By Sandra I. Erwin
The Army will not have enough work to keep today’s armored vehicle suppliers and sprawling maintenance depots in business. Unless the Army soon begins to “right size” its industrial base, it will continue to throw good money after bad, analysts warn.
But before the Army starts picking winners and losers, hardware buyers and budgetmeisters have to agree on how to modernize an aging fleet of combat vehicles, including the Abrams tank, the Bradley infantry fighting vehicle, as well as a large inventory of tactical trucks.
It comes down to stark choices, said retired Army Lt. Gen. Jeffrey Sorenson. The Army must decide how much of its ground-vehicle modernization budget — estimated at about $5 billion a year — should be spent on preserving today’s hardware, and how much to invest in the future, said Sorenson, who is vice president and partner at A.T. Kearney, a management consulting firm.
Sorenson currently is advising Army acquisition executives in the ground combat vehicle program office on how to plan for the future, keep critical industries alive and shed excess capacity.
“The key issues are capability, capacity and cost,” Sorenson said in an interview.
“Over the last 10 years of war we have built up a lot of capacity” both in the private and public sectors, he said. “Now as the drawdown takes place, how much do we need to retain?” he asked.
Nobody expects any immediate answers. The Army bureaucracy might decide to continue to study the issue for years, if history is any guide.
But Sorenson said the Army is running out of time as Pentagon budget cuts loom. Contractors would prefer to know their fate sooner, rather than later, so they can plan accordingly, he said.
Many second- and third-tier contractors have built their entire businesses basically supporting the war, said Sorenson. The Army has to send a clear signal so these companies know whether to expect a future in this market.
Further complicating these efforts is Congress. Both the House and Senate have cleared legislation that would require the Army to keep open the General Dynamics’ M1 Abrams tank production line in Lima, Ohio. The Obama administration had planned on shutting it down for at least three years in order to shift funds to the new Ground Combat Vehicle program, which currently is slated to begin production in 2017. The Senate authorized $91 million for 33 additional Abrams tanks. The House authorized $181 million.
A recent study by the pro-administration Center for a New American Security essentially endorses congressional actions to stop the Army from closing down the Abrams line. The CNAS report contains a comprehensive list of recommendations on how to cut defense spending, and calls for the delay of the Ground Combat Vehicle and for the Army to stick with the Abrams. It argues that the Army can wait a few more years for a new vehicle as the M1 remains the world’s best tank. CNAS analysts argued that if the Abrams line is kept alive, it could help Obama administration efforts to promote tank sales to foreign allies.
Industry consultant Loren Thompson, of the Lexington Institute, criticized the Army for seeking to close a 50-year-old plant that BAE Systems operates in West Manchester Township, Pennsylvania. That is where the Bradley fighting vehicle and others are produced. “The shutdown would only last for three years, but BAE Systems says it would cost $750 million stop and restart -- due mainly to the lengthy effort required to reconstitute the skilled work force and supplier base,” Thompson wrote in a blog post. The contractor contends that the Army’s move would undermine BAE’s efforts to design a successor to the Bradley.
These are, indeed, tough calls, said Sorenson.
“If we continue to spend [procurement dollars] to keep the house running, how much can we spend on future capability?” he asked. “There has to be a balance between modernization and sustainment. … We don’t want to sacrifice modernization.”
A.T. Kearney consultants are helping Army officials analyze the industrial base so they can “rationalize what they have,” said Sorenson. They will “war game” different scenarios, such as what happens to the supplier base if certain Army programs end, if foreign sales are able to make up the slack, or whether industry can handle the cutbacks and still be able to react to a future, unpredictable, contingency.
“Risk based” analysis is what the Army needs to make rational decisions, said Sorenson. “We’re trying to help them baseline their industrial base … and give them insights to make prudent investments.”
Although it has become faddish to propose that the military stop funding costly developments of new vehicles and procure “off the shelf” technology, that is not always possible, and must be weighed in Army decisions, he said. “There is no commercial off-the-shelf” Bradley or Abrams. These take development.”
In the truck sector, there is enough technology in the open market that the U.S. military can tap, as it did when it procured thousands of mine-resistant ambush-protected (MRAP) trucks for the Iraq and Afghanistan wars. “We were lucky that MRAPs were being produced in the open market for foreign countries such as South Africa. So we were able to get them, modify them and use them,” Sorenson said. “They’re not exactly off the shelf, but they were already being built.”
Whatever choices the Army makes on its future vehicles, it can expect high levels of scrutiny from the top echelons of the Pentagon’s civilian leadership.
“Everyone in the Army acquisition business is disappointed by the performance of the past decade,” said Deputy Defense Secretary Ashton B. Carter, following a May 30 speech at the American Enterprise Institute. “They are determined to do better,” but much work remains to be done, he said.
The failure of the Future Combat System clearly continues to haunt the Army.
“This was a lost decade” for Army modernization, Carter said. “It’s sad.”