During an afternoon news conference at the Pentagon, Gates announced the Defense Department had identified a total of $154 billion in efficiencies over the next five years through cuts to overhead, improving business practices and eliminating troubled programs.

The service agencies will be allowed to keep and reinvest roughly $70 billion, though $28 billion from those funds would be directed to higher-than-expected operating expenses, including fuel, maintenance, health care and training costs.

The department also announced it would bring down the overall size of the U.S. fighting force by trimming the Army by 49,000 soldiers and the Marines by 20,000 starting in fiscal 2015. That decrease would be first for the armed forces since the start of the wars in Iraq and Afghanistan.

The secretary stressed that the program decisions amounted to a reduction in the overall rate of growth at the department rather than a decline in total defense spending. “My hope is what had been a culture of endless money . . . will become a culture of savings and restraint,” Gates said.

On the chopping block is the Expeditionary Fighting Vehicle, an armored, high-speed amphibious assault vehicle that has been in the planning stages since the Reagan administration. The $14 billion program has experienced multiple testing delays and cost increases. Thus far, Defense has spent $3 billion on the project.

The Marines had expected to purchase 573 of the floating tanks, but on Thursday Gates terminated the program altogether in his planned 2012 Defense budget. Gates acknowledged this was a “controversial decision,” but he noted the department could not afford a program that would “essentially swallow the entire Marine vehicle budget.” Rather, the Marines will upgrade their existing fleet of amphibious vehicles.

“Despite the critical amphibious and warfighting capability the EFV represents, the program is simply not affordable given likely Marine Corps procurement budgets,” said Marine Corps Gen. James Amos. “The procurement and operations-maintenance costs of this vehicle are onerous.”

Some industry analysts believe the department is being short-sighted with the EFV decision. Loren Thompson, who runs the Virginia-based Lexington Institute, a defense think tank, argued there is no safer way to get Marines ashore than the Expeditionary Fighting Vehicle. “The bottom line is the Marine Corps either gets EFV or it loses a lot of men doing the mission the old fashioned way,” said Thompson, who serves as an adviser to several major defense contractors.

Gates also announced plans to delay by two years the Marine Corps’ version of the F-35 fighter jet because of significant testing problems. The secretary said the program, run by Lockheed Martin Corp., would be reviewed for the next two years to see whether it demonstrates increased reliability. If the program does not show improvements, it could face termination, Gates said.

The Army also canceled plans to purchase a surface-to-air missile defense system being developed by Massachusetts-based Raytheon Co.

Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, stressed that the program cuts actually would “improve our readiness. We can do things smarter and more efficiently.”

The department also on Thursday elaborated on previously announced plans to eliminate $100 billion in overhead costs and inefficiencies from the Defense budget. The Air Force identified $34 billion in proposed efficiencies, while the Army and Navy found $29 billion and $35 billion, respectively, in potential savings.

Nonservice agency offices, including the Office of the Secretary of Defense, identified $54 billion in potential cuts through consolidating information technology support; a hiring and salary freeze; a reduction in generals, admirals and civilian executives; the elimination of hundreds of nonmandatory reports; and an increase in TRICARE health premiums for military retirees. In addition, a 10 percent reduction for each of the next three years in service support contracting is expected to save the department $6 billion, Gates said.

To take effect, the program cuts must still be approved by Congress, and top Republicans already are expressing skepticism.

These proposed cuts “are being made without any commitment to restore modest future growth, which is the only way to prevent deep reductions in force structure that will leave our military less capable and less ready to fight,” said Rep. Howard “Buck” McKeon, R-Calif., chairman of the House Armed Services Committee. “This is a dramatic shift for a nation at war and a dangerous signal from the commander in chief.”

Sen. Carl Levin, D-Mich., chairman of the Senate Armed Services Committee, said the Defense proposals would be discussed as part of the normal budgeting hearing process. But he stressed the need for a new Expeditionary Fighting Vehicle. “The Marine Corps needs a next-generation amphibious vehicle,” Levin said. “The nation needs us to build and buy that vehicle at a reasonable cost.”

Gates briefed the leaders of the House and Senate Armed Services and Defense Appropriations committees on Thursday morning.

The Pentagon’s proposed budget for 2012, which includes funding for the wars, is expected to be $553 billion, or about $13 billion less than it had expected.

– By Robert Brodsky – GovExec.com –  January 6, 2011