in terms of getting ready, getting balanced, and getting bigger and more lethal. And so our request in fiscal year 2017 for the Additional Resources and finally culminating in the fy 17 appropriations act was intended to address nearterm readiness. So, with the Additional Resources, we did in fact get in the fy 2017 budget we are in the process of implementing that as we speak. With this fy 2018 budget request we will build on the readiness improvements that will make for the remainder of this fiscal year and add resources in order to balance the force. Well walk you through the examples. Ultimately thats not the end of the journey. Our goal is and in fiscal year 2019 will be to sustain the gains that hopefully we will be able to make in fiscal year 2017 and 2018, and by that time, informed by the new Defense Strategy, well build further to achieve a bigger, more lethal and ready force. Next slide, please. So the numbers. The base budget request is 574. 5 billion. The overseas Contingency Operation budget, 64. 6 billion. For a total of 639. 1 billion. This base budget request is 52 billion above the Defense Departments share of the fy 2018 Defense Budget cap in the current law. The budget and control act. It is absolutely essential for us, in order to achieve the goals and in order to meet the strategy, we must increase the Defense Budget cap. We have to reverse defense sequestration in order to adequately protect u. S. National security. Since enactmented of budget control act in 2011 the world has become a more dangerous place with rising terrorism and more aggressive potential adversaries. Under the budget and control act, the military has, during the same period of time, become smaller, readiness has eroded and modernization has been deferred. Thats not a good place to be. This budget begins to balance the Defense Program and establishes a foundation for rebuilding the u. S. Military into that more capable, lethal and ready force. Next slide, please. So here are some of the major themes in terms from a budget perspective that inform the building of this budget. Again, as i continue to emphasize, improving readiness has been priority one for secretary mattis since he walked in the door. What does improving war fighter readiness mean . What will it result in . More aircraft in the air, more ships at sea, more troops on the field and more munitions on hand in order to rebuild the current force. The budget also addresses the evolving National Security challenges, first and foremost we need to retain our counterterrorism and Counter Insurgency competencies. We want to seek to preserve our competitive advantage versus our major adversaries and we look to sustain our Capability Development for new war fighter concepts. A number of recapitalization areas. One of the highest priorities is to recapitalize and modernize the Nuclear Enterprise across the entire nuclear triad. Focus on innovation as a way to maintain our technological advantage, and we seek to sustain the finest fighting force in the world. Sensitive to the fact that we are asking for an awful lot of money from the american taxpayer, we look to continue to identify and pursue reforms to improve efficiencies and achieve cost savings. Those are the major themes in the budget. Like any good budgeteer, i have a couple of graphs that will make your eyes glass over here for the next two slides. This slide is essentially a picture of the Defense Budget since 9 11. The blue is the base budget, and the gray is the overseas Contingency Operation budget. I draw your attention to the most important thing in the slide are the last two bars on right, particularly the one on the for fiscal year 17. Excuse me. 17 and 18. Again, there is the numbers i just alluded to, the 574 billion. You can see, in addition to being above the budget cap, its also a significant increase over the enacted fy 17 level, which is 523 billion. Youll see on the top in the gray, the overseas Contingency Operation budget. That is a distorted picture. I caution you. I think as many of you are aware, that, as the fy 17 appropriations act was finalized, the congressional the congressional committees put all the Additional Resources we requested for particularly the readiness improvements, they put it all in the overseas Contingency Operation budget. So that fy 17 number is distorted. So that makes your comparisons from 17 to 18 a little difficult. It also offers me an opportunity to, in a sense, apologize for whats going to be a difficult comparison between any of the fy 17 numbers and the fy 18 numbers. It has to do with sort of the tyranny, what was happening in the calendar and when we had to lock this fy 18 budget and the fact that the fy 17 appropriations process had not concluded yet. And so, as in late april early may, as we were wrapping up this budget, we didnt have the final fy 17 appropriations. So, depending on which book you have, we have and are providing an overview book and weapons book and the like. The numbers you see there for the fy 17 column are the fy 17 budget request number. They are not the enacted numbers. Thats because we didnt have those numbers available to us as we put those books to bed. If you look at the office of management and budgets documentation, all the books that they have, virtually all their fy 17 numbers are essentially a mathematical calculation of a yearlong continuing resolution. And so its a mathematical number that doesnt have any particular problematic basis. So that distorts all the comparisons between 17 and 18. And as we go forward here, selectively, where hopefully we had made some sense for example, in this graph i did pick up the enacted numbers, but be aware that we have been playing catchup since we locked this budget in terms of trying to catch up to when the actual fy 17 budget was enacted and we were making our final decisions here on fy 18. Its unfortunately just the nature of the timing as we have put these two processes through their paces. Next slide. Just basically, a bit of an expansion on the previous slide to show you the plus 52 billion. You see it there on the right. That the calculated budget and control act. D. O. D. Cap for fy 18 would be around 522 billion. Our request is 52 billion above that. Some of you may have seen numbers in the press in terms of plus 54 billion. That is the whole defense function, which includes the department of energy portion of the budget as well. That is also particularly in the omb material, youll see the plus 54. Our portion of that increase was the 52 billion you see on this graph. Let me pause and hand off to the general to walk through a little bit of our readiness story. Next chart, please. The fy 18 request picks up after the supplemental appropriation for fiscal year 17. 17 was about addressing immediate war fighting readiness. In 18, we want to continue to build a baseline from which to move forward from regarding readiness. You see continued significant investment in the aspect of unit preparedness. Training, maintenance and modernization, to restore war fighting readiness while setting conditions for future sustained comprehensive readiness. When we say comprehensive readiness, this being the balance between the capacity, the capability, and Mission Preparedness of our units. This budget also supports combat and commander exercises and engagements to increase joint training capability, invest in critical aviation munitions and command and theater activities. Next chart. This describes the service just highlights servicespecific increases, or investments, intended to increase readiness. So you see here under each of these Service Entries areas that would be that we will invest in regarding training, equipping, maintaining the force at higher levels than we had been under previous years. Where decisions were made to ensure that the force is always ready to accomplish the mission to deploy to the theaters of operation that we are engaged in today, while in some ways sacrificing the longterm readiness of the force and the modernization of the force. Fiscal year 18, as we say, fills those holes and allows us to recover readiness in the aspect of full spectrum readiness. Readiness to operate in different theaters against different adversaries, over different periods of time. This budget allows us to be able to recover that readiness and, as ive said, establish a baseline from which to move forward looking to the future. Next slide. Very busy slide with lots of numbers. Mostly just to provide that for your information. I draw your attention really, the only Important Message on this slide is the right hand column and the bumper sticker. What this budget does is pick up and sustains essentially an increase in end strength over 56,000 from what the 18 column in the fy 17 budget was. To some extent, particularly the Army End Strength increase was inherent in the fy 17 authorization act. We pick up and continue to fund that. There are minor increases in the middle column in navy, marine corps and air force. For the most part is continues the momentum to building the force. Well first work on the National Defense strategy and well figure out what is the appropriate forestructure to execute the new Defense Strategy when thats done and it will inform the fy 19 budget. Next slide. This gives you a Market Basket of some of the major Acquisition Programs, its not inclusive. Its the big ticket drivers, if you will. The dollars on this slide are a combination are a combination of procurement and r d dollars in the base budget. In terms of aircraft, you see the biggest Acquisition Program we continue to have is in fact the f35 joint Strike Fighter program where were requesting 70 aircraft in fiscal year 18. Those 70 aircraft are broken down into 46 aircraft for the air force variant, which is the f35a. We are asking for 20 aircraft for the mostly cloudy variant, the f35b and four for the navy variant, which is the f35c. Youll see there Market Basket, asking for four f in 18s and others. The b 21 are r d. We dont start procuring that until 2020s. We have essentially eight combat ships. Eight Battle Force Ships were requesting in fy 18. These are the six biggest ships here, in addition there is a fleet oiler. And a towing salvage and rescue ship as well. Were asking for eight battle shichs ships. Two submarines, two destroys and lcs. This is the second of the ford class aircraft carriers, uss enterprise. The continued investment in space programs. Three launches are being financed in fy 18. All three will be procured under competitive acquisition process. Next slide. These are the preferred munitions. As we closed out this budget over the last two, three weeks in particular, a great deal of concern was being raised with current inventory levels, and particularly given some of the expenditures in the centcom areas of operation as we talk. The secretary mandated and insisted that we fully fund to the maximum extent possible the full production capability for certain selected preferred mu munitions. This really only half the story. This is the base budget. There is another billion dollars of preferred munitions in the overseas contingency budget as well. You see selected ground systems particularly for the amphibious combat vehicle for the mostly cloudy marine corps and army. Missiles out of the missile Defense Program. The total missile Defense Program is 10 billion in 2018. These are the two major programs in that portfolio. Next slide. This is just a selected set of examples. Largely because, a, they were unclassified and b, just to give you examples of some of the things weve done in past years in terms of focus on technology and innovation. In our mind we have funded a pretty robust science and technology program, 13. 2 billion. And then we offer you here just a couple examples in terms of the alternate navigation technology, directed energy kinds of efforts. Highspeed strike weapons, lowcost Unmanned Systems and, in particular on the bottom there, reacting to current changes in the threat in the field, were investing across d. O. D. To counter the illicit Unmanned Aerial Systems that were encountering even today. This is a Market Basket of our continued concern with investing in new innovation and new technologies. Next slide, please. Were pretty pleased with our situation with facilities investment. This is an area where, when you get constrained budgets and you have lower top lines you tend to take risk, and you tend to defer. Sort of like youre going to wait to fix that window until the next year as long as the roof is not leaking or Something Like that. So we have had pretty anemic military construction facilities budgets over the last four or five years. This year reflects a 25 increase in the military construction budget going from 7. 8 billion to 9. 8 billion. There is a readiness nexus with this as well. Were investing in operational and Training Facilities and maintenance and production facilities in particular. As far as overseas, we continue to invest in the infrastructure to support the relocation of machines from japan to guam. And my footstomp on this slide is that we are seeking the authority, once again, to commence a new base realignment and closearound in 2021. We need to in order to get a round done in 2021 you have to begin the analysis and begin the process here. It has been over ten years since we have had a brac round. 2005 was the last year. The sum total of the four or five rounds that we have had since the 1990s and 2005 has resulted in approximately 12 billion a year in savings by having done that. That is a gift that keeps giving. All were asking for at this stage is the authority we cant even do the Detailed Analysis under current law. What we have is a parametric estimate that tells us weve got about 20 excess capacity. If that number is anywhere near correct we estimate we could save about 2 billion a year that we can reinvest into readiness and modernization kinds of requirements. So we are foregoing, we think, a very significant opportunity to get some savings. Its a very structured, systematic, rigorous process that ultimately congress has the final say on. So, again, we are asking for the authority for brac. We think were getting signals from committees that theyre more amenable to it so well be pushing that pretty hard. Next slide. Were also, again, as i noted, we continue to look at our business processes. The secretary, when he came in as well, said that he had a rebuilding and reform agenda that he has in mind. So there is a number of ongoing activities that we continue to pursue. Were continuing to look at the major headquarters and to reduce them by 25 . We continue with acquisition reform, particularly to better buying power 3. 0. We continue to look at take a hard look at our Service Support contracts and make sure that theyre appropriate. And particularly for us in the Financial Management world, 2018 is an extremely important year. We are going to move from getting ready for an audit to actually beginning the audit. Thats an extraordinarily important year. Were going to learn a lot from it. There will be wins and losses that come out of that process, but what i always describe a little bit spring training is over, we need to get on with the season. Okay. We need to get on to actually doing the audits and we think well learn an awful lot in terms of getting us to where we need to be. Next slide. Similar here with the what the theme in this slide is just some of the reforms that came out of the 2017 authorization act. As many of you are aware, we are reorganizing the Acquisition Community into two undersecretaries. A chief Technology Officer and another in charge of acquisition and sustainment. We are in a process of standing up a chief management officer. Were going to elevate the Cyber Command into a standalone combat and command and develop and implement a plan to reform the administration of Defense Health agency and the military treatment facilities. Smart things to do in terms of reorganizing the department. An