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22 May 03. The Defense Department said it was moving to a two-year internal budget and planning cycle as part of a drive to streamline the way it handles spending that is heading toward $400bn a year.

The department will go from an annual cycle for key program reviews and spending blueprints to a biennial one as of fiscal 2005, which starts Oct. 1, 2004, a Pentagon statement said.

“The department will formulate two-year budgets and use the off-year to focus on fiscal execution and program performance,” it said. The two-year cycle will guide strategy development, the identification of needs for military capabilities, program planning, resource estimation and allocation, acquisition and other decision processes, the statement said. The shift will more closely line up the department’s internal cycle with “external requirements embedded in statute and administration policy,” it said.

Loren Thompson of the Lexington Institute, a nonpartisan research group in Arlington, Virginia, said the change was good news both for the government and for defense contractors.

“It’s a way of saving money and saving time by bringing more stability to the planning and procuring system,” he said, adding that big-ticket programs would become safer bets.

David Nadler, a former Defense Department contracting lawyer and now a partner at Dickstein Shapiro Morin & Oshinsky, said the two-year cycle likely would move funds through the bureaucracy quicker.

“This should help get the dollars into the hands of the people who need them,” he said in a telephone interview, referring to those on the front lines of the U.S.-declared war against terrorism and homeland defense. The switch to a two-year cycle was announced by Dov Zakheim, the Pentagon’s comptroller, after Paul Wolfowitz, the Pentagon’s No. 2 official, signed it into effect Thursday.Zakheim said in a statement that no legislative changes were required for the switch and that Congress would see the same budget justification as it has in the past. The changes were part of an effort for enhancing Pentagon decision-making processes, he said.

Defense Secretary Donald Rumsfeld called on Congress last week to give the department — which spends an average of $42 million an hour — more flexibility to bring new weapons systems on line more quickly, among other things.

“Our goal is to set in motion a process and a culture that will keep the United States several steps ahead of potential adversaries,” he said in calling for adoption of his “Defense Transformation Act for the 21st Century.”

A Pentagon study called the Quadrennial Defense Review, done once every four years, will continue to serve as the department’s major statement of defense strategy and business policy, the statement said.The last such review, sent to Congress barely three weeks after the Sept. 11, 2001, terrorist attacks on the United States, called for increased “homeland defense” and an expanded U.S. military presence in Asia and the Pacific. President Bush has asked Congress for a total of $379.9 billion for fiscal 2004, not including Energy Department spending on the U.S. nuclear bomb-building complex. This would mark a $15.3 billion increase from 2003.

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