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Shutdown Could Cost DoD Billions of Dollars

Oct. 13, 2013 - 03:45AM   |  
This picture taken 26 December 2011 show
The US government shutdown could cost the Defense Department billions of dollars. (Getty Images)
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WASHINGTON — The US government shutdown could cost the Defense Department billions of dollars over the long term, but it is too early to tabulate the full impact, experts say.

It has historically cost $4 billion to $8 billion to shut down and reopen the entire federal government, said Gordon Adams, a professor at American University and former White House budget official. DoD would represent a portion of that, but it is not clear exactly how much.

“Nobody is tabulating it currently, I’m sure,” Adams said. “Historical experience suggests it’s about $2 billion to $4 billion to lock it up and about $2 billion to $4 billion to unlock [the entire government].”

It is unclear whether back pay will be given to civilian workers — some of whom have been furloughed since the shutdown began — which factors in the cost.

“We know generally it creates inefficiencies, many more inefficiencies than a typical continuing resolution, and a continuing resolution is bad enough,” said Todd Harrison, an analyst with the Center for Strategic and Budgetary Assessments.

It is unclear how agencies are going to deal with a backlog of work that has accumulated since the government shut down on Oct. 1.

“All of those things are the kinds of things that will go into the cost calculation of what you have to do to open up again,” Adams said.

The total cost will depend on what type of retroactive steps — such as back pay — Congress takes once lawmakers pass a some type of government spending bill.

Still, Harrison believes that after a month, DoD alone will have accumulated billions of dollars in inefficiencies.

“It’s not that it’s immediate. It won’t cost you billions of dollars in the first year,” he said. “It’s billions of dollars over the life of these programs.”

Five days into the shutdown on Oct. 5, DoD said the Pay Our Military Act — legislation passed by Congress on Sept. 30 — allowed it to call back to work more than 90 percent of the 350,000 employees that were furloughed, lessening the blow to DoD. Among the employees brought back to work were the government inspectors who are co-located at industry production facilities and essential to keeping assembly lines humming.

A number of defense companies — including Lockheed Martin, Boeing, BAE Systems and Sikorsky — said they would be forced to furlough tens of thousands of workers if the inspectors did not return by Oct. 7. Closing the production lines could have proved disastrous.

“When you screw up a production line, it takes a while to get it back in shape,” said Jacques Gansler, who served as the Pentagon’s acquisition chief in the late 1990s and is now vice president for research at the University of Maryland.

The shutdown is having an impact on morale inside and outside the Pentagon, Jo Ann Rooney, principal deputy defense undersecretary for personnel and readiness, told the Senate Armed Services Committee at her Oct. 10 nomination hearing to be the Navy undersecretary.

“In terms of the contractor workforce, any work stoppages or anything that would slow down the production will go right to that industrial base and jeopardize our ability to keep those contractors engaged and keep those people employed and moving to conclusion in the program,” she said.

And the longer the shutdown lasts, the more problems arise.

“Right now, acquisition programs are OK, because they’re not using FY14 funding yet anyway. ... They’re still using prior-year funding,” Harrison said.

There would have been an immediate disruption if Defense Contract Management Agency officials — the organization that oversees production-line inspectors — were not part of the group of civilians brought back to work last week.

Still, defense companies have been furloughing employees in the services sector since in many cases the government offices where those people work are closed.

“There are pockets in the service sector where they can’t come back because they’re paid out of immediate current-year money and that money doesn’t exist,” Harrison said.

Lockheed said it was furloughing 2,400 employees and BAE Systems 1,000 employees.

“At some point in the fiscal year, you need new money and you don’t have it under a shutdown,” Harrison said. “At least under a continuing resolution you would have the same level as the previous year, but you’ve got nothing now.

“If this goes on for a month, two months, three months, then programs and projects are really going to hit a brick wall,” he said

The legislation that has allowed most DoD civilians to continue working despite the shutdown could also reduce the urgency of reopening the government.

“They have lessened the immediacy of the pain,” Harrison said. “I think that increases the odds that the shutdown lasts even longer.”

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