As we enter 2016, my most significant concern remains eroding US military technological superiority, particularly in our ability to project power against a higher-end potential adversary. This concern is becoming more widely understood and appreciated, and I am encouraged by the support that Secretary Ash Carter and Deputy Secretary Bob Work are providing and that the Congress is providing. Nevertheless, I feel strongly that at current budget levels, especially research and development spending levels, the trends are still running in the wrong direction. I cannot make the point strongly enough that this is a real and present problem, not just something we may have to worry about in the future. We tend to cut research and development more or less proportionately along with other accounts, but R&D is a fixed cost; without adequate R&D we will deprive ourselves of future capabilities, in any quantity.
The budget situation has improved in the short term, and the relative stability we can look forward to in Fiscal Year '16 and FY '17 is highly welcome. The FY '17 numbers are well below our planning assumptions, however, and will dictate some difficult choices and reductions that will fall disproportionately on our modernization accounts. The specter of sequestration is alive and well, and will haunt us as we prepare the FY '18 budget next year. One impact of the uncertainty is that it motivates the retention of force structure that may ultimately be unaffordable in a balanced defense portfolio, and it does so at the expense of modernization, creating a deficit for the future force.
The department's efforts to improve acquisition performance will continue as we implement the various Better Buying Power initiatives with a focus on innovation and technical excellence in BBP 3.0. There is strong, even compelling, evidence that the efforts of the last five years are paying off. Cost growth on our major program contracts for development and early production has been on a steep decline and is at a 35-year low — a testament to the success of Better Buying Power and to the terrific work by the department's professional acquisition workforce and our industry partners. Notably this has been accomplished without a reduction in the profit margins industry is experiencing. A number of metrics in the latest annual DoD Report on the Performance of the Defense Acquisition System confirm that we are headed in the right direction when it comes to controlling cost and schedule growth. Cycle times are also moving downward. There will not be a Better Buying Power 4.0 in 2016; we have plenty to do with the implementation of the initiatives we have in place. The data says we are on the right track; we need to continue our efforts while always looking for other opportunities to improve.
I'm positive about the progress we are achieving. We are becoming more efficient and productive, and with the resources we have, we are doing our best to get everything we can out of our technology investments and to identify and develop new sources of innovative militarily important technology that we can bring into our weapons systems. At the end of the day, however, there is no acquisition magic that can make up for inadequate capital and inadequate investments in our new product pipeline. We must remove the threat of sequestration, which was always intended to be an unacceptable outcome. Sequestration has an irrational impact on defense spending, which should be driven by a thoughtful consideration of the threats we face now and in the future. Those threats are growing, and we are not keeping pace.
Kendall is US undersecretary of defense for acquisition, logistics and technology.