Defense Department officials are writing a budget request for fiscal year 2015 that seeks to protect critical components of the industrial base, after the FY ’13 sequestration cuts decimated all spending accounts and the FY ’14 spending plan focuses on restoring readiness and operations at the expense of procurement and research and development.
Frank Kendall, the undersecretary of defense for acquisition, technology and logistics, said at a Center for a New American Security panel event Thursday evening that “we consciously looked at the industrial base and implications of budget decisions on the industrial base…We did make some decisions that I can’t talk about yet that are in the budget that are intended to support critical parts of the industrial base.”
Kendall said that industrial base concerns were a major topic of discussion at a recent Deputy’s Management Action Group meeting, as officials seek to find balance in the budget–balance in short-term and long-term risks, and balance in cuts to troops and to the military and contractor organizations that support them.
“The levels of the cuts we’re taking, particularly under sequestration, are so severe that we just cannot do the things we need to do,” Kendall said. “We have to take risk in all areas. And often when you’re in that situation, you prefer longer-term risk to the shorter-term risk, because that problem is right in front of you.”
The FY ’14 spending plan, which passed the House Wednesday and the Senate Thursday, includes about $22 billion in sequester relief. FY ’15, however, only includes $10 billion, and Kendall has said several times that next year would be harder than this year to protect investment accounts.
“We’re doing our best” to take care of the industrial base in the FY ’15 request,” Kendall told Defense Daily after the event. He said the FY ’14 budget isn’t perfect, because it was written for a higher spending topline and had to be cut by Congress during a month-long negotiation between the House and Senate appropriations committees.
“We obviously would have liked to have had a higher number in ’14, and we’re still looking through the details of the bill to see if there are any reprogrammings we’re going to have to ask for,” Kendall said. “On the whole, I think [Congress] did a reasonable job. They were reasonably consistent to what we asked them to do.”
Asked about the process of selecting where to make $32 billion in cuts from the request to the spending plan that ultimately was voted on, Kendall said, “there was a dialogue–it was rather accelerated, but there was a dialogue” between the Capitol and the Pentagon.
During the panel discussion, Kendall outlined the math that created problems for procurement and research accounts right now. Because future spending levels are still unclear, Kendall said DoD is reluctant to draw down its force structure any further than is already planned. As such, personnel costs cannot be cut, and operations and maintenance accounts can only be trimmed slightly without hurting the readiness levels of troops preparing to deploy. That means that, for the time being, the bulk of the cuts fall on the accounts he oversees.
“Until we can get our force structure down, I’m afraid that’s what going to have to happen. It’s just the math,” he said. “As we get further out, we can start to recover those accounts, but in the near term it’s going to be disproportionate.”
Even within his research and development accounts, there are still disparities. Kendall gave credit to the White House, and to Office of Science and Technology Policy Director John Holdren in particular, for supporting basic research–including DoD’s science and technology spending accounts–as departments have worked on their budget requests in recent years. Kendall said his S&T account, which is about 15 percent of his total R&D budget, has been very well protected thanks to administration support, but that puts even more pressure on the rest of his R&D account as budgets shrink.
Though some in the Pentagon argue that troops need full funding now and research and development can be reinvested in later, Kendall made clear his feelings on the need to maintain a strong portfolio of research projects and an industrial base that can support basic S&T, systems design, prototyping and manufacturing.
“One of the things that I’ve been saying repeatedly within the department is that industry is part of our force structure…and we run some risk as we cut those just as much as if we cut a brigade combat team somewhere or we retire a ship,” Kendall said.