WASHINGTON — The presence of the overseas contingency operations (OCO) fund is preventing needed reforms to the defense budget, a panel of experts said April 3.

The ability to push costs into the OCO fund, which exists in a quasi-independent state outside the budget, has removed a forcing function that could drive the Pentagon and Congress to make hard decisions, the experts said during a panel hosted jointly by the Stimson Center.

Gordon Adams, a former top defense official at the Office of Mmanagement and Budget and now a distinguished fellow at StimsonSimson, referred to OCO as "an infection" that has spread across the budgeting process, a "rampant virus where every single part of the American system has now discovered there is an extra way to play on the defense side."

OCO, he continued, is "a budgetary disaster which leads you to expect resources to continue to be available when they probably will not be."

The Pentagon's fiscal 2016 budget request included $50.9 billion in OCO monies, a number topped by the House Armed Services Committee's budget offering.

Knowing OCO exists "leads to a deferral of hard choices and a deferral of decisions to the expectation the money will always come in from somewhere and it will be above whatever budgetary constraints there are and it will be ample," Adams added.

Matthew Leatherman, an advisor for the Stimson Center, echoed his colleagues words, noting that the way Congress is developing the defense budget shows OCO's existence existing is "eroding savings that we worked really hard to produce."

Both men, who shared the stage with retired Lt. Gen. David Barno, now of American University, and Stimson Senior Associate Rachel Stohl, indicated the Pentagon needs to take a deeper look at potential reductions in the number of non-combatant personnel in an organized fashion. Former Secretary of Defense Chuck Hagel ordered a 20 percent reduction in headquarters staff, a move which has met with various level of success.

But the reality, they said, is big changes need to come from points where Congress and the Pentagon see eye to eye – and those are few and far between, in part because of the emergency valve represented by OCO.

"You get to these points of negotiating agreement when you have an incentive to do so," Leatherman said. "I think the incentive aspect of it is important. Right now the conversations about how not to do that, by creating additional cap space rather than finding the areas of commodity to fit within that."

Striking a slightly more optimistic tone, Barno said he believed Congress is willing to work with the Pentagon on compensation reform in a way it has resisted over the last two decades.

"That's an area where I think Congress could be persuaded this makes sense," he said.

Email: amehta@defensenews.com

Twitter: @AaronMehta

About Aaron Mehta

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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