Henry, a top Pentagon planning official, was giving an early glimpse of the Defense Department's priorities over the next four years to an industry gathering of executives of Lockheed Martin, Boeing, General Dynamics and other leading military contractors. For his listeners, there was one question hanging in the air: What would be the effect on me and my company? Some of the answers were already clear, even if there were few details. Henry, whose official title is principal deputy under secretary of defense for policy, said the Pentagon's spending level of the past several years its budget has increased 41 percent since 9/11 could not be sustained.

"We can't do everything we want to do," he said.

It was a message that the industry has been bracing for. Joseph Albaugh, chief executive of Boeing's military division, said at the conference that the Pentagon's budget had "been a great ride for the last five years." But he added: "We will see a flattening of the defense budget. We all know it is coming."

The issue, however, goes beyond tightening budgets. Henry told the contractors that the Pentagon was redefining the strategic threats facing the United States.

No longer is the primary threat rival nations in a type of warfare that calls for naval destroyers and fighter jets. Today the country is facing international networks of terrorists, and the weapons needed are often more sophisticated, flexible and innovative. One big question, analysts say, is whether the Pentagon and Congress have the desire and the will to kill weapons programs in which are invested hundreds of billions of dollars and the careers of generals and admirals.

In the years ahead, Henry said, the Pentagon would like to move "away from massive force." This would mean, for instance, a need for fewer fighter jets, because the coming Joint Strike Fighter F-35 has more capabilities than the existing F-16s. He noted that special operations forces had played a big role in the early days of the Iraq war, controlling at one time as much as two-thirds of the country, and were expected to be used in greater numbers in the future. That would mean the Pentagon would want more of the highly agile and high-technology weapons that special forces need. Specialized skills like language, intelligence and communication are also becoming top priorities. As for aerospace, he said the Pentagon would be looking for aircraft with longer ranges, which would not need ships or nearby bases to land. Increasingly, the Pentagon will be depending on unmanned aerial vehicles, which can work longer hours than piloted craft and do not put Air Force lives at risk. In the future, he said, unmanned craft will be used not only for surveillance, as in Iraq, but for combat. To illustrate what the Pentagon envisions as the future, Henry showed the group a copy of the photograph that is one of Defense Secretary Donald Rumsfeld's favorites. It shows American troops on horseback in Afghanistan, calling in airstrikes and carrying global positioning devices.

Henry argued that the world was vastly different from the one that existed the last time the Pentagon was required to do a top-to- bottom review of military and national security strategy what is known as the Quadrennial Defense Review in early 2001. He outlined these top strategic priorities, which are to be at the core of the review: defeating global terrorism, defending against terrorist attacks on American soil, preventing other nations from acquiring weapons of mass destruction and influencing countries that Henry described as at a "strategic crossroads."

The quadrennial review is to be released in February, the same day as the Pentagon's 2007 budget request. Henry said many of the review's new priorities would be reflected in the budget plan. But already there are signs of trouble ahead. In the past few years, Rumsfeld has tried to kill some weapons systems that he saw as Cold War anachronisms and to push a military modernization plan. But his efforts have been thwarted by what Washington calls the "Iron Triangle" of Congress, the uniformed military command and military contractors.

Many military experts said the same fate could be in store for this review, although Henry, and some military analysts, argued that this round could be different.

Loren Thompson, a military analyst at the Lexington Institute in Arlington, Virginia, said, "The war in Iraq has not been as successful as expected."

He added: "Rumsfeld's notion of transformation is firmly rooted in the Pentagon and it calls into question previous spending plans. While thematically, this may sound like what we have heard before, that was before Iraq and there was not as much urgency as now."

In addition, there is now greater attention in Washington, both in Congress and at the Pentagon, on unrestrained spending on some weapons. The Pentagon has weapons programs worth $1.3 trillion in its current portfolio, with $800 billion of that total still to be paid. The Pentagon has commissioned a major study to recommend ways to curb runaway costs. But given the difficulty the Pentagon has had in getting Congress to kill politically popular weapons systems, many analysts questioned whether the Pentagon's efforts would succeed. "There is a big chasm between rhetoric and the budget process," said Winslow Wheeler, a military analyst at the Center for Defense Information in Washington.

Referring to Osama bin Laden, the leader of Al Qaeda, Wheeler added that "Osama is happy" for the United States to spend billions on an F-22A fighter jet system "that can do him no harm."

Wheeler, a former adviser to congressional Republicans on military issues, said that while civilian Pentagon officials like Henry talk of transformation, they often cave in to the Pentagon's top military officers and their career concerns.

"It is true that programs are going to be hunting for dollars," Wheeler said. "And it is true there are more programs than dollars. But the civilian leaders are doing nothing to bring the budget in line. Even though we are hearing a lot of rhetoric from the office of the defense secretary, we see they are going along with what the services want. It shows who is running the Pentagon." Specifically, Wheeler criticized the Pentagon's decision to continue financing many weapon systems that some say are ripe for cuts. Among them are the next-generation destroyer, the DD(X), at a cost of more than $1 billion, the expensive F-22A and the V-22 Osprey, a Marine aircraft that has crashed numerous times in test flights. Richard Aboulafia, an analyst with Teal Group, an aerospace consulting company in Virginia, said there was "a huge difference between this quadrennial review and the last." "The last time we had a quadrennial review, it was followed by double-digit upward budget growth," he added. "If we are lucky, there will be a flat budget and a lot of programs that still need care and feeding."

And that is exactly what industry executives at the conference said they were grappling with. The future, Albaugh of Boeing said, "will be less about innovation and more about cost control."

"We will see a competition for resources," he said, "and cost control will be more of an issue." Boeing has already taken some hits. The U.S. Air Force has said it does not want any more of Boeing's C-17 Globemaster cargo planes after receiving those already on order, although the program is so popular in Congress that it may be difficult to kill. In addition, a $20 billion aerial refueling tanker program collapsed in a procurement scandal and its future is uncertain. Even if the program is revived, the air force will probably be buying 15 or so tankers a year, not leasing 100, as originally planned. "Because of budget pressures, programs that are not transformational will be scrutinized," Albaugh said. He added that "all big programs, because of their size," were at risk and that weapon systems now in development "with performance problems could be in jeopardy."

Mark Ronald, chief executive of BAE Systems, the British military supplier, said that given the lack of growth in future Pentagon budgets, "the name of the game going forward is taking market share" from other military contractors. To prepare the industry for this change, Gordon England, the Pentagon's No. 2 official, was the host of a dinner this month with chief executives of the largest military contractors, the first such meeting since the Bush administration took office. One message that emerged was that the Pentagon would frown on contractors that ran to Congress to undermine its cost- cutting efforts.

Still, some specialists remain skeptical.

"Congress equates weapon systems with jobs and votes," said Thompson, the Lexington Institute analyst. "It's hard to convince them of anything that will lead to less jobs and fewer votes."

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