EXECUTIVE OFFICE OF THE PRESIDENT …

                         EXECUTIVE OFFICE OF THE PRESIDENT
                             OFFICE OF MANAGEMENT AND BUDGET
                                       WASHINGTON, D.C. 20503


                                                                                 July 21, 2005
                                                                                 (Senate)

       STATEMENT OF ADMINISTRATION POLICY 

              S. 1042 - National Defense Authorization Act for Fiscal Year 2006
                                     (Sen. Warner (R) VA)

The Administration commends the Senate Armed Services Committee for its continued support
of our national defense and supports passage of S. 1042. The Committee's strong support for the
President's priorities is critical to the continued successful prosecution of the Global War on
Terror.

The Administration appreciates the Committee's support of the President's overall Budget level
for defense activities. Any significant reductions from this overall level of $419 billion, such as
the levels proposed by the Senate Appropriations Committee's current 302(b) allocation for
defense, would be strongly opposed. The Administration thanks the Committee for providing
the requested 3.1 percent military pay raise, the authorized increase to the death gratuity and life
insurance benefits, and the reauthorization of needed special pays and bonuses. We appreciate
the Committee's support for many programs, especially acquisition programs critical to ensuring
America's future military dominance ­ such as the DD(X) destroyer and other next-generation
ships, Joint Strike Fighter, Heavy Lift Replacement Helicopter, and Future Combat Systems
programs. We also appreciate the Committee's support for Defense Health, Cooperative Threat
Reduction, and the Energy Conservation Investment Program.

The Administration also thanks Congress for providing the vital funds in the recently enacted FY
2005 Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and
Tsunami Relief. The Administration appreciates Congress' strong commitment to our troops and
the Global War on Terror and notes that the supplemental funding will be sufficient to pay for
our efforts through the end of the current fiscal year. While the $50 billion bridge fund included
in this bill is not needed for the remainder of FY 2005, the Administration looks forward to
working with Congress to ensure that there is no interruption of resources for the Global War on
Terror in FY 2006 and that funding is allocated in the most effective way to meet the needs of
commanders in the field.

The Administration encourages the Senate to include the requested Administration priorities,
including:

Security Partnerships with Other Nations: We strongly urge Congress to provide the
Administration with the full set of authorities requested to build security partnerships to fight the
Global War on Terror. The requested authorities include the Commander's Emergency
Response Program (CERP) Fund, authority to train and equip foreign military or security forces,
reimbursement for coalition support forces, logistics support to other nations, and support for
emergency stabilization and reconstruction activities. Flexible authorities provided by Congress
have proven critical in responding to needs in Afghanistan and Iraq. The requested authorities
build upon this success but also would enable a broader range of responses to address the Global
War on Terror, including new tools to ensure that foreign states do not become terrorist havens.
While the Administration appreciates the Committee's authorization of $500 million in the
CERP for Iraq and Afghanistan, we urge Congress to extend the CERP authority for use
anywhere it is needed, make it permanent, and include the concurrence of the Secretary of State,
as the Administration has requested.

Stabilization and Reconstruction Support: The Administration strongly urges the inclusion of its
proposal to temporarily authorize the Department of Defense (DOD), at the request of the
Secretary of State, to transfer funds, goods, and services to other U.S. departments and agencies,
such as the new Office of the Coordinator for Reconstruction and Stabilization (S/CRS), for the
purpose of restoring or maintaining peace and security in a foreign country. This authority
would be used for unforeseen emergencies requiring immediate stabilization and reconstruction
assistance where a response is in the U.S. national interest. At a time of increasing instability in
many parts of the world, it is important that the U.S. Government has the ability to respond
quickly to such situations. This emergency authority would enable DOD, the State Department,
and other Federal agencies to work together during stabilization, security, and reconstruction
operations and eliminate delays in deploying S/CRS and other U.S. Government elements in the
critical stages of stabilization, security, and reconstruction efforts.


Robust Nuclear Earth Penetrator: The Administration urges the Senate to approve the
Administration's request to fund an integrated DOD and Department of Energy program to study
the feasibility of adapting an existing warhead to a new precision penetrator casing and bomber
platform integration.

Purchase and Destruction of Weapons Overseas: The Administration thanks the Committee for
authorizing funds to purchase weapons abroad for force protection and to destroy them, but
urges Congress to modify section 324 to include the concurrence of the Secretary of State, as the
Administration had requested.

Protection of Sensitive Information: The Administration supports section 922, which would
protect sensitive operational information of the Defense Intelligence Agency, and recommends
that access by the space control advisory committee to Federal agency information under section
911(d)(1), apply only "to the extent permitted by law," in order to preserve existing protections
for sensitive information, including personal information, intelligence sources and methods, and
trade secrets.

Military Construction/Family Housing: The Administration supports the $12.1 billion
authorized for military construction and family housing, which will help meet the Nation's
military construction priorities for our forces at home and abroad. The Administration is
concerned, however, that the bill does not provide the flexibility to use operation and
maintenance funds for emergency construction requirements outside the United States.

The Administration has a number of concerns, including:

Amendments Interfering with Effective Conduct of War on Terror: The Administration
understands that amendments may be offered to establish a national commission on the detainee
operations or to regulate the detention, treatment or trial of terrorists captured in the war on
terror. The Administration strongly opposes such amendments, which would interfere with the
protection of Americans from terrorism by diverting resources from the war to answer
unnecessary or duplicative inquiry or by restricting the President's ability to conduct the war
effectively under existing law. The Constitution and the Authorization for Use of Military Force
Joint Resolution (Public Law 107-40, September 18, 2001) provide the authority the President

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needs to conduct the war effectively and protect the American people. If legislation is presented
that would restrict the President's authority to protect Americans effectively from terrorist attack
and bring terrorists to justice, the President's senior advisers would recommend that he veto the
bill.

Aircraft Carrier Force Structure: The Administration strongly opposes any further delay in the
retirement of the carrier U.S.S. John F. Kennedy. The Senate is urged to eliminate section 321,
which prohibits retirement of the carrier for at least another 180 days beyond currently imposed
restrictions and perhaps longer. We would oppose any requirement to spend funds to maintain a
ship that the Navy believes is no longer essential. In configuring the fleet for 11 carriers, the
Navy will ensure that it makes effective use of existing carrier ports.

Base Realignment and Closure: The Administration strongly opposes the $376 million funding
reduction for implementing recommendations of the 2005 Base Realignment and Closure
(BRAC) Commission. This reduction would slow BRAC implementation and thus delay
achievement of the mission improvements provided by BRAC changes, costing the DOD more
money over the long term. Delaying the completion of base closures and realignments also
would hinder community efforts to quickly reuse DOD facilities and mitigate the economic
impact of BRAC actions.

The Administration would strongly oppose any amendment to weaken, delay, or repeal the
authority for the 2005 BRAC round. If the President is presented a bill that weakens, delays, or
repeals the BRAC authority, the Secretary of Defense, joining with other senior advisors, will
recommend that the President veto the bill.

Buy American Act Amendments: The Administration would strongly oppose any amendment
that would limit our flexibility in applying the Buy American Act or that would undermine the
longstanding U.S. policy -- repeatedly affirmed by Congress -- to open U.S. procurement
markets to suppliers from foreign countries that open their procurement markets to U.S.
suppliers. Such amendments would harm U.S. companies and workers, as foreign governments
would likely respond by restricting U.S. suppliers' access to their procurement markets. Such
amendments also would decrease competition, increase costs for U.S. taxpayers, and
unnecessarily add red tape to the procurement process. In the case of defense-related
amendments, such legislation also could jeopardize our military readiness, when our objective
should be to enhance our ability to get the best capability for the warfigher at the best value for
the taxpayer. If the President is presented a bill that includes such an amendment, his senior
advisors will recommend that he veto the bill.

End-Strength: The Administration strongly opposes increases in minimum Army and Marine
Corps end-strength (sections 401 and 402). The President has sufficient authority to adjust the
size of the Army and Marine Corps as necessary for the current national emergency. No changes
to end-strength authorizations are needed at this time.

Acquisition Restrictions: The Administration is concerned with section 122, which would
incrementally fund the Navy's future nuclear aircraft carrier, CVN 21, over four years. This
marks a substantial move away from the Administration's full funding policy, and we urge the
Senate to remove this provision. The Administration also opposes sections 132, 134, and 135,
which would prohibit the retirement of any KC-135E tanker aircraft, F-117 fighter aircraft, or C-
130E/H tactical airlift aircraft in FY 2006, because these prohibitions would unnecessarily limit
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DOD's flexibility to manage its assets and meet combatant commander requirements in the most
efficient manner.

Unrequested Additions: The Committee's bill would authorize increased funding for a large
number of weapon systems and programs, including an additional $400 million for Science and
Technology programs, $49 million for homeland defense initiatives, and $80 million for
additional chemical and biological weapons defenses. Although some of these increases, in
isolation, might seem to benefit U.S. defense capabilities, the Administration is concerned that
the Committee reduced Service Operations and Maintenance funds to carry out these authorized
increases. The Administration also objects to section 137, which would require the Air Force to
procure up to two aircraft dedicated solely to aeromedical evacuation. This requirement is not
only unnecessary, since the Air Force no longer needs dedicated aeromedical evacuation aircraft,
but would restrict DOD's ability to effectively manage its resources. The Administration is
especially troubled by the $1.3 billion general cut in section 1004 (based on unrealistic inflation
projections) and reductions to transformational programs used to pay for these unrequested
additions.

Reductions to Transformational Programs: The Administration is concerned by the Committee's
reduction of the Joint Tactical Radio System by $308.3 million. Although the program has
experienced difficulties and is being restructured this year, the full request will be needed in FY
2006 to avoid a delay of up to two years in fielding this transformational, networked tactical
communication system, which is vital to our future coalition warfare operations. In addition, the
Administration opposes the deep cuts in the Transformational Satellite Program and Space
Radar, which have the potential to revolutionize future military operations.

Fissile Material Disposition Program: The Administration is concerned that the $200 million
reduction in the Fissile Material Disposition program would prevent the start of construction of a
mixed oxide (MOX) fuel-fabrication facility in South Carolina in FY 2006, and result in a two-
to three-year delay in the project. While there were delays in reaching an agreement with the
Russian government, agreement has now been reached on these protections, allowing the Fissile
Material Disposition program to proceed. Reduction of funding for the U.S. facility could
undermine Russian confidence in the MOX approach and put at risk international support and
funding for the Russian MOX facility.

Capital Security Cost Sharing: The Administration strongly opposes section 1008 because it
could prevent DOD from contributing to overseas cost sharing for critical security improvements
under the Capital Security Cost Sharing program administered by the Department of State. This
program requires all Federal agencies with authorized positions overseas to budget for and
contribute to the construction of new secure embassy compounds for those positions.

Contract Support Acquisition Centers: The Administration strongly opposes Section 802, which
would require DOD to establish a contract support acquisition center at the Defense Logistics
Agency and each of the Military Departments, as premature and potentially inefficient. DOD
continues to take active measures to improve the procurement of services, which include
instituting management structure improvements. Currently, DOD is reviewing the
implementation and effect of those improvements, which should be considered before statutorily
mandating a new organizational structure for acquiring services. By mandating a new
organization structure, section 802 would eliminate the flexibility that DOD needs to acquire
services in the most efficient manner.

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DOD Financial Improvements: The Administration supports the Committee's requirement that
DOD have a comprehensive and integrated financial management improvement plan to guide
expenditure of resources on improvement activities. However, the Administration is
concerned that the Committee's expenditure restrictions and $200 million funding reduction
contained in Sec. 328 would disrupt the Department's ongoing improvements. The
Administration looks forward to working with Congress toward a successful implementation of
DOD's financial improvement plan.
Competitive Sourcing: The Administration would strongly oppose any amendment that would
unnecessarily subject private-sector bidders to intrusive data requirements concerning the
provision of health benefits to their employees. While well-intentioned, such an amendment
would ultimately undermine the efficiencies in private health plans and provide a disincentive
for the private sector to participate in DOD's competitions. Further, by discouraging private-
sector interest in competitive sourcing, it would place at risk significant savings -- $6 billion
estimated to be generated from DOD competitions completed between FY 2001 and 2006 --
from the Competitive Sourcing initiative of the President's Management Agenda. Small
business participation in competitions will be severely hampered since this provision makes it
particularly burdensome to assemble competitive offers. The Administration urges the Senate to
permit DOD to take advantage of government-wide OMB Circular A-76 policies to achieve the
best value for the taxpayer.

Personnel Issues: While grateful that the Committee's bill provides support for our military and
their families, the Administration is concerned about the following personnel issues:

       Thrift Savings Plan Pilot: The Administration opposes section 652, which would
       establish a new pilot program to pay first-term enlistees matching Government
       contributions to their Thrift Savings Plan contributions. The unparalleled retirement
       benefits which service members already receive serve as a powerful retention tool. Any
       significant changes to retirement benefits should be part of a comprehensive review of
       compensation policy. Moreover, if this pilot program is intended primarily as a
       recruitment tool, the Department already has more cost-effective tools at its disposal.

       Reservist Medical Exams: The new requirement in section 531 for yearly physical exams
       for non-activated reserve members would not enhance readiness, but would entail costs
       to the services of approximately $600 million over five years. Reservists currently
       receive a physical at least once every five years, with the Secretary of Defense ordering
       reservists to receive physicals more often if necessary. When activated, reservists
       already must undergo a physical to ensure they can deploy.

       Acquisition Workforce Restriction: The Administration opposes section 832's mandated
       15 percent increase in the DOD acquisition workforce over the next three fiscal years and
       section 572's restrictions on converting military to civilian positions in medical care.
       These provisions would impede the Secretary of Defense's ability to manage the
       workforce effectively.

       Military-Civilian Conversion: The $285 million reduction in military-civilian conversion
       funds will eliminate the flexibility of the Secretary of Defense to use those converted
       positions to enhance the strength of operating units. This reduction in military-civilian
       conversions would have an adverse impact on all the services, especially Army
       transformation.

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       Hardship Duty Pay: The Administration is concerned that the Committee has not
       authorized an increase in the ceiling on Hardship Duty Pay. This flexible pay is a
       valuable tool for enhancing retention of some of our most critical service members in a
       timely manner.

       Promotion Board Information Credibility: Because promotion board consideration of
       adverse information that is not credible would be unfairly prejudicial to a military officer,
       section 504 should be amended to require submission to a board only of "credible"
       information of an adverse nature.

Finally, the Administration encourages the Senate not to adopt unrequested benefits. New or
major expansion of benefits should await the results of the comprehensive review undertaken by
the Secretary of Defense's Advisory Committee on Military Compensation and the results of the
statutorily required Quadrennial Review of Military Compensation.

Defense Intelligence SES Positions: The Administration is disappointed the Committee did not
include the Administration's proposal to increase the number of Defense Intelligence Senior
Executive Service positions. These additional positions are essential to meeting the increased
demands for intelligence support.

Unmanned Aerial Vehicle (UAV) Reconnaissance to Detect and Monitor Border Traffic: The
Administration opposes section 1031, which would authorize DOD to conduct UAV
reconnaissance to detect and monitor suspicious air, sea, and surface traffic along the U.S.
border. This authority could imply a continuous mission requirement for DOD, which would
place even greater demands on already heavily used UAV assets. Also, under Title 10,
Section 374, the Department already is authorized to provide aerial reconnaissance support to
civilian law enforcement agencies who request DOD support using the established Request for
Assistance (RFA) process. Section 1031 could lead to a recurring border security mission for
DOD outside the scope of Title 10, Section 374. The Administration would support express
statutory authority for DOD to use UAVs in support of civilian law enforcement, but would not
support a potentially continuous mission requirement directing DOD employment of these UAV
assets in any particular way.

Support for Critical White House Communications Activities: The Administration strongly
urges Congress to support the Administration's request to amend section 912 of the National
Defense Authorization Act for Fiscal Year 1997 (Public Law 104-201) to enable the White
House Communications Agency (WHCA) to provide critical audiovisual support services for the
President and the White House. These services help the President and senior White House staff
in communicating with the American people and the world in executing his official duties during
times of peace and national crisis by audio and visual means. The proposed change will
enable the WHCA to streamline its operations and manage its personnel and resources more
effectively and efficiently and eliminate a cumbersome process for requesting and billing for
support provided. Accordingly, the Administration has determined that it would be most
effective to fund these activities directly through WHCA, and the FY 2006 Budget submission
for WHCA reflects this decision. Without this amendment, the WHCA will lack authority to
expend FY 2006 funds expressly requested for this purpose.

Small Business Innovation Research Programs: The Administration is concerned about the
intent of section 814, which would require that DOD maintain lists of Small Business Innovation
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Research (SBIR) programs that have completed the research and development phase of the
program (Phase II) and have the potential for rapid transition to an openly competitive
commercial phase (Phase III). We are concerned that the intent to establish lists of Phase II
projects will lead to expectations that DOD will fund Phase III projects, which are outside the
scope of the SBIR program.

Grades of the Judge Advocates General: The Administration opposes section 505, which would
elevate the Judge Advocates General to 3-star grade. This provision would: (1) undermine the
flexibility of the President to determine what positions of importance and responsibility merit
grades above the major general or rear admiral (upper half); (2) add unnecessary and rank-heavy
bureaucracy; and (3) create unique selection procedures for one class of 3-star officers by
imposing selection board procedures rather than permitting the Secretary of Defense to use his
discretion. The Judge Advocates General, as 2-star officers, already participate fully in the legal
affairs of their respective Military Departments and the entire DOD and would enjoy no greater
access to senior officials as a result of their elevation to 3-star status.

Legal Services in DOD: To protect individuals receiving military legal assistance, section
1044(e)(1) of title 10, United States Code, as contained in section 553 of the bill ­ which grants
the right to practice law anywhere in the United States to judge advocates or civilian attorneys
authorized to provide military legal assistance ­ should be amended to provide that a judge
advocate or civilian attorney must be a "member of the bar of the highest court in at least one
State or Territory or the District of Columbia." In addition, section 923 should be stricken in
order to preserve the authority of the Secretary of the Air Force to determine the appropriate
functions and duties of his subordinates who provide legal services consistent with applicable
law.

Classified Programs: The Administration opposes section 1002, which would incorporate the
classified annex into the bill. The Administration discourages the practice of enacting secret
laws and encourages instead appropriate non-binding uses of classified annexes to committee
reports and the joint statements of managers that accompany final legislation, and therefore
recommends striking section 1002(a).

The Administration looks forward to working with the Congress to address other concerns,
including constitutional ones, such as concern with sections 212(d)(3), 537(e)(3), 591(d)(3),
902(c)(3)(C), and 1042(c), which seek submission of legislative recommendations by Executive
Branch officials. These sections should be modified to require submission only of such
recommendations "as the President judges necessary and expedient," in order to be consistent
with the President's constitutional authority to supervise the unitary Executive Branch and the
Recommendations Clause of the Constitution. The Administration also will work with Congress
to eliminate the unintended and potentially discriminatory effects of section 581, so as to ensure
the eligibility of U.S. citizen children of non-citizen DOD employees living abroad to enroll in
DOD schools.

Budget Estimates and Enforcement

This bill would affect direct spending and receipts. To sustain the economy's expansion, it is
critical to exercise responsible restraint over Federal spending. The Budget Enforcement Act's
pay-as-you-go requirements and discretionary spending caps expired on September 30, 2002.
The President's FY 2006 Budget includes a proposal to extend the discretionary caps through
2010, a pay-as-you-go requirement for direct spending, and a new mechanism to control the
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expansion of long-term unfunded obligations. OMB's cost estimate of this bill is currently under
development.

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