What is the Third Offset Strategy?

For a two-term president issuing his last federal budget that was dismissed before it even hit the Hill, the defense budget rollout has received unusually heavy coverage. This is driven mostly by Secretary of Defense Ash Carter’s unveiling of the “Third Offset” strategy and its official launch and inclusion in the 2017 request. Put simply, the new strategy is an attempt to offset shrinking U.S. military force structure and declining technological superiority in an era of great power competition—a challenge that military leaders have not grappled with in at least a generation.

One reason for this murkiness is that the third offset is not just a quest for next-generation technologies, but also a re-evaluation of existing programs with an eye toward how they can be dramatically improved at relatively low cost. The goal of defense officials is to exploit America’s enduring advantages and impose costs on enemies or potential adversaries. Pentagon leaders have long been in pursuit of this goal dating back to the 2008 National Defense Strategy in the last administration, and it is welcome to finally see some tangible if belated change behind it.

So what are the specifics of the Third Offset strategy in next year’s budget? There is a combination of small new-start research programs, “black” work in the classified world, and significant accelerations of existing developmental programs. The total investment in this new strategy is $18 billion over five years, with over $3.5 billion being spent in 2017. Over $6 billion of all money shifted to the third offset will be spent on classified programs.  

The key to understanding offset investments is that it’s not only the many experiments and small bets being placed by the Secretary’s Strategic Capabilities Office. It is also a massive acceleration of dozens of programs that constitutes a significant shift in internal funding priorities. Still, close to $1 billion in direct offset funds are controlled by the Strategic Capabilities Office, which repurposes existing weapons to create asymmetric advantages.

A prime example is the effort to turn the SM-6 surface-to-air interceptor into an anti-ship missile. Another is upgrading Virginia-class attack submarines to more than triple their missile payload. Other illustrations include giving the Tomahawk missile a ship-attack capability and spending on acoustic superiority for all attack and missile submarines.

Beyond the reconfiguration of existing capabilities, there is also $45 million in fresh money for Secretary Carter’s new DIUx office in Sunnyvale, CA, established to seek out innovative technologies and talent from Silicon Valley.

In 2017, the budget contains at least $1 billion in anti-access and area denial spending, $489 million in guided munitions spending, $508 million in undersea warfare spending, $201 million in human-machine teaming, $309 million in cyber and electronic warfare, and $155 million in wargaming and new operational concept development. By portfolio, here are some more details on the Third Offset strategy:

Anti-access and area denial (A2/AD): To overcome these growing challenges, the budget focuses hundreds of millions of dollars on accelerated Air Force and Navy aviation propulsion development programs, new counter-space investments like a reinvigoration of the Operationally Responsive Space office, and a Navy autonomous cargo re-supply platform.  

Guided munitions: In the budget is a new $74 million lease on life for the program to counter hardened and deeply buried targets, expanded experimentation with hypersonic weapons, a $10 million effort to improve the jamming resistance of JDAMs, and development of alternative guidance technologies to reduce reliance on GPS.

Undersea warfare: There’s an acceleration of traditional investments in this domain, including surface anti-sub capabilities such as quieting and sensing improvements, and a diverse $200 million portfolio of unmanned undersea vehicles of all shapes and sizes, including the Large Diameter UUV and Extra-Large UUV.

Cyber and electronic warfare: A variety of smaller new starts combined with some significant increases for existing cyber weapons programs are in this basket, along with a $49 million acceleration of the Advanced Anti-Radiation Guided Missile next-generation anti-radar missile, and a heavy cross-service investment in aircraft countermeasures against electronic warfare.

Human-machine teaming: While harder to detect within the budget, the acceleration of the machine-aided Joint Precision Approach Landing System may be counted, as well as a new program for a more intelligent logistics system and several unmanned systems projects.

Wargaming and concepts development: The new budget increases the Navy’s Fleet Experimentation program to $21 million and provides $60 million in investment for naval rapid acquisition programs such as Rapid Prototype Development and Unmanned Rapid Prototype Development, priorities of both Chief of Naval Operations Admiral John Richardson and Congress.

These are some of the highlights of the Third Offset strategy in next year’s defense budget, and even this list does not match exactly what Pentagon leaders consider it to be in totality. But the third offset does exist, and tradeoffs were made among many programs to finance the new emphasis on next-generation breakthroughs that might begin to restore American military technological superiority toward the latter end of the 2020s.

The question now is whether Congress will accept those present-day tradeoffs for an overdue bet on the future when investments in both areas are desperately needed.

Mackenzie Eaglen is a resident fellow in the Marilyn Ware Center for Security Studies at the American Enterprise Institute, where she works on defense strategy, defense budgets, and military readiness.