The U.S. Army is warning that it may face at least $17 billion in near-term cuts if Congress doesn’t get the nation’s fiscal house in order by a self-imposed March deadline to forestall sequestration, and the $500 billion in automatic cuts that it will force upon the Department of Defense.
Adding to the budgetary drama is the continuing resolution (CR) that Congress has enacted to keep the Pentagon’s spending accounts funded, but which also freezes spending at fiscal 2012 levels and doesn’t allow for new funding lines to get programs off the ground.
“If we do not have a legislative solution that provides our leaders with the time and the flexibility to shape our force for the future, we will create a hollow force,” the Army chief of staff, Gen. Raymond Odierno, warned at an Association of the United States Army (AUSA) breakfast Jan. 24. “We’ll very quickly go to extremely low levels of readiness in the next six months throughout the Army,” if the cuts aren’t avoided, he added.
Specifically, Odierno warned that if the CR is extended for the rest of fiscal 2013, the service will incur a $6 billion shortfall in its operations and maintenance, because the CR doesn’t allow the services to move money between accounts. Surpluses in one area of the budget, therefore, are not able to make up for shortfalls in other parts of the budget.
If $45 billion in sequestration cuts fall on the Pentagon in March, the Army also will be on the hook for another $6 billion in cuts by the end of fiscal 2013 on Oct. 1. That would bring the shortfall over the next eight months to at least $12 billion in operations and maintenance accounts, according to the chief.
Odierno also warned that the service faces a shortfall of at least $4 billion in its Overseas Contingency Operations account, bringing the total fiscal 2013 cuts, rounding up, to as high as $17 billion.
“Once you start these delays,” the general warned, “it will take you longer and longer and longer to catch up, so this just won’t be a ’13 readiness issue — it’ll be a readiness issue that goes into ’14 and ’15.”
In a memo sent to Army subordinate commands Jan. 16, the chief ordered the Army Materiel Command to cancel third and fourth quarter depot maintenance and reset work not directly related to the war effort.
He also ordered Heidi Shyu, the assistant secretary of the Army for acquisition, logistics and technology, to coordinate with the commands, industry partners and program executive officers to gather the requisite data on how to accomplish this.
Odierno said he expects to have the details from the major subordinate commands “within the next week” about what they may have to cut to meet these goals.
The Army depot at Anniston, Ala., has already announced layoffs of 139 of its 400 employees working on Stryker upgrades for General Dynamics. If all work at the depots is halted at the end of the fiscal year, more layoffs are likely to follow.
“If the demand for program modifications and overhauls softens, then you have to ask yourself if [the Army depots at] Anniston, Red River and Letterkenny can all stay in business,” Loren Thompson, chief operating officer of the Lexington Institute, warned.
“The industrial base is becoming attenuated now,” he continued, “the whole system is slowing down in response to budget pressures and the gradual waning of overseas contingencies.”
One program that has already felt the sting of the budgetary winds is the Army’s developmental Ground Combat Vehicle (GCV). On Jan. 17, the Pentagon’s chief weapons buyer, Frank Kendall, instructed Army leadership to extend the program’s technology development phase by six months, and to award an engineering, manufacturing and development contract to a single vendor, as opposed to two, in fiscal 2014.
“We had a very solid strategy with the GCV,” Odierno said, “but the decision is to go with one vendor sooner than we originally wanted with the GCV … and also we’ll incur a bit more risk in the program as we lose the competition.”
Odierno insisted that he is “still confident that the vehicle we end up with will be the one that we need for the future,” but that the Army is being forced to “incur more risk with going with one contractor.”