President-elect Barack Obama announced last week that Robert Gates will become the first Defense secretary ever asked by an incoming president to stay on. Hours later, Gates outlined his plans for the next administration in an exclusive interview with Senior Pentagon Editor Amy Butler on board USAF C-37A.

Robert Gates, empowered by a mandate from President-elect Barack Obama to continue serving as Defense secretary, is turning his attention to the thorny issues of acquisition reform and tradeoffs involving the size of the military services' fleets.

These are problems Gates thought he would have to leave unaddressed. "I'd punted them to the next secretary, and I ended up being on the receiving end of the punt," he says.

He made his remarks on a flight to Washington from Minot AFB, N.D., on Dec. 1, the day Obama announced his decision to keep Gates in office. He delivered a speech at Minot, the site of disciplinary firings after mismanagement of the service's nuclear arsenal came to light. The incidents prompted the dismissal of then-Chief of Staff Gen. T. Michael Moseley and then-Air Force Secretary Michael Wynne.

Gates's remarks seem to be an attempt to close this dark chapter for an Air Force that he says is "moving in the right direction."

Those dismissals received the attention of senior military leaders. During a press conference, Gates said he does not intend to be a "caretaker" secretary. And, with a reform-minded president-elect backed by Democrats controlling both houses of Congress, military officials are not likely to counter efforts to fix the acquisition system and, possibly, terminate hardware programs. These reforms will affect how the Pentagon will spend its budget - more than $500 billion annually - as the country is dealing with a recession. But, when it comes to money, the U.S. military services aren't known for collaboration.

"While in operational terms, the services have become very joint, I think when it comes to budgets and programs, they are still very service-oriented," Gates says. "Are you willing - and here is what could get really hard - do you offset risk by investing more in a future-oriented program of one service and less of that in another service?" While Pentagon spending has grown since 2001, its budget to develop and buy new hardware has felt a squeeze owing to the wars abroad and cost of retiree health care. The Air Force had embarked on a strategy to reduce manpower to fund new aircraft. Gates, however, is "totally against cutting manpower in order to fund the platforms."

It is a nationwide clamor for financial belt-tightening that could bring the traditionally bloated and parochial Pentagon to its knees, according to some defense analysts. "It is going to require a level of cooperation from the new service secretaries and the services - as well as [the Office of the Secretary of Defense] - that has not necessarily been the pattern before," says Gates. The services have customarily been protective of their budgets. Gates, however, says, "I don't have very much patience with people that are more focused on their budget than on getting the mission done."

Making tradeoffs across the services could produce substantial savings, says one expert. "That is one of the areas that potentially has the biggest long-term savings in terms of total program cost," says David Berteau, a senior adviser at the Center for Strategic and International Studies. "There is a need not only to look at it from the upfront point of view of buying the system, but the long-term cost of sustaining the system over time." About 70% of the cost of most platforms is borne out after it is developed, while a service operates and maintains it.

Forcing tradeoffs between the services is just one challenge. In recent years, the Pentagon has racked up a series of acquisition misfires ranging from two failed attempts to buy a refueling tanker to replace aging KC-135s to repeated protests and stalls to the Combat Search and Rescue-X (CSAR-X) program. Poor management also led to the termination of the Army's Aerial Common Sensor (ACS) signals intelligence collection aircraft and its Armed Reconnaissance Helicopter. The result: delays coupled with the cost of keeping legacy systems operating.