With the start of fiscal year 2014 just a few days away and with no budget in place, the military services are already in the process of briefing their proposed fiscal 2015 budgets to Pentagon leaders. It’s a highly uncertain process, except for one thing: members of industry can expect a lot of routine decisions to be delayed while the budget process gets hammered out.
In the case of the Air Force, 2013, the first year of sequestration, was not as bad as it could have been. The service was able to reprogram funds so that it kept major programs mostly intact, partially because it was able to use unexpended funds from prior fiscal years, said Richard Lombardi, the Air Force’s deputy assistant secretary for acquisition integration. This is not a luxury the Air Force will have next year.
The ongoing uncertainty means a lot of decisions to award contracts or to move to the next milestone of a program are likely to be put on hold during the first part of 2014.
“I think what we’ll continue to see is things will continue to be slower as we’re trying to make financial decisions to make sure that we’re not launching off on something and then having to do a real quick redirect,” he told an Air Force Association breakfast Thursday. “The last thing we want is to march off, award something, industry has teams ready to go and staffing up, and then we have to do a complete 180 and rescope programs.”
Lombardi said additional oversight from the Pentagon is also going to produce some lag time for programs.
“[Requests for proposals] and source selection plans are getting unprecedented levels of scrutiny all the way up the chain,” he said. “On the [major acquisition programs], Frank Kendall, [the undersecretary of Defense for acquisition, logistics and technology] is personally reading the RFPs. We’re going through a lot of multiple reviews to make sure we’ve got everything put together in a tight fashion.”
2014 is all but certain to start out with a continuing resolution that funds the government for only a small part of the fiscal year. And when it does, Lombardi says the Air Force will begin to dole out dollars to its acquisition programs carefully, funding them with only a portion of what the president’s 2014 budget request included. The Air Force is assuming the Pentagon would continue to be funded at the level of the 2013 budget, minus sequestration cuts. But it’s unclear how long such a continuing resolution would last, whether Congress will eliminate or amend sequestration, and how much flexibility DoD will have to move money between accounts. And Congress still has not passed authorization bills for 2014 that tell the military how much money it’s allowed to spend on a given program.
“Typically what we do during a continuing resolution is we’ll allocate about 80 percent of our budget out to the programs, and the reason we need to do that is we need to maintain some flexibility,” he said. “That really helped us in 2013 because we didn’t know how much we were going to be sequestered. So, by not allocating the full amount out to programs, it allowed us to have a little bit of a buffer so that programs were not overexecuting dollars.”
If overexecuting dollars is the Air Force’s biggest challenge over the next few months, it’s had the opposite one over the last few. While it’s no secret that all federal agencies make a big push to spend all their appropriations toward the end of a fiscal year, 2013 was different, since most agencies spent half the year with no idea what their final budget numbers were and with no ability to start new programs. Reprogramming authorization from Congress to try to mitigate the impact of sequestration also came very late in the fiscal year. So, Lombardi says, there’s now an urgent need to spend every procurement dollar the Air Force has.
“We’re working almost daily with all the program executive officers to see what they’re actually putting on contract to minimize the amount of dollars that are going to expire,” he said. “In this environment, we cannot afford to have dollars expire. That’s just leaving money on the table.”