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U.S. Services Detail Fiscal Crisis Impact

Freeze Hiring, Prepare for Deeper Cuts

Jan. 20, 2013 - 02:15PM   |  
By DEFENSE NEWS STAFF   |   Comments
Warships undergo overhauls at BAE's shipyard in San Diego on Jan. 6. Budget uncertainty and delays are threatening the Navy's ability to plan, pay for and carry out regular maintenance on the fleet
Warships undergo overhauls at BAE's shipyard in San Diego on Jan. 6. Budget uncertainty and delays are threatening the Navy's ability to plan, pay for and carry out regular maintenance on the fleet (Christopher P. Cavas / Staff)
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As the tentacles of a fiscal calamity tighten, U.S. military leaders last week directed their staffs to begin cutbacks immediately and stand by for deeper cuts should the worst come to pass.

In memos, the Joint Chiefs confirmed fears that have swirled across U.S. defense circles since August 2011: The ramifications of Washington’s budgetary woes are here.

And to prepare for the worst, the services issued guidance freezing hiring and laying the groundwork for furloughs, layoffs, cuts in operations and maintenance funding as well as weapon program changes.

On Jan. 18, the possibility of avoiding that worst-case scenario surfaced when House Republican leaders emerged from a private retreat in Williamsburg, Va., announcing the chamber this week will vote on a three-month debt-ceiling hike. In return, House GOP leaders want the Senate to pass a budget that sets the stage for big federal spending cuts. Senate Democratic Leader Harry Reid, Nev., welcomed the overture, but only if it assures a “clean” debt ceiling increase without conditions.

If the three-month extension passes, it would divorce the pending sequestration cuts from the politically charged debt-ceiling fight. That could give lawmakers and the White House extra time in January and February to strike the kind of $1.2 trillion deficit-reduction package needed to void twin $500 billion cuts to planned defense and domestic spending.

The problems aren’t due only to sequestration, set to take effect March 1. The more immediate problem for the Pentagon is the continuing resolution, under which the Defense Department and other federal agencies must operate through March 27 under fiscal 2012 budget levels.

The four-star chiefs of the U.S. Army, Air Force and Navy, in the memos, wrote about how their operations and maintenance (O&M) accounts, civilian personnel and major weapon programs likely would be targets for cuts in what they deemed a highly uncertain budget environment.

“We are on the brink of creating a hollow force due to an unprecedented convergence of budget conditions and legislation that could require the [Defense] department to retain more forces than requested, while underfunding that force’s readiness,” the Joint Chiefs of Staff wrote in a Jan. 14 letter to the Senate Armed Services Committee.

“Troops on the front lines will receive the support they need, but the rest of the force will be compromised. Should this looming readiness crisis be left unaddressed, we will have to ground aircraft, return ships to port, and stop driving combat vehicles in training,” the service chiefs wrote. “Training will be reduced by almost half of what we were planning just three months ago.”

All of the services are also looking at civilian furloughs and hiring freezes.

Both chambers of Congress return to Washington this week, with the White House and congressional leaders expected to soon open talks on how to avoid sequestration, and the shape of another spending measure to keep the federal government operating.

Navy

Navy Secretary Ray Mabus, in an all-Navy message issued Jan. 11, said the service will “only be able to sustain fleet operations.”

“We will not be able to sufficiently maintain and reset our forces for future operations,” he wrote.

On Jan. 17, Mabus, speaking to a packed room at the Surface Navy Association symposium in Washington, put some hard numbers on the budget crisis.

“If sequestration hits, that’s a $4.6 billion hit [to the Navy and Marine Corps] within five months. If a yearlong [continuing resolution] hits, that’s another $4.6 billion hit,” he said starkly.

Mabus pleaded for the chance to choose how the cuts are made, rather than deal with the straight across-the-board cuts threatened by the impending spending reductions.

“Give us the top line, let us manage how any cuts or reductions are made. Let us put dollars against strategy instead of simply cutting the top line,” he said.

The Navy’s top officer in charge of maintaining surface ships gave a sense of how the delayed budgets, continuing resolutions and overall uncertainty already are affecting the fleet.

“It makes it difficult to effectively plan, because you don’t want to waste a lot of resources on this detailed planning when you’re not sure you’re going to get the money to go in and do the work,” Vice Adm. Tom Copeman, commander of Naval Surface Forces, said in a Jan. 17 interview. “Ninety-nine percent of our depot-level maintenance is done in the private sector, and to plan these things [the shipyards] have got to have money, and they’ve got to have some certainty that they’re going to get paid.

“And we like to have the contracts definitized before the ship goes in the yard, otherwise you start to have all sorts of emergent work and you get less for your money. It’s very problematic to have this uncertainty of when you’re going to get funding — let alone how much you’re going to get, but when you’re going to get it.”

The fleet’s high operating tempo already is making it difficult to keep up with scheduled ship maintenance, compounding the problems of funding uncertainties.

“I’m on the ships and I talk to the sailors, and they’re doing the job,” Copeman said. “We just keep asking them to do a little bit more with a little bit less, and there’s a cumulative impact of that.”

Copeman joined many senior military leaders in sounding the threat of a “hollow force” created by the funding crisis.

“The hollow force is not having the right number of people properly trained on the ships, the right amount of ordnance, maintenance, spare parts, training resources you need to do your job. That’s when you start to get hollow,” he said. “You can move bodies around, move parts around, you can avoid that. But it’s just keeping the wolf at bay for a little while longer; you can’t do it indefinitely.”

Undersecretary Bob Work, speaking Jan. 17 at the SNA conference, echoed Mabus and Copeman.

“We are planning as if sequestration occurs, and if the yearlong [continuing resolution] occurs,” he said. “And if that happens, the world as we know it will end. There’s just no way we can keep the Navy we have today.”

Air Force

The Air Force is looking to trim as much money as possible ahead of budget cuts, with a focus on O&M savings such as ending maintenance to facilities and curtailing aircraft flyovers for major events.

“The combined impact of two sources of budgetary uncertainty necessitates that the Air Force take immediate action to reduce our expenditure rate, especially in our operations and maintenance account,” wrote Gen. Larry Spencer, the Air Force’s vice chief of staff, and Jamie Morin, the acting undersecretary of the Air Force, in their Jan. 14 memo to major commands.

While civilian furloughs and hiring freezes represent clear action in the face of budget cuts, senior officials such as the Air Force chief of staff, Gen. Mark Welsh, have told reporters these moves are not enough to mitigate the impact of budget cuts.

The service is focusing on O&M cuts in part because it has already cut personnel and materiel to meet the demands of actions in Afghanistan and Iraq, said Douglas Birkey, director of government relations with the Air Force Association. What’s left is core capability and capacity, which cannot be cut without affecting the mission of the service.

“They’ve already come down pretty darn far,” Birkey said. “Unless the missions go away, there’s not a lot left to cut.”

Because the available pool of money is so small, Birkey said he believes the continuing resolution has “really messed up” the budget already.

Large acquisition programs such as the F-35 Joint Strike Fighter, the new long-range bomber and the KC-46 aerial refueling plane are especially vulnerable, as these programs’ budgets are carefully designed to ramp up each year. Removing funding, therefore, could cause a ripple effect that leads to increased costs and delays down the line.

“The question is, does Congress remember that two years from now when they ask about delays?” Birkey asked. “It’s all part of the circle. This would be a textbook example of congressional blame.”

The KC-46 is particularly vulnerable, said Todd Harrison, a budget expert with the Center for Strategic and Budgetary Assessments. DoD planned to spend $1.8 billion on the tanker program in fiscal 2013. Like everything else, however, under the continuing resolution, the program is operating at fiscal 2012 levels, with just $900 million to work with.

For a growing program operating at half cost under a continuing resolution, the added hit from automatic budget cuts would be a “disaster,” said Harrison, who warns it could force the Defense Department to renegotiate its very government-friendly contract to one that contains better terms for Boeing, the tanker’s prime contractor.

Birkey said he believes the Air Force is taking the threat of these cuts very seriously, and warns that even if sequestration is avoided, the Air Force could be in for hard times.

“The challenge for the Air Force is there isn’t much in production right now,” he said. With the major acquisition programs still down the road, the Air Force lacks the large industrial base that can put pressure on politicians, he said.

Army

In its effort to “plan for the worst,” the Army chief of staff, Gen. Raymond Odierno, and Army Secretary John McHugh wrote to the force on Jan. 16 that the service plans to take aggressive steps to meet the challenges of sequestration and a continuing resolution.

The Army would terminate some temporary employees, curtail training events not related to deployments to Afghanistan, and reduce base operating funds by at least 30 percent.

In perhaps the most significant move, Army Materiel Command has been ordered to begin planning to cancel third and fourth quarter “depot maintenance and reset orders and contracts that do not directly support units deployed to a theater or entering the Army Force Generation-available pool.” The command has until Feb. 15 to submit plans.

The memo didn’t delve into specific programs and platforms. But the assistant Army secretary for acquisition, logistics and technology was ordered to work with program executive officers and industry to begin developing plans “regarding acquisition programs, science and technology activities, and contracts,” which will include submitting all contract awards or modifications over $500 million to the defense undersecretary for acquisition, technology and logistics for approval.

The lack of emphasis on specific programs in the memo is due to the necessity for short-term savings, as opposed to long-term solutions, said Russell Rumbaugh, director of the Stimson Center’s budgeting for foreign affairs and defense program.

“It’s not clear that sequester forces choosing winners and losers, because procurement spends out so slowly,” Rumbaugh said. “The immediate drop — though bigger than usual — is a long-term management problem, and doesn’t necessarily entail walking away from any one program.”

While the service’s plans remain vague on specific programs, the top Pentagon weapons buyer did inform the Army on Jan. 17 that it must restructure its Ground Combat Vehicle (GCV) program. The GCV ranks second on the Army’s priority list, behind the service’s battlefield communications network.

According to the memo, the GCV program will extend its technology development phase by six months, while awarding an engineering and manufacturing development contract to a single vendor — as opposed to the previously planned two vendors — in late fiscal 2014.

Deployment plans and the evaluation schedule for the Army’s battlefield network and network integration evaluations, remain in place, according to an Army source.

While the GCV program is being reconfigured to save money, aircraft purchases will take up a good chunk of the Army’s base procurement costs.

The service received the full $5.9 billion it requested. Purchases of UH-60M Black Hawk and CH-47 Chinook helicopters will run $2.2 billion, while the Army will spend $577 million to remanufacture Block I and II AH-64 Apache attack choppers into the Block IIIA variant. That’s $209 million more than was spent last year.

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Aaron Mehta, Christopher P. Cavas, Paul McLeary, John T. Bennett and Lance M. Bacon contributed to this report.

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