LETTER (SANITIZED) FROM WILLIAM J. CASEY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86M00886R000400110010-8
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 7
• Document Creation Date: December 21, 2016
• Document Release Date: August 28, 2008
• Sequence Number: 10
• Publication Date: January 10, 1984
• Content Type: LETTER

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/s/ William is $'$t 4
William J. Casey
Director of Central intelligence
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Thank you for your letter. I appreciate the time and effort
devoted by the Panel members to these very complex analyses and
have relied on MEAP recommendations in evaluating our own work
program. The continuing dialogue between our analytical
components and outside experts is an important one and, as this
summer`s methodological review has proven, can have a major and
immediate impact.
Your report of the latest MEAP session highlighted two
substantive issues: the forecasting of Soviet military forces
and the estimate of Soviet military R&D costs. In times past,
both of these issues have caused controversy in the defense
community. I would welcome a chance to discuss them with you and
the members of the Panel and to hear any proposals you have for
improving them. I am asking Rae Huffstutler to arrange a time
that is mutually convenient.
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 FROM: Director of Soviet Analysis
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SUBJECT: (Recent Activities of the
Military-Economic Advisory Panel
1. The attached letter, for the Director's signature, is our proposed
acknowledgment of Ivan Selin's recent letter to him on MEAP activities.
2 request for a meeting of the Panel with the Director is
probab y worth ollowing through on, although some members of the Panel appear
to be overly concerned about the visibility of their work. The particular
concerns Ivan proposes to raise in such a meeting--analytical problems with
forces projections and limitations of our military R&D cost estimates--are not
new ones for us, although we can use any good ideas on them the Panel might be
able to offer. The meeting would also offer the Director a chance to help
shape some of the future work of the Panel if he is so inclined.
Attachments:
As Stated
STAT'
STAT
STAT
 MEMORANDUM FOR: Director of Central Intelligence
FROM Deputy Director for Intelligence
SUBJECT Recent Activities of the
Military-Economic Advisory Panel
1. In a letter dated 13 December,) passed along
to you a brief status report on MEAP activities and raised two
issues of concern to the Panel.0 requested that you
hold a meeting with the Panel to discuss their ideas for future
2. The MEAP members are apparently concerned that they have
had too little personal contact with you recently to be an
effective advisory group. A meeting with the Panel would allow
them to air their concerns on some issues of substance as well as
organization directly with you; it would also give you a chance
to set any parameters for the work of the Panel over the next
year or so that you think would be useful. Certainly, the work
of the Panel has been and continues'fo be useful, as you well
know, but its visibility has been lower than some members think
it deserves.
Attachment:
As Stated
STAT
STAT
STAT
 Approved For Release 2008/08/28: CIA-RDP86M00886R000400110010-8
Mr. William Casey
Director
Central Intelligence Agency
Washington, D.C. 20505
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Dear Bill,
This will be the first MEAP report to you since we delivered the major
review of the CIA efforts at estimating Soviet military resources. All of
the current MEAP members participated in that review and are very inter-
ested in the follow-up, and so our fall meeting (November 4 and 5)
concentrated on points related to that review.
The SOYA staff briefed us on their reactions to our review and, more
importantly, on what steps they are taking to implement the recommenda-
tions. By and large we are pleased with the response of SOYA, and have no
analytical issue concerning their-response to bring to your attention.
There is, however, a new area of review that we identified last spring
and which we discussed extensively at our fall meeting. In answer to your
question, this area will be a major topic on our agenda in 1984. The
review that we performed for you assumed that the force quantities were
correct, and consistent with that assumption we concentrated on the way
that.CIA priced the quantities, both in dollars and in rubles. At our last
meeting we performed an initial review of the processes by which the
quantities are estimated.
The traditional way in which force estimates are made is essentially as
follows:
1. A series of working groups are organized, for Navy forces,
strategic forces, etc.
2. These working groups are further broken into more specialized
groups, such as surface ships, ICBMs.
3. The specialized groups make force estimates, based on
evidence, trends, doctrine, and whatever seems relevant.
4. These individual best guess estimates are aggregated, and
in aggregate they form the basis for the estimate of Soviet
forces. -
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 The problem with this bottom-up process of forecasting quantities, is
that it does not lend itself to top-down considerations, such as over-all
Soviet economic or budget constraints. Furthermore, the process implicitly
assumes that each of the programs will make its plan, that none will slip
unexpectedly, and that no competition for scarce resources will lead to un-
expected delays in those programs that lose out in the bureaucratic in-
fighting. In fact, we do know that some programs will slip, hit snags, or
be relegated to lower priorities in future struggles for scarce resources,
although we do not know which programs they will be.
This phenomenon leads to the contradiction that we observe each year.
Looking back, we see that individual programs or services sometimes enjoy a
sharp increase in investment, but Soviet defense spending trends as a whole
change very slowly. Our forecasts, however, invariably show an across-the-
board increase starting in the coming year, an increase that in practice is
never so sharply realized.
The current force forecasts, when priced, imply that each and every
part of the Soviet procurement program is about to increase, simultan-
eously, at as fast or faster a rate than we have ever observed. This
phenomenon, if it occurred, would be distinctly non-Soviet, and appears to
us to be more a result of the force-estimating methodology than a real
conclusion.
SOVA is acutely aware of this problem, and has made laudable first
efforts to look at the over-all force estimates from a top-down, historical
economic point of view. We commend this effort and hope that it will con-
tinue to be supported. However, in order to be useful, the community will
have to be willing to change the form of its estimates.
It is plausible that the SOVA military-economic analysts may end up
with a conclusion of the form, "whereas we believe that each of the indi-
vidual force estimates represents a most likely estimate for that compo-
nent, we also believe that the overall procurement will fall x% short of
the program obtained by summing the individual components. However, we
cannot now specify where this shortfall is likely to occur, since it will
depend on technical progress and strategic decisions that have probably not
yet occurred". In short, you may have to consider over-all estimates that
are somewhat different from the sum of the lower- level component estimates,
without now being able to pinpoint where these differences are most likely
to occur.
Related to the question of quantities are the well publicized
differences between CIA and DIA estimates. We have started to look into
this, beginning with an initial DIA briefing at our November meeting.
 There are some serious questions on which we will focus for the next year
or so. We will report the results to you when we have something more
definite to say.
There is one more topic that I do wish to draw to your attention. As
you will recall, we were very critical of the R&D estimates and strongly
recommended that they be specifically excluded from over-all Soviet
military economic projections until improved results were available. This
conclusion is especially important in estimating Soviet defense spending
growth since without the assumed rapid growth in R&D there is no growth in
Soviet military spending in the last few years. We are generally satisfied
with the steps planned or underway to improve the R&D estimates, but con-
tinue to believe strongly that the incorporation of the current, poor R&D
estimates into the over-all Soviet defense estimates must be changed.
In this report I have tried to concentrate on the two salient issues,
rather than provide a more comprehensive and perhaps balanced report of
MEAP activities. I have done so because the Panel feels that these two
points require your attention. These are somewhat novel points which
probably require more discussion than is feasible in a short letter, and so
on behalf of the Panel I am requesting a meeting with you to discuss them.