This report discusses the (1) high-risk areas of financial management, information technology, weapon systems acquisition, contract management, infrastructure, and inventory management; (2) underlying causes of these high-risk areas; and (3) overall strategy we believe is needed to eliminate them.

The Secretary's November 10, 1997, DRI was DOD'S latest effort to reform operations and processes. The report was an outgrowth of recommendations made in the Report of the Quadrennial Defense Review. The Quadrennial Defense Review report noted that, while DOD had reduced active duty personnel by 32 percent between 1989 and 1997, it had reduced the number of people performing infrastructure functions by only 28 percent. That report called for significant additional reductions in military and civilian personnel. Reductions called for by the Quadrennial Defense Review and others already planned by DOD would reduce military and DOD civilian personnel end strength levels by an additional 59,000 and 130,000 positions, respectively, below their fiscal year 1998 levels.

In this book we introduce the basics of the federal budget process, provide an historical background on the foundation and development of the budget process, indicate how defense spending may be measured and how it impacts the economy, describe and analyze how Planning, Programming, Budgeting, and Execution System (PPBES) operates and should function to produce the annual defense budget proposal to Congress, analyze the role of Congress in debating and deciding on defense appropriations and the politics of the budgetary process including the use of supplemental appropriations to fund national defense, analyze budget execution dynamics, identify the principal participants in the defense budget process in the Pentagon and military commands, assess federal and Department of Defense (DoD) financial management and business process challenges and issues, and describe the processes used to resource acquisition of defense war fighting assets, including reforms in acquisition and linkages between PPBES and the defense acquisition process.