updated 12/7/2007 3:18:09 PM ET 2007-12-07T20:18:09

House and Senate lawmakers on Thursday agreed on a Pentagon policy bill that would authorize $696 billion in defense spending, including $189 billion for the wars in Iraq and Afghanistan.

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The defense bill, which covers the budget year that began Oct. 1, also would authorize the Defense Department's myriad high-ticket weapons programs.

The measure does not send money to Pentagon. But it is considered a critical bill because it often guides companion spending legislation and sets policy guidance for the acquisition and management of all military programs.

The House passed its version in May; senators did so in October. The final compromise is expected to pass next week, or before lawmakers leave for their holiday break.

Included is a provision that would establish a system to oversee the billions of dollars being spent to rebuild Afghanistan. The effort would be modeled after the special watchdog for Iraq reconstruction. This office has unearthed numerous cases of waste, fraud and abuse that hampered the rebuilding effort.

Video: Bush's war funds warning The bill also would:

  • Require that private security contractors working in a war zone comply with military regulations and orders issued by commanders;
  • Authorize a 3.5 percent pay raise for uniformed service personnel;
  • Guarantee that combat veterans receive mental health evaluations within 30 days of their request;
  • Allow the Pentagon to recruit more soldiers and Marines to reduce the stress on the forces;
  • Authorize $10.1 billion in ballistic missile defense, about $331 million below the president's request.

The defense bill's prospects had been in question in recent days because of an unrelated provision on hate crimes. Senate Democrats insisted the bill expand federal hate crime laws to cover attacks on gays. But they backed down Thursday after House leaders said that plan would cost needed Republican support and sink the bill.

Completion of the bill comes as Democrats are struggling for a way to pay for combat operations overseas without appearing to support President Bush's policies in Iraq.

Democrats are pushing a $50 billion bill that would tie the war money to bringing most troops home by Dec. 15, 2008. But the measure has been unable to pass the Senate, and Bush says he would veto it.

House Speaker Nancy Pelosi, D-Calif., told reporters that Democrats probably will provide additional money by year's end for Afghanistan and some domestic military requirements. The goal is to ensure that civilian Pentagon contractors will not receive pre-Christmas warnings of February layoffs.

The Pentagon says the Army will run out of money by mid-February.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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