In a little-noticed move, the plan by Defense Secretary Robert Gates to reorganize the Pentagon's budget includes an overhaul of military intelligence programs as well as increased spending on intelligence and surveillance capabilities.
While the plan outlined by Gates on Thursday would cut $78 billion from the Pentagon's budget over the next five years, it also includes significant actions affecting military intelligence operations and spending.
For example, Gates said he wants to consolidate intelligence organizations that are "excess and duplicative" while buying more platforms like the Air Force Reaper unmanned aerial vehicle and the Army MC-12 reconnaissance aircraft.
"The demand from ground commanders for intelligence, surveillance, and reconnaissance assets continues to exceed the military's supply," Gates said. "In response, the military, with the Army, will buy more MC-12 reconnaissance aircraft, accelerate procurement of the service's most advanced Gray Eagle UAVs, and begin development of a new vertical unmanned air system to support the Army in the future."
Reading into Gates's announcement, defense industry officials and analysts expect military intelligence programs to reap increased investments in the coming years.
"We believe a priority investment area not at risk to significant cuts is future procurements of intelligence, surveillance and reconnaissance (ISR) systems," financial advisory firm Lazard Capital Markets wrote on Friday in assessing Gates's plan.
"In our opinion, investor sentiment in the space has improved; however, there remain risks of further budget pressures if Congress rejects Gates' proposals and takes a sword to the defense budget rather than a scalpel," the firm added.
Under Gates's plan, some military intelligence organizations will be downsized, while redundant programs will be consolidated into two task forces under the Defense Intelligence Agency.
"Based on this review, I have approved a number of changes," Gates said, adding that he consulted with Director of National Intelligence James Clapper. "They include downsizing the new intelligence organizations that have grown up around a number of the combatant commands in recent years, most of which are not directly engaged in the post-9/11 military conflicts."
Gates said the Pentagon "will transition to an arrangement" under which DIA can surge intelligence support to combatant commands as needed. Clapper's office referred additional questions to DIA, which did not respond for this story.
Laying out new areas of investment, Gates said his plan would "move essential intelligence, surveillance, and reconnaissance programs from the temporary war budget to the permanent base budget."
For example, he said, "advanced unmanned strike and reconnaissance capabilities must become an integrated part of the Air Force's regular institutional force structure."
"The Air Force will increase procurement of the Evolved Expendable Launch Vehicle to assure access to space for both military and other government agencies while sustaining our industrial base," he added.
Gates also said the Navy plans to accelerate developing a new generation of airborne surveillance, jamming, and fighter aircraft. "They will develop a new generation of seaborne unmanned strike-and-surveillance aircraft," he added.
On a related front, Gates said he also plans to reform how DoD uses information technology, which now costs about $37 billion a year.
"At this time, all of our bases and headquarters have their own separate IT infrastructure and processes, which drive up costs and create cyber-vulnerabilities," he said. "The department is planning to consolidate hundreds of data centers and move to a more secure enterprise system, which we estimate could save more than a billion dollars a year."