The second highest official in the Defense Department Monday said she has not yet seen significant inflation effects in the military budget, but the department is watching out for signs going forward like schedule slips and supplier price increases.
“We are not seeing today, a substantial amount of inflation effects. We are seeing some, certainly in fuel we see it, but in some of these other areas. But given COVID, that inflation, and the supply chain issues…we do anticipate we have to watch this, all of that space closely, as we go forward,” Deputy Secretary of Defense Kathleen Hicks said during an online Defense One Tech Summit on June 13.
Hicks said the department is particularly looking at program schedules when watching for impacts from inflation.
“We have many firm-fixed price contracts, for example, where it may not be that we see a price increase because it’s a firm-fixed price contract, but we might see schedule slips. And that could be supply chain, it could be workforce related, etc., could be supplier prices. So that will be something we’ll be watching throughout the summer into the fall.”
She noted where DoD finds buying power issues they will work with Congress, but the department has not seen major issues yet.
“I will tell you, we are not seeing what most people would think of as substantial, a high percent of the defense budget being affected right now by those buying power concerns, but I do anticipate we’ll see them in the longer term,” Hicks said.
Hicks also said the rising cost of fuel further underscores “what we know already about fuel dependency,” but the department is already being motivated at a higher level to change that in places like the Pacific region with long supply lines.
“I think we are motivated at a more strategic level to make sure that we can free that tether on fossil fuel to the extent that we can we.”
She said there is a lot DoD can do to move the fuel dependency system “and when we do that we’re going to help ourselves with that combat credibility, particularly in places like the Pacific where the logistics lines are very long.”