Budget Stalemate Puts Pentagon Programs Back on the Brink

The prospect of Congress keeping the government open via temporary funding measures through the coming fiscal year is sending shudders through the halls of the Pentagon.

With a bitterly divided Congress and no signs that lawmakers are any closer to agreeing on funding levels for fiscal year 2016, the Defense Department fears it will have to operate with short-term funding through the coming months, or even through the entire budget year.  Congress approved a stopgap spending bill Oct. 1 to keep the federal government open until Dec. 11. It temporarily continues defense and non-defense appropriations at the 2015 levels.

For Pentagon weapon buyers, continuing resolutions are a nightmare scenario, even worse than actual budget cuts, a panel of senior procurement officials said Oct. 6 at an industry conference hosted by Defense One. They described in the starkest terms the consequences of lacking a proper budget, including the possibility of having to cancel programs and cut some equipment orders short at a time when the Pentagon is trying to modernize U.S. forces with more advanced technology.

Officials lamented that the current partisan budget standoff comes just as the Pentagon is beginning to recover from the Oct. 2013 government shutdown and fiscal upheaval that ended with the Ryan-Murray budget deal signed in December 2013.

“The biggest fear I have is of this ‘incremental CR’ that goes on in perpetuity,” said Heidi Shyu, the Army’s senior acquisition executive. “It really devastates our programs.” An internal Army study estimated that about 400 programs would be derailed to some degree if the government is funded by continuing resolutions for the remainder of the fiscal year.

“In just about every major program, we won’t be able to procure the quantity we planned,” she said. For instance, half the projected order of Apache combat helicopters would have to be nixed.Programs that are starting engineering and manufacturing development — like the armored multipurpose vehicle the Army is buying to replace aging troop carriers — will not be ramping up, Shyu said. “You’re stuck at last year’s funding.”

Undersecretary of Defense for Acquisition, Technology and Logistics Frank Kendall said, under a full-year CR, the Pentagon would first protect the accounts that pay for force readiness and training, so inevitably procurement, research and development projects would take a hit. Further, the Defense Department would be at risk of having to break multiyear contractual commitments with suppliers for major weapon systems.

Case in point is the multiyear contract the Air Force signed with Lockheed Martin for C-130J cargo airplanes. “If we go to a year-long CR, we’ll break that multiyear,” said Air Force acquisition executive William LaPlante. “It’s pretty severe.”

The Air Force estimates about 50 programs would be thrown into chaos. “What’s worse than sequester? A year-long CR,” LaPlante said.

One of the Air Force’s most prized acquisitions, the KC-46 aerial refueling tanker, could be affected, even though the aircraft development is being funded under a fixed-price deal with The Boeing Co. “The tanker is going well even though it has challenges. The biggest threat to the tanker is actually the government’s behavior,” said LaPlante. “So far we’ve been good at keeping our part of the deal. But it has been very difficult in this climate.”

An illustration of the inefficiency created by short-term funding is what happened in 2013 when the Air Force had to delay a contract award for a space surveillance system. The plan was to sign a contract for the so-called “space fence” in September 2013, but with no budget in place, the Air Force held off. By the time funding was approved, the pricing in the proposal was no longer valid so the service had to go back to square one. That ended up costing the program a whole year and $120 million in extra costs, LaPlante said. “That was just because of the uncertainty.”

Navy acquisition executive Sean Stackley painted a similar picture. “We are still recovering from the 2013 CR and sequester,” he said. The Navy has a growing backlog of airplanes and ships waiting for repairs and upgrades at depots. “New starts were slowed down in 2013, but that’s minor compared to what we’re staring at in 2106,” Stackley said. “By and large the uncertainty of not knowing what your budget will be puts you in shackles in terms of executing in the course of the year.”

Kendall said he and Deputy Defense Secretary Robert Work have been putting together a potential hit list of programs that may not make it in 2016 if the CR continues beyond December. “I’ve given the deputy secretary a list of the major commitments we’d be making in 2016, with some thoughts on which ones we would defer because of the uncertainty,” said Kendall. ”Some of the things we were planning are going to have to be deferred.”

Topics: Defense Department, DOD Budget