Army Industrial Base Said to Be in 'Death Spiral'

There was plenty of doom and gloom on the final day of the Association of the United States Army annual conference where a panel of officials, industry leaders and academics spelled out all the problems with the service's research, development and acquisition enterprise.

At what point will Army readiness be compromised by sharp reductions in research, development and acquisition spending, a moderator on a panel asked Heidi Shyu, assistant secretary of the Army for acquisition, logistics and technology.

"We are already at that point," she answered. Later, she said that the Army-owned manufacturing facilities were in a "death spiral." R&D and acquisition accounts have dropped twice as fast as the Army top line budget over the past three years, she said. Parsing out the design and development accounts, the Army's is now has the smallest budget of all the armed services.

"That is very disconcerting for our future," she said Oct 15.

Overall budget reductions, last year's government shutdown and furloughs of the civilian workforce, have all taken their tolls, she said.  

Budget cuts do not equate to less work. They equate to more work as programs are strung out, Shyu said. That means more contracts have to be issued. Meanwhile, the vital contracting workforce is being "slashed and burned," she said. One-third the budget does not mean the Army needs one-third the number of personnel to carry out the acquisition duties, she added.

With the possible return of sequestration in 2016, the Army might be writing two budgets. "It creates an enormous amount of additional work and churn on all the folks that we have in the acquisition workforce," she said.

The furloughs had an "incredible impact on the civilian workforce's morale," she said. The attrition rate is increasing. "We are starting to lose people we don't want to lose."

As acquisition programs are stretched out, it causes more inefficiencies, Shyu noted. Purchasing items in smaller quantities equates to higher costs as opposed to buying in bulk. "It's not better buying power. It's much worse," she said, referring to the Defense Department's Better Buying Power 3.0 initiative.

The Army acquisition enterprise is being asked to deliver systems the Army needs but can't currently do so in a timely manner, she said.

Because workloads are going down substantially in the organic industrial base -- manufacturing carried out by government-owned plants -- the rates the Army must pay are going up, she said. That results in fewer items that can be purchased.

"This is a death spiral that we're in," she said.

Congress won't allow a Base Realignment and Closure process to reduce capacity, so there are few knobs the Army can turn, she added.

Lt. Gen. Patricia McQuistion, deputy commanding general and chief of staff of the Army Materiel Command, said the impact of budget cuts on AMC's personnel "cannot be overstated."

"It is having a significant impact on our people and their ability to do their work," she said.

The budget slowdown means AMC is being given tasks to perform incrementally, which actually requires more work on the part of contracting specialists, McQuistion said. That creates headaches for industry as well, she noted.

"It really is the most inefficient way to do our operations," she added.

Topics: Defense Department, DOD Budget