With that surprise announcement, a Rumsfeld reprise after 25 years, Bush filled a vacancy that had been the object of intense speculation since he was reported to be on the verge of choosing a former Indiana senator to take it.

Rumsfeld, 68, is a veteran of four Republican administrations, dating back to Richard Nixon's time. He served as secretary of defense under President Ford.

"He is going to be a great secretary of defense -- again," Bush said.

Bush said he hopes to have the Cabinet completed by the end of the first week in January. "Don't hold me to it, though," he said, answering questions after the Rumsfeld announcement. He said he thought he was making good progress in staffing the new administration, given the five-week postelection contest before his victory over Al Gore was settled.

Rumsfeld headed a bipartisan commission that concluded two years ago that American intelligence officials have been too relaxed. In the waning days of this year's presidential campaign, Rumsfeld signed a letter along with several other former secretaries of defense, critical of Vice President Al Gore for agreeing in 1995 to Russia's sale of military equipment to Iran.

Rumsfeld has held more than a half-dozen jobs in Republican administrations, including head of Nixon's Office of Economic Opportunity and wage-price control program and as Nixon's ambassador to the North Atlantic Treaty Organization; as Ford's chief of staff and secretary of defense; and as President Reagan's Middle East envoy. He served on a National Economic Commission that studied deficit reduction under former President Bush.

Vice President-elect Dick Cheney was a deputy to Rumsfeld when he was Ford's chief of staff and Cheney later succeeded Rumsfeld as Ford's chief of staff. Rumsfeld was once a Republican congressman from Illinois.

Bush said he has assembled "a team of fairly strong smart people" in Secretary of State-designate Colin Powell, national security adviser Condeleezza Rice and Rumsfeld, along with Cheney, a former secretary of defense.

He said he knows, indeed hopes, there will be times when those national security advisers differ, and that he will then decide the outcome.

"Dick Cheney's no shrinking violet, but neither is Don Rumsfeld," Bush said.

While he chose an old secretary of defense to return to the job, Bush said: "We are in a new national security environment. We do need to be arranged to deal with the new threats, not the old ones..."

Bush said he has talked to some Democrats about their willingness "to work with us in Congress" and possibly about joining the administration, but most want to stay put.

He also said he is making "pretty darned good progress" on a budget for next year.

"On inauguration day we'll be ready to assume our respective offices," Bush said.

He indicated he will have more appointments to announce on Friday.

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