The measure, which is $7 billion more than last year's defense authorization funding, will pay for salaries for U.S. troops, research and development, construction and other military operations for the budget year that began October 1.

"This conference report contains much-deserved pay raises and benefits for our military personnel and their families, much-needed increases in family housing and quality of life projects on military installations," says Republican Senator John Warner of Virginia, chairman of the Senate Armed Services Committeeas. "As well as prudent investments in equipment and technology our military needs to successfully counter future threats."

Among the compromises in the bill is one calling for the Air Force to lease 20 Boeing airplanes as midair refueling tankers, and buy 80 more. Some Senators had criticized the Defense Department's initial proposal to lease all 100 planes as too expensive.

Another compromise concerned a House-passed provision that would have restricted the Defense Department's ability to buy equipment, parts and services from other nations. The provision angered U.S. allies and was opposed by the Pentagon.

The final deal creates a fund to ensure that the U.S. industrial base can manufacture all critical military components. It also calls on the Pentagon to determine whether any countries have refused to deliver military supplies because they objected to U.S. counter-terrorism or military operations, and if so, to stop buying from them. In addition, the bill includes incentives to encourage defense contractors to use U.S. machine tools.