‘Some Slowdowns’ in Modernization Programs Expected in Next Fiscal Year

Industry can expect to see some cutbacks in modernization programs in fiscal year 2017, the Defense Department comptroller said Nov. 30.

As it finalizes its budget request for the next fiscal year, the Pentagon has to find a way to close the approximately $15 billion gap between the amount of topline funding it hoped to receive and the level that was agreed upon in the recently passed Bipartisan Budget Act of 2015, Comptroller Mike McCord said during remarks at the Center for Strategic and International Studies, a Washington, D.C. think tank.

“There will probably be some slowdowns in some modernization programs,” he said.

The changes can be expected in “a few places,” but he declined to specify whether the F-35 joint strike fighter or other high profile programs would fall victim. The new long-range strike bomber program will experience delays due to “its own schedule dynamics” because the contract was just awarded last month, he noted.

The department expects to receive about $525 billion in base funding in fiscal year 2017 plus $59 billion for overseas contingency operations (OCO), McCord said.

“We are near the end of program review,” he said. “We have a couple more issues to discuss [and] to finalize,” including the details of OCO funding.

How much money to put into the European Reassurance Initiative is a key OCO issue that has yet to be resolved. In fiscal year 2015, the initiative was funded at just under $1 billion. It includes force rotations, exercises and other activities intended to reassure jittery NATO allies concerned about a resurgent Russia.

“We’re going to ramp that up in the ’17 budget,” McCord said. “The exact number we’re still debating, but it’s going to be a … pretty significant increase.”

The Pentagon wants to fund “a more robust version” of what it has been doing, as well as more permanent measures, he said.

“The difference that we’re looking at this year is some more permanent investment, whether it be prepositioning or basing for some additional presence and additional posture and capability in Europe that will be of a more longer term nature,” he said.

However, the U.S. military will not be involved in efforts to deal with the refugee crisis there, McCord emphasized.

“What we are not talking about would be having the U.S. Department of Defense help police up the immigration system or the influx of people … into Europe from the Middle East,” he said. “That’s something the Europeans need to handle for themselves.”

The Pentagon plans to finalize the budget request within the next three weeks and submit it on schedule at the beginning of February. The department is still waiting for decisions or “passback” from the Office of Management and Budget, as well as financial analysis from actuaries related to military compensation, McCord noted.

Observers should not expect to see proposals for more force cuts in the upcoming budget request. The Defense Department doesn’t want to initiate another drawdown until it knows whether it will have to operate under sequestration caps in fiscal year 2018 and beyond.

“We don’t know what we’re going to be living with, so I don’t think you’ll see a big move on that side because that’s such a hard thing to do without a clear imperative" … given the demands on the force,” McCord said. “Nobody really wants to shrink the force that much.”

Topics: Defense Department, DOD Budget