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DEVELOPED IN RESPONSE TO THE PRESIDENT'S STRATEGIC FORCES
MODERNIZATION PROGRAM. THE NEED FOR TACTICAL, NON-STRATEGIC
WEAPONS IS DETERMINED AFTER REVIEWING THE CAPABILITY OF
CONVENTIONAL SYSTEMS; BECAUSE MOST SUCH WEAPONS ARE NOT TIED
DIRECTLY TO DELIVERY SYSTEMS, THE REQUIREMENTS ARE SCRUTINIZED
EVEN MORE CAREFULLY. DOD DOES INCUR LARGE COSTS TO SUPPORT
NUCLEAR FORCES, ABOUT 15% OF THE BUDGET. BOTH THE TYPES AND
THE NUMBERS OF WEAPONS ARE EXTENSIVELY REVIEWED, RECEIVING MUCH
MORE TOP MANAGEMENT ATTENTION.

(U) ARE THE DESIGNS TOO ELABORATE? EACH WEAPON TYPE MUST BE CONSIDERED IN VIEW OF THE MILITARY OPERATIONAL ROLES IT IS DESIGNED TO FULFILL. SPECIAL FEATURES ARE INCLUDED ONLY WHEN THEY PROVIDE A NEEDED CAPABILITY OR ALLOW EFFICIENCIES THROUGH SMALLER QUANTITIES AND OPERATIONAL FLEXIBILITY IN MULTIPLE ROLES. THE LABORATORIES DO SOMETIMES HELP TO IDENTIFY AND "STIMULATE" SUCH REQUIREMENTS.

(U) BUT, DO NUCLEAR WEAPONS SIMPLY COST TOO MUCH? COMPARED TO OTHER HIGH TECHNOLOGY DEFENSE PROGRAMS, WARHEAD UNIT COSTS APPEAR TO BE RISING AT ABOUT THE SAME RATE. OF COURSE MORE DISCIPLINE IS POSSIBLE, AND RECENT INITIATIVES ARE HELPING WITH THAT. HOWEVER, BECAUSE WE KNOW SO LITTLE ABOUT SOVIET NUCLEAR PROGRAMS, OUR PUSH IN TECHNOLOGY ADDS TO DE TERRENCE AND IS WORTH THE INVESTMENT. THE TASK GROUP STRONGLY ENDORSED THE WORK OF THE LABORATORIES IN THIS REGARD.

(U) THE TASK GROUP CONCLUDED THAT FUNDING RESPONSIBILITY FOR DOE'S NUCLEAR WEAPON ACTIVITIES SHOULD NOT BE TRANSFERRED TO DOD--BECAUSE THE DISADVANTAGES OF SUCH A TRANSFER WOULD MORE THAN OFFSET THE ADVANTAGES. ON THIS, WE CONCUR FULLY WITH THE TASK GROUP. BUT HAVING REACHED THIS CONCLUSION, THE TASK GROUP RECOMMENDED A BROAD SET OF "FINE-TUNING“ CHANGES IN MANAGEMENT

ARRANGEMENTS AND PROCEDURES AIMED TOWARD INTRODUCING MORE
FISCAL DISCIPLINE WHILE AVOIDING THE RISKS ASSOCIATED WITH
TRANSFERRING FUNDING RESPONSIBILITIES,

(U) BOTH DOB AND DOE HAVE COMPLETED INDEPENDENT AND JOINT ASSESSMENTS OF THESE TASK GROUP RECOMMENDATIONS. IN GENERAL, WE AGREE WITH THE TASK GROUP ASSESSMENT THAT IMPROVEMENT CAN BE MADE IN THE MANAGEMENT ARRANGEMENTS AND PROCEDURES WITHIN BOTH DOD AND DOE, AND IN THE WAY THE DEPARTMENTS WORTH TOGETHER. THE DETAILS OF SUCH IMPROVEMENTS ARE STILL BEING STAFFED BOTH INDEPENDENTLY AND JOINTLY BY DOD AND DOE. BUT WE CAN ALREADY SEE A CLOSER WORKING ARRANGEMENT EMERGING BETWEEN THE TWO DEPARTMENTS.

(U) NEW CLOSER WORK ING ARRANGEMENTS WILL FACILITATE CONSIDERATION OF PROGRAM PRIORITIES AND ENCOURAGE GREATER FISCAL DISCIPLINE ACROSS THE DEPARTMENTAL BOUNDARIES. FOR EXAMPLE, THE DOE BUDGET REQUEST NOW BEFORE YOU FOR CONSIDERATION REFLECTS OUR FIRST STEPS TOWARD MODIFYING THE BUDGET PREPARATION PROCESS TO INCLUDE FISCALLY CONSTRAINED TRADE OFFS AMONG DOE REQUIREMENTS AND OTHER DEFENSE (DOD) NEEDS. BOTH DOD AND DOE WORKED CLOSELY WITH OMB TO STRUCTURE A RATIONALE PROGRAM BALANCE ACROSS DEPARTMENTAL LINES. ADJUSTMENTS BETWEEN DOD AND DOE WERE MADE LATE IN THE FY87 BUDGET REQUEST PREPARATION CYCLE, AND WE ARE WORKING TO DEFINE NEW ARRANGEMENTS AND PROCEDURES FOR USE MUCH EARLIER IN THE FY88 CYCLE. FOR EXAMPLE, WE HAVE AGREED TO CONSIDER THE INCREMENTAL COSTS OF DOE NUCLEAR WEAPONS PRODUCTION IN COMPETITION WITH OTHER DEFENSE (DOD) NEEDS IN A JOINT DOD/DOE REVIEW PROCESS.

(U) ARRANGEMENTS AND DETAILS ARE NOW BEING DEFINED TO ALLOW IMPLEMENTATION OF THIS JOINT PROCESS TO COINCIDE WITH OSD

REVIEW OF SERVICE PROGRAM OBJECTIVE MEMORANDA THIS SUMMER.
ADJUSTMENTS ACROSS DEPARTMENTAL LINES, IN EITHER DIRECTION,
WILL BE POSSIBLE AS WE JOINTLY PRIORITIZE COMPETING
REQUIREMENTS IN A FISCALLY CONSTRAINED PROCESS. THIS WILL MORE
CLOSELY INTEGRATE DOE'S PROCESS INTO DOD'S PROGRAMMING AND
BUDGET FORMULATION MUCH LIKE THE TASK GROUP RECOMMENDED, BUT
WITHOUT THE COMPLEXITY OF ARTIFICIAL BUDGET PLANNING CEILING
MANIPULATION. WHERE ADJUSTMENTS BETWEEN DEPARTMENTS ARE
NEEDED, DOD AND DOE CAN JOINTLY WORK WITH OMB, BEGINNING EARLY
IN THE PROCESS AND CONTINUING THROUGH FINAL PREPARATION OF THE
BUDGET REQUEST.

(U) JCS AND THE SERVICES, ALONG WITH OSD AND DOE, WILL BE MAJOR PARTICIPANTS IN THIS TRADEOFF AND RESOURCE ALLOCATION PROCESS, ASSURING THAT ALL DEFENSE NEEDS COMPETE EQUITABLY. THIS ALSO ADDRESSES ANOTHER TASK GROUP CONCERN, THAT MILITARY PRIORITIES BE FULLY CONSIDERED.

(U) A NEW GROUP, PROPOSED BY THE TASK GROUP, IS BEING CONSIDERED WHICH COULD FOCUS THE CONDUCT OF INTEGRATED REVIEWS OF NUCLEAR WEAPONS ISSUES AND BUDGETS AND COULD ASSURE APPROPRIATE CONSIDERATION OF TRADEOFFS WITHIN AND BETWEEN DEPARTMENTS. WE DO, HOWEVER, BELIEVE THAT THE MLC CONTINUES TO SERVE USEFUL FUNCTIONS BOTH WITHIN DOD AND BETWEEN DEPARTMENTS IN ITS LIAISON ROLE. THIS FORUM SHOULD BE PRESERVED AND STRENGTHENED, AND WE ARE WORKING TO IMPROVE THE ABILITY OF THE MLC TO DO ITS JOB.

(U) ARRANGEMENTS EXIST NOW FOR EFFECTIVE COORDINATION WITH DOE, BOTH FUNCTIONALLY AND THROUGH THE MLC, ON SUCH INDIVIDUAL SYSTEM MATTERS AS THE MILITARY CHARACTERISTICS (MCS) AND THE STOCKPILE-TO-TARGET-SEQUENCE (STS). DISCIPLINE IS ENHANCED BY FORMAL STATEMENTS OF REQUIREMENTS (MC/STS) BY DOD

AND FORMAL STATEMENT OF COSTS TO MEET THOSE BY DOE (1.E., PHASE
2A STUDIES AND ESTABLISHMENT OF BASELINE COST) AND, LATER,
FORMAL ACCEPTANCE OF CERTIFICATION BEFORE PRODUCTION DECISION.
THE MLC IS THE RIGHT DOD FORUM, WITH THE APPROPRIATE SERVICE
MEMBERSHIP, TO EXERCISE INDIVIDUAL SYSTEM COST DISCIPLINE, FOR
EXAMPLE, ON ISSUES REGARDING THE MILITARY NEED/BENEFIT OF
SPECIAL FEATURES THAT CAN DRIVE UP THE UNIT COST OF NEW NUCLEAR
WEAPONS.

(U) ADDITIONALLY, WE ARE EMPHASIZING PROCEDURES TO ASSURE THAT COST/PERFORMANCE TRADE-OFFS ARE ACCOMPLISHED DURING THE NUCLEAR WEAPON ACQUISITION PROCESS. THIS EMPHASIS BEGINS WITHIN EACH DEPARTMENT AND IS FOCUSED DURING THE JOINT MILITARY LIAISON COMMITTEE (MLC) REVIEW PROCESS. IN LINE WITH PARALLEL CHANGES THAT HAVE ALREADY BEEN IMPLEMENTED TO STRENGTHEN DOD'S BROADER ACQUISITION MANAGEMENT RESPONSIBILITIES, WE ARE STAFFING PROCESS CHANGES WHICH WILL ELEVATE MANAGEMENT ATTENTION ON NUCLEAR WEAPON ACQUISITION. FOR EXAMPLE, WE ARE STAFFING NEW DOD DIRECTIVES TO ELEVATE A MAJOR DOD/DOE PROGRAM MILESTONE DECISION POINT FROM THE CURRENT USDRE LEVEL. THE DEPUTY SECRETARY OF DEFENSE, AS THE DOD ACQUISITION EXECUTIVE, WILL ACT ON DECISIONS TO INITIATE ENGINEERING DEVELOPMENT (PHASE III REQUESTS) OF NUCLEAR WEAPONS. THIS RESPONDS TO THE TASK GROUP'S RECOMMENDATIONS. SIMILARLY, WE ARE WORKING WITH DOE TO EMPHASIZE COST DISCIPLINE, AGREE ON BASELINE COSTS, AND ENFORCE COST MONITORING AS THE TASK GROUP RECOMMENDED.

(U) FINALLY, AS WE TAKE EACH STEP IN RESPONSE TO RECOMMENDATIONS IN THE TASK GROUP'S REPORT, WE ARE ALSO TAK ING GREAT CARE TO ASSURE PRESERVATION OF THE STRENGTHS AND CAPABILITIES OF THE PRESENT SYSTEM. WE MUST NOT AND WILL NOT

COMPROMISE ON CRITICAL AREAS SUCH AS NUCLEAR SAFETY, AND WE
MUST ALSO ENCOURAGE, NOT INHIBIT, THE DOE'S INNOVATIVE AND
AGGRESSIVE TECHNOLOGY BASE ACTIVITIES. THE INVESTMENTS WE MAKE
TODAY IN THIS AREA ARE THE FOUNDATION FOR A STRONG DEFENSE
POSTURE TOMORROW. WE ARE WORKING WITH DOE TO PROVIDE IMPROVED
ARRANGEMENTS FOR DEFENSE-RELATED R&D AT THE NATIONAL
LABORATORIES ON THE FULL SCOPE OF DEFENSE NEEDS WHERE THE
UNIQUE CAPABILITIES OF LOS ALAMOS, LIVEMORE, AND SANDIA CAN
MAKE MAJOR CONTRIBUTIONS. HOWEVER, THE LABORATORY PRIORITY ON
NUCLEAR WEAPONS RESEARCH HAS SERVED THE NATION WELL AND WILL BE
PRESERVED UNDER DOE STEWARDSHIP,

(U) IN SUMMARY, WE ARE DILIGENTLY PURSUING A CONSTRUCTIVE RESPONSE TO THE TASK GROUP'S RECOMMENDATIONS, IN MANY AREAS WE ARE PREPARING TO IMPLEMENT CHANGES WHICH FULLY ADAPT THE RECOMMENDATION, IN A FEW AREAS WE ARE STRIVING TO IMPROVE FURTHER ON THE RECOMMENDATIONS BY RESPONDING TO THE TASK GROUP'S CONCERN AND INTENT WHILE AVOIDING NEEDLESSLY COMPLEX PROCESSES. WE BELIEVE THAT, JUST AS THE TASK GROUP'S RECOMMENDATIONS WERE STRUCTURED AS A COHERENT SET, OUR IMPLEMENTATION ACTIVITIES TAKEN AS A WHOLE ARE A VERY RESPONSIVE, CONSTRUCTIVE, AND COHERENT APPROACH. WE ARE MAKING IMPROVEMENTS NOW, AND REFINEMENTS WILL CONTINUE AS THE NEW PROCESSES, PROCEDURES, AND MANAGEMENT ARRANGEMENTS MATURE OVER THE NEXT YEAR.

(U) WE BELIEVE THE TASK GROUP'S EFFORT HAS BEEN CONSTRUCTIVE IN ASSISTING US TO FOCUS MANAGEMENT ATTENTION. WE WILL STRIVE TO RETAIN AND ENHANCE THAT FOCUS ON MUTUAL DOD/DOE FISCAL DISCIPLINE ACROSS THE NUCLEAR WEAPONS PROGRAM AND OTHER DEFENSE NEEDS.

(U) IN A LESS FORMAL WAY THAN WHAT WILL SOON BE ESTABLISHED, THIS CLOSER COORDINATION IS ALREADY BEING

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