DoD acquisition programs remain alive, but sequestration damage is real

The military services’ top acquisition officials told Congress this week that sequestration dealt a blow to virtually every modernization program in the Defense Department during fiscal 2013, and that the impacts will get progressively worse the longer Washington stays in short-term crisis budgeting mode.

Each of the military services say they managed to avoid outright cancellation of any major acquisition programs in 2013, but only through a lot of harried restructuring of programs. They also were helped by a combination of unspent 2012 money and reprogramming of funds from Congress.

In 2014, the services say they won’t have the luxury of unobligated prior year dollars, and it remains to be seen how much flexibility Congress will give them to move money between accounts in the absence of a spending plan for the fiscal year.

“I would say that every program was impacted, and we were able to absorb some of the impact,” said Sean Stackley, the assistant secretary of the Navy for research, development and acquisition, during a House Armed Services Committee hearing Wednesday. “But frankly, the Department of the Navy had to push a significant amount of that impact into the out years. So the impact is still staring at us across the board in those same programs. Did we cancel any? No. Our priority was to not cancel, which would create more harm over and above what the sequestration caused.”

Space Fence one example

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Across the military’s acquisition programs during 2013, officials cut back on the quantities of items they planned to buy, pushing up unit costs, and delayed the development of new capabilities into future years.

And if programs continue to be delayed, history shows they’ll soon be canceled, said Dr. William LaPlante, the Air Force’s principal deputy assistant secretary for acquisition.

“The way it works is, the step to cancellation is delay, and that’s already started,” he said. “Space Fence, the major Air Force program for space situational awareness, has been put on hold, OK? That doesn’t mean the program’s been canceled, but contractors were told to stop work on that program about Sept. 15.”

The Air Force had the Space Fence program ready to go, LaPlante said, and assuming it starts up again, delaying it by just one year will increase its cost by at least $70 million.

Also, as long as the government keeps operating under a continuing resolution, the military is barred from starting new programs. The Navy, for example, can’t award contracts for any new ships — since the current bill funding the government is a copy of 2013’s sequestered spending plan, the Navy only has authority to buy the exact same ships it bought last year.

Under the Budget Control Act, sequestration in 2014 would reduce DoD’s overall budget by 10 percent from the levels it’s been planning for. But since President Barack Obama has used his authority under the same law to wall off military pay accounts from the cuts, the rest of the military’s accounts will take a larger hit. For acquisition, that would mean a 14 percent reduction in 2014.

Heidi Shyu, the assistant secretary of the Army for acquisition, logistics and technology, said with personnel spending off the table, the areas of the DoD budget that will pay the bills will be primarily modernization and military readiness.

“We don’t have any more buffer room left,” she said. “We’re going to defer maintenance on 172 of our aircrafts, more than 900 of our vehicles, over 2,000 of our weapons systems, over 10,000 pieces of communication equipment. This is going to have a rippling effect in terms of fielding to our units. Our contractors who are looking for stability of their workforce and of the contracts that they have can no longer plan for it. They continuously ask me what I anticipate the budget is going to be so they can plan for their workforce, and it is very difficult to give them any numbers. The other rippling effect it has created for us is an enormous amount of additional work for our internal government folks to plan for what-if contingencies. We go through multiple iterations of planning that’s very, very disruptive.”

Furloughs delay programs too

During 2013, some programs suffered directly from the workforce impacts of sequestration. Even in cases where the military services managed to reallocate enough money to keep contracts intact, the programs were still thrown off because the civilian workforce that was supposed to help execute them was on mandatory unpaid vacation this past summer.

“The F-35 lost one to two months of schedule overall in the program due to the furloughs,” LaPlante said. “The reason was that we were prohibited from paying overtime to civilians for testing both at Eglin [Air Force Base] and [Naval Air Station Patuxent River]. And if you’ve been around testing, you know that nothing gets done in a regular 40-hour week, let alone a 32-hour week.”

While, in theory, military hardware purchases can be put back on track once some level of funding stability is restored to the government, DoD leaders say they’re very worried that workforce impacts from the budget turmoil might not be reversible. LaPlante said those impacts are hard to measure right now, since staff turnover tends to be a lagging indicator of bad morale.

“I can tell you what my instinct is. Based upon individual resignations that have already occurred, I believe we’ve broken with particularly the younger acquisition and science workforce,” he said. “These are folks who are at a point in their career where they’re trying to make a decision whether this is something they can do for a full career and whether it’s something that’s reliable. Particularly the highly talented and marketable ones, they’re very vulnerable. We already have cases, including specific letters of resignations. And oh, by the way, that was before the government shutdown. During the first week of October, half of the [program executive officers] in the Air Force were at home. We were within about two days of shutting down the F-35 line, OK? I know that these are differences between sequester versus government shutdown, but the effect in the field is not terribly distinctive.”

Need more stability

There’s no doubt that everyone in the Pentagon would very much like sequestration to be undone entirely, but at some level, leaders have already accepted it as reality. For 2015, the military services are developing two separate budgets — one that accounts for the automatic budget cuts and one that does not.

But acquisition officials say what they need most of all is predictability, so that they at least know the amount of money they have to work with.

“Stability is absolutely critical to the performance of our programs across the board,” Stackley said. “And what we’ve been experiencing over the last one-and-a- half to two years, frankly, has been extraordinarily destabilizing. This uncertain environment that we’re marching through is unraveling all the efforts that the department has put in to driving affordability into our programs. All those programs underpin current and future readiness. What sequestration poses is a steady decline across the board in terms of operations, readiness, force structure, which ultimately equates to presence, response and national security. And so we’re in the front of that today. In 2013, we saw deployments being canceled. We saw the front end of procurements being canceled. You’re seeing delays to programs. When you compound that year over year, as posed through sequestration, it’s not a straight line. It will quickly devolve.”

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