Thursday, April 4, 2013

4/4/13 RD Bulletin: DoD Budget Request Set to Ignore Sequester

News: At a policy conference held at the Carnegie Endowment for International Peace last week, six national security experts presented practical options for reshaping America’s military to make it more relevant, effective, and affordable in coming years.
News: The White House will request $526.6 billion for the Pentagon’s base budget when it issues its budget request on April 10, 2013. 
Reports: The Congressional Budget Office recently examined the Ground Combat Vehicle (GCV) program as well as three alternatives and determined that the GCV is the least capable and most expensive option.
Project on Defense Alternatives Perspective: Personnel interests need not be pitted against procurement interests in a declining DoD budget era.  Reducing end strength is the most straight forward, balanced and effective way forward.

State of Play
During his first major policy address, held at the National Defense University yesterday, Secretary of Defense Chuck Hagel provided a somber and humble view of the Pentagon’s future which recognized that fiscal restraints will constrain the department’s procurement, modernization, and personnel ambitions for the foreseeable future.  “The Department must understand the challenges and uncertainties, plan for the risks, and, yes, recognize the opportunities inherent in budget constraints and more efficient and effective restructuring,” Hagel intoned.  The secretary identified three primary drivers of growth in the military budget, acquisitions, personnel, and overhead, and pledged to address all three.  American University professor Gordon Adams was impressed by Hagel’s recognition of current resource constraints, noting that “the approach to target is correct — resources constrain strategic choices — and the target selection hits a bulls eye – excessive acquisition costs, size and cost of personnel, and, above all, the big back office… But like most puddings, the proof will be in the eating: will he discipline the appetites of the [four-star military service] chiefs?” 
Hagel’s speech came exactly one week before the White House’s Fiscal Year 2014 budget request is expected.  Reportedly, the administration will request $526.6 billion for the Pentagon’s base budget (excluding war costs and mandatory spending) in FY14, and in doing so, ignore the onset of sequestration.  Commenting on the forthcoming budget request, Todd Harrison of the Center for Strategic and Budgetary Assessments observes, “The Pentagon, White House, and Congress are all planning as if the defense budget will jump back next year like sequestration never happened…The reality is that the budget caps remain in effect, and the mechanism of sequestration applies to fiscal year 2014 and beyond if the budget caps are exceeded… Congress and the White House are no closer to reaching a compromise to alter or eliminate the budget caps now than they were in August of 2011 when the Budget Control Act was passed. They thought it would never happen for fiscal year 2013, yet it did. Now they are talking the same way about fiscal year 2014.”
As evidence that it is truly ignoring the automatic cuts, the Pentagon is expected to request $8.4 billion in FY14 funding for the troubled Joint Strike Fighter program, most of which will be used to purchase 29 aircraft – the same amount that had been planned before sequestration occurred.  Meanwhile, the former service chief of the Navy, retired Admiral Gary Roughead, has suggested that the Air Force drop its plans for the F-35A variant, and instead begin purchasing the Navy’s carrier-based F-35C. 
If last year was any indication, the President’s FY14 budget request will likely receive little to no support in Congress.  Still, POLITICO’s Tim Mak and Austin Wright wonder what the forthcoming request portends for the military over the coming year: Will the budget request break the so-called ‘golden ratio’ in which all three services generally receive an equal share of the budget pie because of the administration’s recent ‘pivot to Asia?’  The duo also wonders if the Pentagon will again attempt to cut Guard and Reserve, the Global Hawk Block 30 drone, or the M1 Abrams tank after being rebuffed by Congress for similar attempts last year.  Early indicators are that the administration will again propose mothballing the Global Hawk Block 30 UAV as well as its Block 40 cousin. 
The White House may also consider terminating or further delaying one of two ground vehicles being developed by the services, either the Ground Combat Vehicle (GCV) or the Joint Light Tactical Vehicle (JLTV), the latter of which only barely survived recent budget battles while the former's development was delayed in the Pentagon’s last budget request.  However, if the Pentagon thought that delaying the GCV would help save the program, it could be terribly wrong: Just this week, the Congressional Budget Office examined the ground vehicle program and found that potential alternatives were both cheaper and more capable.  CBO found that purchasing the German-manufactured Puma infantry fighting vehicle or recapitalizing the current Bradley Fighting Vehicle would both be cheaper and more effective than purchasing the new GCV.  “Fielding Pumas or upgraded Bradleys would cost $14 billion and $9 billion less, respectively, than the Army’s program for the GCV and would pose less risk of cost overruns and schedule delays,” CBO found.  All told, the Army plans on purchasing more than 1,700 GCVs at a total estimated cost of $28.8 billion.  Separately, U.S. Special Operations Command is soon expected to award a $670 million seven-year contract for the development of the Ground Mobility Vehicle intended to replace the HUMVEE for special operator use. 
Last month, the Government Accountability Office released its annual selected acquisition report, which examines cost growth and progress in the Pentagon’s acquisition portfolio.  Unlike recent years, this year’s report found that the Pentagon has made significant progress in reducing the cost of most programs in its portfolio.  The report found that eight of the Pentagon’s most costly programs saw a total reduction in estimated costs of $4.9 billion, with the notable exceptions being the F-35 Joint Strike Fighter and first Ford-class supercarrier, whose estimated costs rose by $101 million and $533 million respectively.  Surprisingly, the watchdog agency found that none of the reductions in estimated costs came as a result of decreased procurement buys, but rather, “in several cases -- notably ship programs -- the cost decreases were due to changes in program estimating assumptions.” 
One last problem area identified by GAO is the ground-based midcourse (GMD) missile defense system whose development and testing cost projections have ballooned from $236 million to the current estimate of $1.2 billion.   Separately, Inside Defense reports that the Navy is stepping back from plans to invest more than $15 billion in the Air and Missile Defense Radar (AMDR) system.  The service is expected to reduce the total cost estimate for the program by 62 percent, which would amount to $5.7 billion in savings once a contractor is selected as soon as next month. 
Project on Defense Alternatives Perspective
A POLTICO article this week by Philip Ewing calls attention to the growing perception of a zero-sum competition between the budgets for military equipment, ordnance, and supplies (procurement), and the budgets for salaries and benefits of soldiers and their families (personnel). Both these accounts grew rapidly during the last decade, but with easy money getting much harder to find at the Pentagon, defense industry representatives are beginning to call for reigning in personnel costs.
Of course, tensions rise in any institution when money is tight.  However, there is no reason to reduce the options at the Pentagon to a trade-off between buying equipment or buying health care for soldiers.  There are other factors that can be adjusted and thereby reduce the pressures on personnel and procurement accounts.
For example, the end strength of the armed forces should be reduced further than current plans.  Lower end strength means lower personnel costs and will reduce the requirement for procurement of equipment and supplies.  Lowered recruitment targets will also open some room to cut benefits, if that is considered necessary and desirable.  Overall, end strength reductions are the most straightforward, balanced, and effective way to reduce defense spending.
A practical way to mitigate any risks attending to a reduced active component military is to put proportionally more troops in the reserve.  Because most reserve personnel are part-time, reserve units are much less expensive to maintain than the active duty units.  
The relatively large active component of the military we have today is an artifact of the military activism of the last fifteen years and the high rate of routine forward deployment of soldiers, ships and planes.  If we are willing to be more selective in our military activism, deploy fewer troops forward in peace time, and commit to superior training of our reserves, we will reap large budget savings from a military with a smaller active component and a stronger strategic reserve.  One other important benefit:  If presidents must first mobilize significant reserves before entering into medium and large-scale wars, they will be much more likely to restrain themselves from sending the military into harm’s way when it is not essential to do so.   That’s good for the military and good for America. 
‘Time to Reset Defense’ Conference
On March 26, the Project on Defense Alternatives sponsored a conference entitled ‘Time to Reset Defense: Guidance for a More Effective and Affordable US Defense Posture,’ at the Carnegie Endowment for International Peace.  Six expert panelists presented practical options for reshaping America’s military to make it more relevant, effective, and affordable in coming years.
The assessments of the panelists repeatedly hearkened back to a common theme: The Pentagon’s budget is now on a downward path, and, steepened by sequester, this trajectory will necessitate changes to defense posture and strategy. Panelists targeted American security policy for producing a disconnect between defense reality and budgeting. Causes of this disconnect were variously attributed to an overall lack of strategy and a general eschewing of multilateralism by both the civilian and military establishments: Col. Douglas Macgregor (USA, ret.) noted that, “We haven’t had a national military strategy since 1989.”
The panelists described other products of this strategy vacuum in definitive budgetary terms. American University professor Gordon Adams cited poor hardware choices, high personnel costs and compensation, and the complex support structures required, as direct fiduciary consequences of a defense budget not bridled by clear directives. Benjamin Friedman of the Cato Institute described budget choices less delicately as the consequences of maintaining a “shape the world luxury budget” instead of a threat-based national security budget.  
PDA director Carl Conetta concluded the conference by posing a stark choice: “It's the Pentagon budget versus everything else.  And the real challenge before us is not whether the military budget will decline in coming years, but rather, ‘How deep will it go and what will go?’”
News and Commentary
“A month after those cuts began taking effect, many Americans might look at the aftermath and think, ‘Well, it doesn't seem so bad.’ And to judge by the initial headlines, which suggest the most visible impact thus far is furloughs for a relatively small number of DoD civilians, I can understand where people might reach that conclusion. But that's the wrong conclusion. The problem with the defense sequester cuts isn't something that will be felt immediately. The real problem arises from what will be a long-term, slow motion hollowing out of our nation's defense investment over the next decade.”  (4/4/13)
Bloomberg: Audits Preventing Taxpayer Overcharges Impeded by Pentagon Cuts - Nick Taborek, Danielle Ivory
“U.S. budget cuts may delay the Defense Department’s plan to eliminate a $400 billion backlog of unaudited contractor bills by next year, a Pentagon official said. The Defense Contract Audit Agency has frozen hiring and will lose about 5 percent of its workforce, or 250 employees, this year as the Pentagon absorbs $41 billion in automatic reductions, said Patrick Fitzgerald, the office’s director… The backlog of unaudited expenses has more than quadrupled since 2005 as awards surged because of the wars in Iraq and Afghanistan. Contractors that have been snared in the audit backlog wouldn’t get paid until their requests are approved, which might put millions of dollars on hold for years… Even under ideal circumstances, the goal of getting through the backlog by Sept. 30, 2014, was going to be daunting.”  (4/3/13)
“The Pentagon is not in denial about the coming austerity, Defense Secretary Chuck Hagel said. The prospect of $500 billion in sequester cuts over the next decade, he cautioned, means sacred cows will no longer be tolerated in the military’s budget… To soften the impact of the sequester — and of whatever other fiscal blows might come — the Defense Department must set priorities, he said. That would prepare the Pentagon to ‘deal with further reductions in the defense budget that could result from a comprehensive deficit reduction deal or the persistence of sequester level cuts.’”  (4/3/13)
“The federal budget is coming out next week. The defense part has been declared dead on arrival because it does not take sequestration into account, just works off of last year's request and projects about a 3 percent cut in the Pentagon's funding, year over year. It will go down farther. But what is more interesting is the extent to which fear about defense is being replaced by realism about the sequester and declining defense budgets. Both may be more absorbable than the rhetoric has been suggesting.”  (4/2/13)
“The final cost of the Iraq and Afghanistan wars will be between $4 and $6 trillion — and most of those costs have yet to be paid, according to a new study out of Harvard University. The report from Harvard Kennedy School professor Linda Bilmes finds the Iraq and Afghanistan wars together will be the most expensive in U.S. history when long-term medical and disability costs for service members are factored in.”  (3/29/13)
The News Tribune: Outdated Stryker parts piled up in Auburn warehouseAdam Ashton
“The Army program charged with keeping thousands of eight-wheeled Strykers running over the past decade had its eye so much on wars in Iraq and Afghanistan that it neglected to keep its books. It accumulated nearly $900 million worth of Stryker replacement parts — most of them in an Auburn warehouse — with much of the gear becoming outdated even as the military continued to order more equipment, according to a Defense Department Inspector General report released late last year.” (3/29/13)
“The U.S. Navy’s troubled Littoral Combat Ship, a vessel intended to be small and speedy for use in shallow waters close to shore, lacks the firepower it needs, a top U.S. navy commander said in a classified memo. Vice Admiral Tom Copeman, the commander of naval surface forces, called on the Navy to consider a ship with more offensive capability after the first 24 vessels are built, according to a Navy official who asked not to be identified discussing the confidential document.”  (3/28/13)
Government Executive: A Growing Consensus for Shrinking the Defense Budget?Charles Clark
The ‘silver lining’ of sequestration is that the defense budget is coming down as political parties and the public focus on the economy and debt, a panel of progressive defense specialists said on Tuesday. Though Pentagon leaders have warned of catastrophe if their budget absorbs a 15 percent cut, few in the department have awoken to the new consensus that a military drawdown is inevitable, according to speakers at a forum titled ‘Time to Reset Defense’ sponsored by the left-leaning Center for International Policy. Their visions for the new era in American defense strategy ranged from further troop reductions to narrower overseas missions to abolishing the Marine Corps.  (3/26/13)
Foreign Policy: Can the Marines Survive?Lt. Col. Lloyd Freeman
“The Marines are a door-kicking service, designed to breach enemy territory and establish an entry point for the Army's strategic land capability. But the U.S. military's development of unmanned aircraft, combined with stealth technology and unmatched ISR capability, makes it almost impossible for an enemy today to significantly impede the landing of U.S. forces on a beach or at a port. Forcible entry no longer requires landing forces -- it takes precision strikes, coordinated by special operations forces as needed. But if the door is going to be kicked in by a cruise missile, an unmanned aircraft, or other platform delivering precision munitions, why does the Marine Corps insist on maintaining such a large amphibious forcible entry capability based around the same Marine who stormed ashore at Tarawa? Because to argue that the United States does not need a forcible-entry force would be to question the very necessity of having a Marine Corps. Unfortunately, that is the question the Corps must now answer.”  (3/26/13)
FCW: Funding the military of the futureAmber Corine
“It is a widely held principle that strategy should not be driven by budget, but the two have been intertwined at the Pentagon for some time, experts say. For the military to be most effective – and to best posture the U.S. for continued economic recovery – the two need to be looked at separately, and tough choices must be made.”  (3/26/13)
“The argument for reducing excess nuclear arms often focuses on enhancing the nonproliferation regime. However, while less discussed, the financial benefit of nuclear reductions is significant, especially in the wake of sequestration. The exact amount of savings possible depends upon the specific reductions made, but easily reaches the billions. But determining safe, smart levels of reductions first requires thinking about the legitimate national security role of American nuclear forces. Throughout the nuclear age, the sole purpose of U.S. nuclear forces has been providing deterrence. Given the size and expense of U.S. nuclear forces the key question is: what special advantages in terms of deterrence does such an overwhelming nuclear arsenal give the U.S.? The answer: not much.”  (3/26/13)
“DOD appears to have an unseen hand in influencing the text of GAO reports, and the management guidance as perceived by the GAO staff is to accept the DOD guidance to reduce as much as possible any areas of disagreement. The differences may only be subtle in a final GAO report, or they could appear in the form of strangely unsubstantiated assertions and conclusions -- the sort of vapid statements that appear in GAO's new F-35 report. Indeed, the only other explanation for the data-free assertions might be that the work at GAO, especially the review process, was sloppy and did not merit what used to be the highly prized declaration (known as the ‘GAGAS statement’) that all the work for the report was performed "in accordance with generally accepted government auditing standards," which -- justified or not -- appears on page two of the report.”  (3/22/13)
The Hill: Time for a new peace dividendRep. Jared Polis
“Although fighting terrorism has been the rationale for the boost in military spending, a relatively small part of the Pentagon's budget is devoted specifically to counter-terrorism. We continue to spend at historically high levels because the military establishment is fixated on the big wars and the threats of the past. Even with sequestration, the Pentagon budget still exceeds the average level of the Cold War era. While those on the left and the right subscribe to different economic theories, most agree that as long as our defenses are strong, there are more productive ways to use our resources than excessive military spending. Conservative economists might model high-growth scenarios where the peace dividend is reinvested in tax cuts. Liberal economists might model a scenario that emphasizes public investment in health, education, and economic infrastructure. Either way, additional Pentagon budget cuts beyond sequestration levels would serve the goal of restoring growth while reducing debt.” (3/20/13)
Congressional Budget Office: The Army’s Ground Combat Vehicle Program and Alternatives (4/2/13)
Carnegie Endowment for International Peace: Iran’s Nuclear Odyssey: Costs and Risks (4/2/13)
Government Accountability Office: DOD Procurement of Mi-17 Helicopters (4/1/13)
Congressional Budget Office: Supplemental Appropriations: 2000—Present (3/29/13)
Government Accountability Office: Defense Contracting: Actions Needed to Increase Competition (3/28/13)
Government Accountability Office: Defense Acquisitions: Assessments of Selected Weapon Programs (3/28/13)
Department of Defense: Doctrine for the Armed Forces of the United States (March 2013)
Department of the Army: Legal Support to the Operational Army (March 2013)
Department of the Army: Offense and Defense (March 2013)
Department of the Army: Reconnaissance, Security, and Tactical Enabling Tasks (March 2013)