DIVISION C- DEPARTMENT OF DEFENSE APPROPRIATIONS ACT, 2015 The agreement on the Department ofDefense Appropriations Act, 2015 incorporates some of the provisions of both the House-passed and the Senate-reported versions of the bill. The language and allocations set forth in House Report 113-473 and Senate Report 113-211 shall be complied with unless specifically addressed to the contrary in the accompanying bill and explanatory statement. DEFINITION OF PROGRAM, PROJECT, AND ACTIVITY The agreement delineates that, for the purposes of the Balanced Budget and Emergency Deficit Control Act of 1985 (Public Law 99-177), as amended by the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987 (Public Law 10 0-119), and by the Budget Enforcement Act of 1990 (Public Law 10 1-508), the terms "program, project, and activity" for appropriations contained in this Act shall be defined as the most specific level of budget items identified in the Department of Defense Appropriations Act, 2015, the related classified annexes and explanatory statements, and the P-1 and R-1 budget justification documents as subsequently modified by congressional action. The following exception to the above definition shall apply: the military personnel and the operation and maintenance accounts, for which the term "program, project, and activity" is defined as the appropriations accounts contained in the Department of Defense Appropriations Act. At the time the President submits the budget request for fiscal year 2016, the Secretary of Defense is directed to transmit to the congressional defense committees budget justification documents to be known as the "M-1" and "0-1" which shall identify, at the budget activity, activity group, and sub-activity group level, the amounts requested by the President to be appropriated to the Department of Defense for military personnel and operation and maintenance in any budget request, or amended budget request, for fiscal year 2016. CLASSIFIED ANNEX Adjustments to classified programs are addressed in the accompanying classified annex. CONGRESSIONAL SPECIAL INTEREST ITEMS Items for which additional funds have been provided or items for which funding is specifically reduced as shown in the project level tables or in paragraphs using the phrase "only for" or "only to" are congressional special interest items for the purpose of the Base for Reprogramming (DD Form 1414). Each of these items must be carried on the DD Form 1414 at the stated amount, as specifically addressed in the explanatory statement. REPROGRAMMING GUIDANCE The Secretary of Defense is directed to continue to follow the reprogramming guidance for acquisition accounts as specified in the report accompanying the House version of the Department of Defense Appropriations bill for Fiscal Year 2008 (House Report 11 0-279). For operation and maintenance accounts, the Secretary of Defense shall continue to follow the reprogramming guidelines specified in the conference report accompanying H.R. 3222, the Department of Defense Appropriations Act for Fiscal Year 2008. The dollar threshold for reprogramming funds shall remain at $10,000,000 for 2 military personnel; $15,000,000 for operation and maintenance; $20,000,000 for procurement; and $10,000,000 for research, development, test and evaluation. Also, the Under Secretary of Defense (Comptroller) is directed to continue to provide the congressional defense committees annual DD Form 1416 reports for titles I and II and quarterly, spreadsheet-based DD Form 1416 reports for Service and defense wide accounts in titles III and IV of this Act. Reports for titles III and IV shall comply with guidance specified in the explanatory statement accompanying the Department of Defense Appropriations Act for Fiscal Year 2006. The Department shall continue to follow the limitation that prior approval reprogrammings are set at either the specified dollar threshold or 20 percent of the procurement or research, development, test and evaluation line, whichever is less. These thresholds are cumulative from the base for reprogramming value as modified by any adjustments. Therefore, if the combined value of transfers into or out of a military personnel (M-1 ), an operation and maintenance (0- 1), a procurement (P-1), or a research, development, test and evaluation (R-1) line exceeds the identified threshold, the Secretary of Defense must submit a prior approval reprogramming to the congressional defense committees. In addition, guidelines on the application of prior approval reprogramming procedures for congressional special interest items are established elsewhere in this statement. FUNDING ADJUSTMENTS The funding increases outlined in the project level tables for each appropriation account shall be provided only for the specific purposes indicated in the tables. Programs for which the funding provided is less than the requested amount shall be reduced for the purposes specified in the project level tables and may be considered congressional special interest items as defined in titles I, II, III, and IV of this statement. The reductions to special interest items shall only be restored using the prior approval reprogramming 3 process. The Under Secretary of Defense (Comptroller) shall ensure appropriate distribution of this guidance. CIVILIAN FURLOUGHS In fiscal year 2013, the Secretary of Defense furloughed most Department of Defense civilian employees for up to six days due to budgetary shortfalls primarily caused by sequestration. There is concern that the negative impact on productivity, morale, and readiness substantially outweighed the savings generated from civilian furloughs. The Bipartisan Budget Act (BBA) replaced sequestration in fiscal years 2014 and 2015 with new spending limits and raised the budget limit for National Defense spending above the sequestration level. No furloughs were implemented in fiscal year 2014 and while the agreement does not include provisions to prohibit the use of funds to furlough civilian employees, it is assumed that the passage of the BBA and the passage of this Act will eliminate entirely any need to furlough civilian employees in fiscal year 2015. ISRAELI MISSILE DEFENSE PROGRAMS The fiscal year 2015 budget request includes $272,775,000 for Israeli missile defense programs within the Missile Defense Agency (MDA) budget, including $175,972,000 for the procurement of Iron Dome. This request concludes a previous U.S. commitment to the Government of Israel to provide $680,000,000 from fiscal years 2012 to 2015 for the Iron Dome program in response to a request from the Government of Israel. Strong bipartisan congressional support remains for Israeli missile defense programs to ensure fulfillment of Israel's missile defense needs and the retention of Israel's qualitative military edge. Long-standing and successful contributions of U.S. 4 industry towards meeting these goals include co-production of Arrow and David's Sling; and, beginning in fiscal year 2014, co-production of Iron Dome components. Subsequent to the fiscal year 2015 budget submission, the Government of Israel increased its funding requirement for Iron Dome. Therefore, the agreement provides an additional $175,000,000 above the request for Iron Dome, which brings U.S. investment in Iron Dome production since fiscal year 2011 to over $1,200,000,000. The Iron Dome program, which was developed by Israel solely with Israeli funding, is not subject to conditions of other joint Israel-U.S. cooperative missile defense programs, but rather is governed by a Memorandum of Agreement signed in March 2014. Therefore, the agreement directs that all funds appropriated in fiscal year 2015 for Iron Dome be subject to the terms and provisions of this Memorandum of Agreement, as amended, to reflect an agreed-upon implementation plan between MDA and the Israel Missile Defense Organization (IMDO). In addition, the agreement directs that not more than $175,972,000 may be obligated or expended for Iron Dome in fiscal year 2015 until IMDO provides additional justification and documentation to MDA, and the Director of MDA certifies receipt of all such information to the congressional defense committees. The documentation should include a timeline for the expenditure of Iron Dome funds included in the fiscal year 2015 budget request and the additional funds recommended in t1scal year 2015, a delivery schedule for items funded with these and prior year funds, and a report to MDA documenting full and complete delivery by Israeli industry and acceptance by U.S. industry suppliers of all technical data packages required for U.S. co-production of Iron Dome components. Further, this report shall document that all export licenses required to enable the release of classified technical data packages from the U.S. prime contractor to U.S. subcontractors are completed; a common cost model of Iron Dome components that includes recurring and non-recurring engineering costs, to be jointly developed and agreed upon by MDA and IMDO; actual Iron Dome production costs beginning in fiscal 5 year 2013; and component lead-times and delivery schedules for each fiscal year thereafter. It is expected that to fully satisfy the requirements listed above, the Government of Israel will provide to MDA copies of signed and ratified contracts, subcontracts, and teaming arrangements between Israeli and U.S. industry for all Iron Dome co-production efforts. In addition, the Director ofMDA, in coordination with the Under Secretary of Defense (Acquisition, Technology, and Logistics), is directed to provide a report to the congressional defense committees with the fiscal year 2016 budget submission on the information provided in the detailed cost and schedule justification required above, including the views of the Director and the Under Secretary on its sufficiency. It is noted that moving forward with Iron Dome co-production will not negatively impact development, test, and production schedules of the Arrow and David's Sling programs. Therefore, the agreement recommends an additional $172,039,000 above the request for the Arrow and David's Sling programs. SHIP MODERNIZATION, OPERATIONS AND SUSTAINMENT FUND The fiscal year 2015 budget request includes a new proposal by the Navy to remove eleven Ticonderoga-class guided missile cruisers and three amphibious dock landing ships from the operational fleet and lay them up for several years under a phased modernization plan. It is noted that this proposal does not conform to direction provided in the National Defense Authorization Act for Fiscal Year 2013, the National Defense Authorization Act for Fiscal Year 2014, the Consolidated and Further Continuing Appropriations Act, 2013, and the Consolidated Appropriations Act, 2014. Instead, the Navy's fiscal year 2015 budget request removes more Ticonderoga-class guided missile cruisers and amphibious dock landing ships from the operational fleet than previously proposed by the Navy, relies on the congressional defense committees to provide 6 additional financial management and acquisition authorities, and does not contain full funding in the outyears for this proposal. The agreement does not support the Navy's proposal due to concerns over the duration of the proposed lay-up period for several of the ships, the additional authorities required, and doubts as to whether the Navy could execute the phased modernization plan as proposed given the volatility of the Navy's budget requests in recent years. Therefore, the agreement rejects the Navy's proposal and instead recommends a modified modernization plan that is consistent with the Navy's proposal to expand the application of Ship Modernization, Operations and Sustainment Fund (SMOSF) resources to four additional Ticonderoga-class guided missile cruisers and an additional amphibious dock landing ship, while modifying the induction schedule for SMOSF ships' modernization. The agreement directs the Secretary of the Navy to induct no more than two cruisers per year into phased modernization, beginning with two cruisers in fiscal year 2016. Further, the Secretary of the Navy is directed to allow no more than six cruisers in lay-up at any given time. Finally, the Secretary of the Navy is directed to ensure that the duration of the lay-up period be no longer than four years and that modernization equipment be ordered and placed on contract in the year prior to the ship entering its modernization period. The SMOSF was established in fiscal year 2013 to allow the Navy sufficient time to plan and fully budget for the manning, operation, equipping, sustainment, and modernization of the cruisers previously proposed for premature retirement. However, as in fiscal year 2014, the Navy has not budgeted accordingly in fiscal year 2015. In fact, it is noted that to date the Navy has obligated more than $670,000,000 from the SMOSF for cruiser operations, with only a modest investment in modernization. Further, it is understood that the Navy intends to use SMOSF funds in fiscal year 2015 to pay for military personnel funding requirements that should have been included in the Navy's fiscal year 2015 budget request. Given the two-year budgeting window provided to the 7 Navy in fiscal year 2013 with the establishment of the SMOSF, this is inconsistent with congressional intent, and the agreement does not provide either the authority to transfer or obligate SMOSF funds for the purpose of military personnel costs at any time or operation costs incurred outside of the modernization period. In addition, while the agreement continues to allow the use of SMOSF funds to pay for the sustainment of SMOSF cruisers, it is noted that this authority shall be limited to sustainment of cruisers during lay-up, and that the Navy ought to properly budget for the operation of these ships in its operation and maintenance account. Finally, the agreement recommends $540,000,000 in addition to the more than $1,400,000,000 currently remaining in the SMOSF, which is sufficient to fund the revised phased modernization plan in the near-term. The Secretary of the Navy is expected to fully budget additional funds required in the future. WORKING CONDITIONS IN BANGLADESH The agreement commends the Marine Corps for adopting a requirement to abide by the Accord for Fire and Building Safety in Bangladesh, an agreement designed to improve worker safety in Bangladesh, and strongly encourages the other Services to adopt this standard. A second organization of companies, the Alliance for Bangladesh Worker Safety, is also committed to improving working conditions in Bangladesh. In order to better understand the magnitude of business that the Department of Defense conducts with businesses that are not signatories or in compliance with the Alliance or the Accord, the Secretary of Defense is directed to provide annual reports, not later than March 1 of each year, to the congressional defense committees, which disclose all factories in Bangladesh producing items sold in the commissary and exchange systems. The reports should include the factory name, address, brand(s), private label(s), licensee(s), or retail supplier(s) sourcing from that factory from the prior year. Next to the factory name, it shall be indicated whether that factory complies with the Alliance, 8 the Accord, both, or neither. This language replaces the reporting requirements directed in the Consolidated Appropriations Act, 2014. NATIONAL SECURITY AGENCY REPORTS The agreement does not contain language proposed by the Senate requiring several reports from the National Security Agency related to the bulk telephone metadata program. The House report contained no similar language. 9 TITLE I- MILITARY PERSONNEL The agreement provides $128,004,618,000 in Title I, Military Personnel. The agreement on items addressed by either the House or the Senate is as follows: SUMMARY OF MILITARY PERSONNEL END STRENGTH Fiscal Year 2015 Fiscal Change Year2014 Change from Budget Authorized Final Bill from Fiscal Request Request Year 2014 Active Forces (End Strength) Army• .......................................................... 520,000 490,000 490,000 -30,000 Navy ......................................................... . 323,600 323,600 323,600 Marine Corps** .......................................... . 190,200 184,100 184,100 -6,100 Air Force ......................................................... . 327,600 310,900 312,980 +2,080 -14,620 Total, Active Forces ......................................................... . 1,361,400 1,308,600 1,310,680 +2,080 -50,720 Guard and Reserve Forces (End Strength) Army Reserve ........................................................ .. 205,000 202,000 202,000 -3,000 Navy Reserve ........................................................ .. 59,100 57,300 57,300 -1,800 Marine Corps Reserve .......................... . 39,600 39,200 39,200 -400 Air Force Reserve .......................................................... 70,400 67,100 67,100 -3,300 Anmy National Guard ........................................................ .. 354,200 350,200 350,200 -4,000 Air National Guard ........................................................ .. 105,400 105,000 105,000 -400 Total, Selected Reserve ......................................................... . 833,700 820,800 820,800 -12,900 Total, Military Personnel .......................................................... 2,195,100 2,129,400 2,131,480 +2,080 -63,620 •for FY14, Army Active Forces end strength includes 30,000 Army end strength requested in the Overseas Contingency Operations budget ..F or FY15, Marine Corps Active Forces end strength includes 2,100 Marine Corps end strength requested in the Overseas Contingency Operations budget 10