Obama said that there was wide agreement in both political parties that the way the government purchased weapons was plagued by waste, but that defense firms were influential in Congress and had ensured industry jobs were spread across the country.

"I think everybody in this town knows that the politics of changing procurement is tough," Obama told a prime-time news conference.

"Because you know, lobbyists are very active in this area. Contractors are very good at dispersing the jobs and plants in the Defense Department widely," the US president said.

Obama said spending on benefits for veterans would increase under his proposed budget but that he and Defense Secretary Robert Gates would focus on saving money by changing the way weapons programs are managed and approved.

"Where the savings should come in, and I have been working with Secretary Gates on this and will be detailing it more in the weeks to come, is how do we reform our procurement system so that it keeps America safe and we're not wasting taxpayer dollars?"

The review of the defense budget would need to be "more disciplined" than in the past several years, Obama said.

He reiterated that his administration had identified possibly up to 40 billion dollars in savings through a reform of the procurement system.

"And we are going to continue to find savings in a way that allows us to put the resources where they are needed, but to make sure that we're not simply fattening defense contractors."

Previous presidents have struggled to rein in Pentagon spending and encountered stiff opposition from lawmakers and their sponsors in the defense industry, one of Wasington's most powerful lobbies.

Obama has come under criticism for appointing as deputy defense secretary William Lynn, who worked as a lobbyist for defense firm Raytheon.

He said his proposed defense budget was more transparent as it presented the projected costs of the wars in Iraq and Afghanistan at the same time as the rest of the federal budget, instead of past practice when war spending was presented piecemeal over time.

"In order for us to get a handle on these costs, it's also important for us to be honest what these contracts are. That's why it's important for us to acknowledge the true cost of the Iraq war and the Afghanistan war," Obama said.

"Because if those costs are somehow off the books and we are not thinking about them, then it's hard for us to make some of the tough choices that need to be made."

The president last month unveiled a 663.7-billion-dollar defense budget for fiscal 2010, up a modest 1.5 percent from 2009.

Administration officials hope to make savings through a planned withdrawal of US troops from Iraq and from cuts in expensive weapon projects, but Obama has yet to say which programs might be scrapped.

The defense secretary has warned that his department would "reassess all weapon programs" and that there would be difficult choices ahead for the 2010 budget.

Gates called off his planned trip to a NATO summit next month because he said he needs more time to review the budget.

The vast US defense budget represents more than 40 percent of the world's total military spending.

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