Clarification:Due to a quote being written down incorrectly, an earlier version of this article's fifth paragraph directly quoted Kendall speaking about the Third Offset, but he actually used a pronoun.

WASHINGTON — The Pentagon expects to make "disproportionate" cuts to modernization and research and development funding in its fiscal 2017 budget request, while personnel and readiness remain stable, according to the department's top acquisition official — cuts which may well include a slowdown in F-35 production.

Those decisions could slow down lead to a slow start in the much ballyhooed "Third Offset" strategy, identified by Defense Secretary Ash Carter as key to maintaining America's military technological dominance.

Speaking Wednesday, Frank Kendall, undersecretary for acquisition, technology and logistics, said "what you'll see in '17 is disproportionate hits to modernization, R&D and procurement."

While acknowledging that the budget deal reached by Congress was "much better than it could have been," he still warned that the budget decisions will have an impact on the ability to push forward with the Third Offset strategy.

"Given the pressure on our budget and given the things we talked about earlier, the best we're going to be able to do is to start the earlier phases of [the technology programs that make up the Third Offset]," Kendall said. "We don't have the money to make the major investments."

Kendall's comments match with those made by Comptroller Mike McCord on Monday, which warned that modernization is likely to get hit in the budget.

"I think that you'll probably see one of the ways we'll accommodate this $15 billion cut or so is there will probably be some slowdowns in modernization programs," McCord said then.

Kendall concurred, adding later in his speech that "The disproportionate hits on '17 are going to be on modernization. I think that will probably be more on production than R&D."

Asked after his speech if production of the F-35 joint strike fighter was one area that could be see production slowed down, Kendall indicated it was likely.

"The F-35 is not — it is impossible in these budget to entirely protect it, just put it that way," Kendall responded. "Dollar for dollar, it probably gives us more combat capability than any other investment we're making but we have a lot of other things that we have to do as well. So it's not entirely fenced. I can't say it's entirely fenced [off from cuts]."

However, he did say programs that make up the nuclear triad — the Ohio-class submarine, Long Range Strike-Bomber and new ICBM designs — would be a "priority" in the budget.

Despite the hit going most to production, Kendall told the audience, hosted by the Potomac Officers Club, that he was "most concerned about R&D" funding in the FY17 budget.

"If you don't do the R&D you won't have a product at all," Kendall said. "It's a fixed cost. Once you take the R&D out you are denying yourself future products, in any quantity, period."

After the event, Kendall stressed to reporters that the Pentagon has not finalized the budget decisions, but again reiterated his concerns over R&D funding.

"We're trying to fit as much of that in the budget as we can, at least to move the technology forward to position ourselves for starting EMD in a few years from now," he said.

At the same time, the way the Pentagon uses R&D may need to be reworked. Kendall said he is "getting worried" the Pentagon has protected its science and technology accounts too much as other parts of R&D, in particular the accounts that fuel the new product pipeline, have shrunk.


Twitter: @AaronMehta

Aaron Mehta was deputy editor and senior Pentagon correspondent for Defense News, covering policy, strategy and acquisition at the highest levels of the Defense Department and its international partners.

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