Acting Secretary of the Navy Thomas Modly this week directed a new review akin to the Army’s ‘Night Court’ process to save $40 billion from FY 2022-2026 so the Navy can better reach its goal of 355 ships while improving readiness and starting to build new ballistic missile submarines.

In a memo dated Feb. 18 Modly is directing a Stem-to-Stern (S2S) capability-based strategic review with an objective, on average, of saving $8 billion per year to reach $40 billion total savings. He underscored the Navy needs a bigger fleet and the 2019 Integrated Naval Force Structure Assessment calls for increasing ship numbers and other capabilities “within a strategically relevant time frame of 10 years.”

Acting Secretary of the Navy Thomas Modly speaks during a National Defense Industrial Association event at the Logistics Management Institute on Jan. 24. (Photo: U.S. Navy)
Acting Secretary of the Navy Thomas Modly speaks during a National Defense Industrial Association event at the Logistics Management Institute on Jan. 24. (Photo: U.S. Navy)

At the same time, the service “must continue to claw our way out of readiness and lethality shortfalls that evolved after years of operational tempo, budget caps, and sequestration.”

This is concurrent with the Navy starting a 40-year recapitalization of the nuclear ballistic missile submarine force, a requirement that “will consume a significant portion of our shipbuilding budget in the coming years and squeeze out funds we need to build a larger fleet.”

“We must find savings within the Department to reinvest in the kind of decisive naval force that will provide for our nation’s future economic and political security. The bottom line is that we need to find at least $40 billion in real line-of-accounting savings to fund the development, construction, and sustainment of this new fleet over the next 5 years, and to set the Department up for continuing this trajectory in the 5 years that follow,” Modly wrote.

He acknowledged the Army has be working through similar reviews over the last two years in what they call “Night Court.”

“In these “Night Court” sessions, they identified approximately $13 billion in savings over the Future Year Defense Program (FYDP). As always, it’s time to BEAT ARMY!” Modly wrote.

The Army’s FY 2021 budget request included information on $13.5 billion in funding over the FYDP realigned from 41“low priority programs” in the latest round of the “Night Court” effort (Defense Daily, Feb. 10).

However, the first round of night court cuts informing the FY ’20 budget request resulted in 186 program cuts or reductions and shifted about $33 billion to modernization over the FYDP. Defense Secretary Mark Esper first pushed the “night court” process in the that service when he was Army Secretary (Defense Daily, March 12, 2019).

The Navy’s review said it aims to “apply a strategic lens to the [Department of the Navy] program” with the savings “repurposed in accordance with [Modly’s] three priorities: designing and building a future integrated naval force structure (355+ Ship Navy by 2030); advancing our intellectual capacity and ethical excellence; and accelerating digital modernization across the force.”

Modly said the $40 billion amounts to seven percent of the department’s discretionary topline after separating force structure, associated manpower, and operational tempo.

According to the memo, the S2S will specifically identify low priority, redundant and legacy capabilities, programs, processes, or headquarters functions “that can be realigned, eliminated, or reduced to meet DON’s resource needs.”

The review will particularly consider duplication of information technology systems and infrastructure; consolidation or elimination of headquarters, commands and organizations; streamlined naval logistics; enabling capabilities that can be outsourced; enabling capabilities that can be consolidated to support an integrated naval force like education and training pipelines; reductions in global force management offerings; and significant reductions in service support contracts.

The S2S review began on Feb. 18 and will be co-chaired by the Deputy Under Secretary of the Navy; the Director, Office of the Chief Management Officer; and three-star or equivalent from the Navy and Marine Corps. It will also include representatives of the Assistant Secretaries and the Chief Information Officer.

The Business Operations Management Council (BOMC) will serve as the four-star body to review the work of the S2S.

The S2S is due to conclude on April 15 to support the June 2020 Program Objective Memorandums (POM) submission to the Office of the Secretary of Defense as part of the FY 2022 budget request process.

The Navy’s FY ’21 budget request has already started considering ways to save and shift funds. During the Navy’s FY ’21 budget request press briefing, Deputy Assistant Secretary of the Navy for Budget Rear Adm. Randy Crites said the department started with a zero-based budget review.

Crites said, “we have about 6,400 different line items within our budget. It’s essentially a review of every single line item within the budget for cost schedule execution, how it aligns to the strategy, what’s the stratification of value of each item that the program might have, all that…it’s ongoing, so as we build the next program, it’s built into the way we build our program, so it’s not just a one-time.”

He added the zero-based review is also continuing as the department works on the FY ’22 budget request.

The S2S and zero-based review are in line with what Esper has said he wants to see to modernize systems in a budget constrained environment.

While speaking at the Reagan National Defense Forum in California in December, Esper said the Pentagon’s ongoing Fourth Estate review led to $5 billion in cost savings as the process to shift funds from legacy programs to higher-priority modernization continues into 2020. He also said the process was just beginning and he expected the leaders in the military services, Office of the Secretary of Defense, Joint Staff, and combatant commands to review their budgets and reprioritize in the same light (Defense Daily, Dec. 9).

In a statement, the Navy said the S2S review “expands and accelerates ongoing reforms to ensure we’re making the most of the resources Congress provides. The National Defense Strategy (NDS) requires relentless and ruthless prioritization to balance near term challenges and prepare for great power competition, particularly given the fiscal realities confronting us.  To accomplish these NDS goals, we need to grow a bigger Navy, but for now, we cannot count on a bigger budget.  By focusing on processes that free up time, money, and manpower, S2S will directly inform development of future Department of the Navy budgets – this is a strategic imperative.”

“The DON is following Secretary Esper’s guidance that “no reform is too small” and that we must think differently to make every dollar advance the NDS,” the Navy added. last week was first to report on the S2S.