Get Serious About Reform

Budget Challenges Will Force Hard Choices

Carl Conetta and Charles Knight
Defense News, 21 February 2010

During the past decade, the U.S. Defense Department has enjoyed a rise in its budget unprecedented since the Korean War. With President Barack Obama's fiscal 2011 budget request, it is up nearly 100 percent in real terms from its post-Cold War low. But few observers believe that this level of spending can continue in light of the mounting national debt. So it is wise to think now about options for savings.

A way to begin is to ask, what has driven budgets so high? Obviously, the wars are part of the answer. But they account for only 20 percent of today's expenditures. And they are the least likely targets for economizing.

It is more fruitful to reflect on the shortcomings in past efforts at defense reform. Can we do it better? It is also worth thinking about the practice of force modernization during the post-Cold War period, which has been distinctly undisciplined.

The end of the Cold War presented a unique opportunity - as well as a manifest need - for the structural reform of our defense posture. The force reductions of the 1990s necessarily risked decreased efficiency, due to the loss of economies of scale affecting support activities and equipment acquisition. The standard solution to such problems is to restructure as one gets smaller, matching reductions in size with a reduction in complexity - a practice the DoD did not, for the most part, follow.

Although smaller, DoD and the services have largely retained or even increased their complexity. For instance, there are today 50 major commands either one step above or below the service level - not much different from during the Cold War.

In our recent study of budget trends, we identify a dozen areas where significant changes had been proposed in the 1990s. These involved service roles and missions, consolidation of various support and training functions, and recentering budget and acquisition planning at the joint level.

In addition, the need to reform DoD's acquisition, logistics and financial management systems has been evident for a long, long time. However, only two reform initiatives - competitive sourcing and military base closures - were pursued far enough to yield significant annual savings, and these have not amounted to more than 4 percent of the defense budget.

There also was hope in the mid-1990s that a "revolution in military affairs" might lead to new efficiencies. We would reap more bang for the buck by means of increased battlefield awareness, improved logistics, increased capacities for standoff precision attack, and the networking of units within and across services.

In some areas, such as precision attack, capability has dramatically increased. Theater logistics also have improved. But nowhere has the revolution in information technology led to manifest and substantial savings. Rather than supplant-ing legacy capabilities and platforms, the new technology has mostly just supplemented them.

In prospect, the evolution of net-centric warfare might reduce the need for redundant capabilities. But progress toward the services sharing a common nervous system has been slow and mostly involved special operations units and precision ground attack. Generally, net-centric capabilities exist as an anemic overlay to traditional service-centric structures and assets.

DoD and the services have faced little pressure to economize or transform during the past decade. This is also evident in equipment acquisition.

We can discern three distinct acquisition trends at work in recent decades. First, there are legacy programs that came forward from the Cold War period with considerable institutional momentum. Second, there are programs reflecting the revolutionary potential of new information technologies. Finally, there are adaptive programs, such as the recent mass purchase of Mine Resistant Ambush Protected vehicles, that correspond to new mission requirements.

In an ideal world, the imperative to adapt to new missions and circumstances would draw on the revolutionary potential of new technologies to rewrite or supplant legacy programs. But this has not happened.

Too much of the $2.5 trillion in modernization funding since 1990 perpetuated the status quo circa 1990. Transformational acquisition was mostly restricted to producing supplements, such as Predator drones, to the legacy arsenal. And adaptive acquisition was largely delayed until field experiences forced a flurry of ad hoc efforts beginning six years ago.

The Pentagon's central authorities have done too little, too late to compel the integration of modernization efforts along adaptive lines. Legacy, transformational and adaptive modernization have lurched forward together, but poorly integrated and competing for resources. And yet, even though modernization spending now surpasses that of the Reagan era, no one is happy with the result.

For 10 years, Congress and the White House have been permissive when it comes to defense spending; this has undercut any impetus for reform and prioritization. Obama's decision to further boost the defense budget suggests that this dysfunction will persist for a while, but this, too, is a bubble that will burst. Preparing for that eventuality means revisiting options for structural reform and getting clearer on our strategic priorities.

Shipbuilders Batten Hatches as Navy Weighs Cuts

Nathan Hodge
Wall Street Journal


NEWPORT NEWS, Va.—Mike Petters keeps a well-thumbed volume of naval history handy on his desk. One of its lessons, he says, is that maintaining a fleet is a long-term national investment that outlasts short-term politics.

"You end up building ships for the administration after next," said Mr. Petters, the president and chief executive of Huntington Ingalls Industries Inc. "That's the history of shipbuilding."
But with economic constraints putting pressure on the Pentagon's budget, it may not be the future of shipbuilding—at least in the U.S.

Huntington Ingalls, formed as a spin-off of Northrop Grumman Corp., is building the USS Gerald R. Ford at its shipyard here. The Navy plans to buy the next Ford-class aircraft carrier in fiscal 2013, as part of a request to be submitted to Congress early next year.

In recent months, however, rumors have swirled in Washington about a possible delay. Rather than buying one carrier every five years, as it does now, the Navy may buy one every six or seven years.
Such attempts to save money, Mr. Petters said, can drive up the cost of the ships, which the Navy currently estimates at around $11 billion each.

"When you start stretching them out, you have to start disbanding the [shipbuilding] teams, and you have them go do other things," he said. "So you break those learning curves, and suddenly you've lost the opportunity to create efficiency."

How many ships does the nation need? Not everyone agrees that the Navy should maintain an 11-carrier fleet, its current force, set by law. The Sustainable Defense Task Force, a nongovernmental panel endorsed by Reps. Barney Frank (D., Mass.) and Ron Paul (R., Texas), concluded in a June report that the Navy could downsize to nine carriers without compromising national security.  "The capabilities to do what we did in the past with fewer carriers are there," said Carl Conetta, co-director of the Project on Defense Alternatives and a contributor to the report.

Naval shipbuilding has even emerged as an issue in the 2012 presidential campaign, with Republican candidate Mitt Romney proposing a 50% boost in shipbuilding budgets in a speech last week.  In congressional testimony in July, Adm. Jonathan Greenert, now the Navy's top officer, told lawmakers that a five-year interval between purchases was "about in the sweet spot" for carrier construction. Asked whether a longer interval was being considered, he conceded that a "whole host of items" were on the table in internal discussions about the 2013 budget. Navy officials said no decisions had been made to change the procurement schedule.

Building carriers is a labor-intensive task that requires a sizable work force and major investments in heavy equipment. The 550-acre Newport News shipyard, which stretches for two miles along the James River, is bustling with activity: In addition to the work on the new carrier, employees are busy overhauling the USS Theodore Roosevelt, another nuclear carrier, and are building two Virginia-class submarines.

It also requires handing down skills from one shipbuilder to the next. Inside the machine shop, Jimmy Witt, a 50-year veteran of the yard, supervised shipbuilder Kenny Walker as he machined a 55-ton propeller shaft for the new carrier.  "Young guys are not too fond of the grinding and the legacy shipbuilding stuff," said Joey Perry, the head of the machine shop. "We're trying to make this stuff exciting and challenging as a career path."

Naval analyst and author Norman Polmar said the Newport News yard could easily maintain its nuclear expertise without building carriers at the current rate, because it also builds nuclear-powered submarines. But piecing together a massive carrier, he said, "is a major issue, because that's 100,000 tons of steel, and it takes a lot of skill to glue it all together."

The yard currently employs 20,000 people, and with unemployment high around the nation, it has few problems attracting job applicants. Christopher Spanos, a second-generation shipbuilder who is enrolled in the company's apprentice school, said the yard offered the promise of steady, long-term employment. "When the economy headed downhill, it was time to come back to what you know," he said.

Mr. Petters, the Huntington Ingalls CEO, said the budget debate had forced a return to a recurring discussion in Washington: "How big does the Navy need to be? What do we need a Navy for?"

The key difference now, he said, was the nation's fiscal situation. "Now we're at the point where it's time to make the deal," he said. "Are we going to build the ship, or are we going to do something else?"

RD 11/2/11: DoD Funding Freeze May Be Thawing

PDA Reset Defense Bulletin – 11/2/11
ed. Ethan R. Rosenkranz

State of Play

Legislative: CQ Today reports that Congressional appropriators are considering providing $518 billion in funding for the Department of Defense in FY12, which is $5 billion more than the Senate Appropriations Committee approved-bill and $12.5 billion less than the House passed-legislation.  While disagreements remain over detainee provisions, SASC Chairman Carl Levin indicated that the defense authorization bill will likely head to the Senate Floor before the defense appropriations measure is considered, which is expected to occur sometime in December.  The Senate has completed work on a mini-omnibus appropriations measure comprised of three regular spending bills, however House GOP opposition could derail the package as it’s considered in conference.   The Senate will likely take up another mini-omnibus appropriations bill later this week.

The Super Committee met publicly yesterday to receive testimony from the Co-Chairs of the Fiscal Commission, Erskine Bowles and Alan Simpson, as well as former Senator Pete Domenici and former OMB director Alice Rivlin.  Despite 15 closed-door meetings and several public hearings, the Super Committee remains far apart on the issue of taxes and is still trying to find agreement on a broad framework that can pass both chambers.  At a classified, closed-door House briefing last night, Sec. Panetta, Gen. Dempsey, and other top administration officials lobbied lawmakers to approve recommendations put forth by the Super Committee in order to avoid sequestration cuts to defense.  Panetta also said that he expects half of the $450 billion in defense cuts to come from weapons systems, while the remaining savings will likely come from efficiencies, health care reforms, and cuts to troop end strength.

Executive: The service chiefs are testifying at a HASC hearing this morning, where the discussion is expected to focus on the upcoming Pentagon strategy review and how it will influence forthcoming budget cuts.  Testifying at a HASC subcommittee hearing last week, the service vice-chiefs indicated that the strategy review should be completed by December of this year.  The New York Times reports that the Administration is considering sending to Kuwait some of the 39,000 troops scheduled to leave Iraq by year’s end.

Highlights

Democracy Arsenal: Our False Debate on Cutting Defense Spending
Michael Cohen responds to a Washington Post editorial by Robert Samuelson and rebuts his claim that military spending is more important than domestic spending.  (10/31/11)

Capital Gains and Games: Defense, Jobs, and the Making of Hypocrites
Gordon Adams slams the AIA jobs arguments and exposes its underlying hypocrisy.  (10/30/11)

National Interest: Strategy vs. Jointness
Benjamin Friedman argues that removing the “golden ratio” will encourage strategic competition amongst the services leading to greater efficiency.  (10/28/11)

Other News and Commentary

Huffington Post: Super Committee Could Pass a Resolution Giving Itself More Time
The Super Committee has the option of reporting out a resolution that would provide additional time for it to complete its work.  (11/1/11)

Secrecy News: Prospects Fade for a Separate Intelligence Budget
Although DNI James Clapper supports a separate budget for the National Intelligence Program, he admitted in a speech last month that it “ain’t gonna happen.”  (11/1/11)

The Hill: Pentagon May Shift Focus to Asia-Pacific
Sources say the upcoming strategy review may recommend cancellation of the littoral combat ship.  (10/31/11)

Battleland: Triad & True
Mark Thompson responds to a recent piece defending the nuclear triad in the Weekly Standard.  (10/31/11)

Danger Room: Army’s Vision for the Future: Mostly Doom, Some Idiocy
The Army is hosting a symposium called “A Vision of Alternative Futures” where government officials, academics, and contractors will make the case for maintaining the Army’s budget at $140 billion.  (10/31/11)   

New York Times: Bombs, Bridges and Jobs
Paul Krugman acknowledges defense spending creates jobs, but exposes the overall hypocrisy of the military jobs argument.  (10/30/11)

Small Wars Journal: Salami Slices, Cheese Spread and Kool-Aid: A Recipe for Anorexic Organizations
Two Air War College academics argue against across-the-board cuts to defense and in favor of allowing strategic vision to guide defense reduction.  (10/29/11)

CQ: In Downsizing Defense, Politics Trumps Strategy
Gordon Adams disputes the notion that past defense builddowns have endangered U.S. national security.  (10/29/11)

New York Times: The Bloated Nuclear Weapons Budget
New York Times editorial calls for significant savings from the nuclear weapons budget, including forgoing modernization of the B61 bomber in Europe and reducing to 1,220 the number of deployed strategic nuclear weapons.  (10/29/11)

Defense News: Slight Drop in U.S. Funding for Intel Programs
Recently released funding figures for the intelligence community show that, although the overall National Intelligence Program’s budget increased from FY10 to FY11, the Military Intelligence Program received three billion dollars less.   (10/28/11)

Reports and Publications:

CBO: Recent Development Efforts for Military Airships (November, 2011)

Center for International Policy and Common Cause: Tools of Influence: The Arms Lobby and the Super Committee
Bill Hartung finds that Super Committee members have received over $1.1 million in campaign donations from defense lobbyists over the past two election cycles.  (October, 2011)

Department of Defense: Report on Progress Toward Security and Stability in Afghanistan  (April, 2010)

 
Compiled and submitted by:
Ethan R. Rosenkranz, program associate
Project on Defense Alternatives (PDA)
http://www.comw.org/pda/
202-316-7018

DOD Aims To Boost Investment In Capabilities For Major-Power War

Defense Secretary Leon Panetta has signed classified guidance advocating increased investment in military capabilities designed for high-end war among major powers, according to sources familiar with the document.
The Pentagon is "not walking away" from the wars in Iraq and Afghanistan, fought largely by soldiers and Marines trained in counterinsurgency operations, but the discussion of potential threats in Panetta's Aug. 29 Defense Planning Guidance (DPG) signals a "new seriousness about major-power war," which could trigger a "flowering of air and naval power," said a former service official familiar with the guidance.

As it draws down forces in Iraq and Afghanistan and cuts security spending by hundreds of billions of dollars over the next decade, the Defense Department is likely to reduce Army investment and boost funding for key Air Force and Navy capabilities associated with countering China, said current and former defense officials.
Although DOD's budget topline in fiscal year 2013 remains to be decided, the department is planning to reduce capability for conventional military operations and counterinsurgency, shrink the size of the military, maintain counterterrorism capability and invest more in countering high-end threats like long-range weapons being developed by China that could challenge U.S. power projection capabilities in the Western Pacific, said a military official familiar with Panetta's guidance.

Panetta's press secretary and a Pentagon spokeswoman declined to comment on the classified guidance. But Panetta told reporters last week that DOD's budget review will develop "a smaller, more agile and more flexible force for the future."

The Air Force and Navy have been developing an AirSea Battle concept to address "anti-access and area-denial" weapons being developed by China. The concept's proponents also see applications elsewhere, including in NATO's recent naval and air strikes on the Libyan regime of Moammar Gadhafi.

"It seems clear there will be increased emphasis on AirSea Battle approach going forward," said a senior defense official. "Libya is a good illustration of this."

In remarks last week to Business Executives for National Security, Chairman of the Joint Chiefs of Staff Adm. Michael Mullen stressed the importance of investing to keep pace with the growth of China's military. And Mullen questioned the wisdom of continuing to treat the Army, Navy and Air Force as fiscal equals, noting the "one-third, one-third, one-third" approach to funding the three military departments could be obsolete.
"I don't know if that's right," said Mullen, who is due to step down Friday. "Actually, if it isn't right, we need to change that."

John Nagl, president of the Center for a New American Security and a retired Army officer, said the budget share has "shifted substantially over the past decade" because ground forces received substantial funding for the Iraq and Afghanistan wars in the "overseas contingency operations" account, which is outside the base budget. "Save for that accounting trick, the Army share of the overall budget would have been appreciably more than one-third," he said.

"The Army share of the budget is very likely to drop over the next decade," Nagl said. "We have underinvested in Air Force and Navy platforms during the wars." The QDR Independent Panel, which Nagl was a member of, recommended a larger Navy given emerging threats in the Western Pacific. He also said Air Force planes need recapitalization, arguing it would be best to invest relatively more in stealthy drones and less in manned stealth platforms.

"The ground forces can expand or contract more quickly than can the capital-intensive air and sea forces," he said. "They are likely to decrease in size over the next decade, and should focus on retaining mid-grade officer and NCO strength in order to be able to expand rapidly when required."

If the budget comes out with the "one-third, one-third, one-third" ratio intact, the comprehensive review "should be judged a complete failure," an administration official said. The Army's topline will likely be cut harder than other services, the official said.

"Gates was right -- there aren't many contingencies for which we'll use 100,000 troops to invade and occupy a country," the official said, noting the Marine Corps will "get smaller and lighter."

"The Navy and Air Force are positioned to do well -- but I imagine business as usual for them won't be an option either," the official said, noting unmanned aircraft will need to be a prominent feature for both. The Navy needs to "get serious" about unmanned combat air vehicles "if they want to keep carriers relevant" and the Air Force "needs to rethink whether the long-range bomber will be manned," the official said.

Adm. Jonathan Greenert, who became chief of naval operations last week, cited warfighting as the Navy's top priority in a Sept. 23 message. Still, the Navy's fleet is expected to shrink due to budgetary pressures. Today, the fleet has 284 ships in its battle force, despite a 313-ship goal. That goal could fall as low as 225, an industry source said.

Mullen's successor, Army Gen. Martin Dempsey, said at his confirmation hearing in July that the 313-ship goal is reasonable for DOD's current strategy. He noted shipbuilding supports the AirSea Battle concept. But he also warned the new strategy being developed in conjunction with budget cuts might not support the 313-ship goal.

Next-war-itis no more

Panetta's predecessor, Robert Gates, used to complain that the defense establishment had a case of "next-war-itis," meaning it was too focused on potential needs for future conflict. But the new guidance shows it is now OK to talk about potential future wars, said the former service official, noting there are more threats on the department's mind.

Charges against Gates that he neglected the future are "a little unfair," a former Pentagon official said, noting Gates made key decisions about the nuclear triad and the need for long-range strike capabilities that addressed "anti-access and area-denial" threats. But on Gates' watch the department focused mostly on today's wars, the source said, noting that now DOD is increasing its attention on the potential for war with countries such as China and Iran.

Some of DOD's discussion with President Obama about "alternative futures" -- and what the military ought to be able to do in the years ahead -- centers on "continued instability in the Middle East [and] a growing concern and a need for stability in the Asia-Pacific region," Mullen said last week.

DOD annually issues guidance on defense planning to steer development of the armed services and defense agencies' long-term investment plans. But the Aug. 29 guidance is Panetta's first DPG -- and it comes as the department faces hundreds of billions of dollars in budget cuts over the next decade.

Panetta listed an array of national security challenges beyond the wars in Iraq and Afghanistan during a recent talk at National Defense University.

"We're involved in two wars; we're in a NATO mission in Libya; we're confronting other threats from Iran and North Korea; we continue to be in a war on terrorism; we're fighting a concern about cyberattacks, increasing cyberattacks here," he said. "And we have rising powers -- nations like China and India and Brazil, not to mention Russia -- that we have to continue to look at in terms of their role in providing stability in the world. And we're facing resource constrictions, budget constrictions now."

Last year, Gates issued a classified document called the Defense Planning and Programming Guidance (DPPG) to lay out the department's priority missions, force-sizing construct, major force-planning assumptions and key capabilities to size and shape the future force. Panetta's DPG addresses such issues with "varying degrees of depth and success," the former service official said. A Pentagon official said Panetta's guidance omits programming instructions, which were not ready for inclusion. It is difficult to give precise programming instructions when the FY-13 budget topline remains undetermined due to overarching deliberations about slashing the federal deficit, said a second military official.

Defense officials maintain they are developing a strategy to inform the planned defense-spending cuts. The former service official said Panetta's guidance "does not provide what any serious student of strategy would consider a strategy," but it does include "big-picture muscle movements" that suggest "echoes or shadows" of a new strategy.

Current and former defense officials said the department's long-term strategy for investment and budget cuts remains a work in progress that is being debated. The part of the debate concerning "anti-access and area-denial" threats is not whether to boost investment in countering such weapons but rather "how much more, how quickly and in lieu of what," said the former Pentagon official.

Capitol Hill has both proponents and skeptics of AirSea Battle. "The AirSea Battle advocates clearly want a defense establishment oriented on the higher end and air/naval forces for dealing with anti-access/area denial," said a congressional source. "But they seem to ignore, and no one is asking, the 'then what?' question. Kicking in the door is one thing, but then what?" Wasn't it [former Secretary of State Gen. Colin] Powell who said, 'you break it, you bought it'?"

A fundamental choice

Earlier this year, Gates predicted the department would have to choose between putting a new emphasis on high-end threats and continuing to focus more on counterinsurgency operations.

"One of the fundamental choices is, do we focus our force structure on being able to deal with high-end sophisticated threats and then assume that that will handle all lesser included cases?" he said May 24 at the American Enterprise Institute. "Or do we continue to emphasize what we've been emphasizing in the last few years, which is counterinsurgency and counterterrorism, with less emphasis on the high-end threats? You know, that's the analysis that we're doing."

Mullen said last week the U.S. military is a "heavy counterinsurgency force right now, and we've got to rebalance that." Similarly, last month he called for the military to "renew" its training as a force with a "broad spectrum of capabilities." In the process of becoming "the best counterinsurgency force in the world," the U.S. military has had to "sacrifice some . . . training and capabilities in other areas . . . of what I would call our . . . multispectral capability that we've got to have," Mullen said in an Aug. 1 talk with troops in Mosul, Iraq.
Earlier this year in congressional testimony, Mullen said the Pentagon's future force would likely "involve a greater emphasis on [intelligence, surveillance and reconnaissance], command and control, long-range strike, area denial, undersea warfare, missile defense, and cyber capabilities." He also noted the military "must continue to adapt some of our systems and tactics to counter anti-access and area-denial strategies, which may involve both the most advanced and simplest technologies."

A retired senior military official said phrases like "major power war," and "high-end asymmetric threat," seem to be "code for China because no other major power, including Russia, has significant potential to affect" the United States. North Korea, Iran and Venezuela "are surely not major powers," the source said, noting India, Brazil, Japan and the European Union are "non-threatening excepting commercial competition."

A recent Pentagon report to Congress warns that China is "pursuing a variety of air, sea, undersea, space counterspace, information warfare systems and operational concepts" to achieve anti-access and area-denial capabilities. The report cites China's "sustained effort to develop the capability to attack, at long ranges, military forces that might deploy or operate within the Western Pacific." On June 3 in Singapore, Gates said DOD is "investing significant sums of money" to address the long-term challenge posed by such high-end threats.

DOD is also concerned that the Iranian-backed militant group Hezbollah, armed fighters in Afghanistan or other potential foes could wield guided munitions that are simple compared to high-end Chinese systems but still amount to deadly anti-access and area-denial weapons. In Singapore, Gates referenced Hezbollah's possession of "anti-ship cruise missiles with a range of more than 65 miles that potentially puts our and other ships at risk off the coast of Lebanon."

"While Iran is unlikely to initiate or launch a preemptive attack, it could attempt to block the Strait of Hormuz temporarily, threaten U.S. forces and regional allies with missiles and employ terrorist surrogates worldwide," Defense Intelligence Agency Director Lt. Gen. Ron Burgess told the Senate Armed Services Committee in March.

The Naval Research Advisory Committee recently launched a new study on Marine Corps capabilities for countering precision weapons. "The intel community is seeing greater proliferation of relatively inexpensive Guided Rockets, Artillery, Mortars, and Missiles (G-RAMM), which can pose a great threat to future Marine operations," states the draft terms of reference for the study. "This threat is yet another example of cheap technologies with the potential to have a huge impact on future missions, much like the [improvised explosive devices] have had on recent ones."

But the near-term battle facing the department could have more to do with budgetary infighting. Even as Mullen last week proposed dividing DOD's budget differently among the armed services to better posture the military for tomorrow's challenges, he cautioned institutional resistance could make such change "very difficult" to accomplish. He warned against letting spending cuts devolve into a parochial squabble for resources among the armed services.

Although it is healthy for the services to see the world in different ways, DOD must be "careful" in its choices, he said. Allowing friction among the services to dominate the budget review -- which aims to cut "more than $450 billion" over a decade -- could "set back" jointness and readiness, he warned. "Frankly, our record of change without squabble is checkered at best," Mullen said. "We didn't do this well in the '70s. We didn't do it well in the 90s." But failing to be "thoughtful" about the strategy could leave the department with the "wrong force at the wrong time," he said.

Panetta's guidance is not the endgame of the FY-13 budget process but rather an opening salvo in a budget debate tethered closely to efforts to slash the massive federal debt. Much depends on whether the congressional supercommitee this fall triggers huge additional defense cuts by failing to achieve prescribed deficit savings. That outcome could break the Pentagon by hollowing out the military, senior defense officials argue. -- Christopher J. Castelli

Real McCoy: $450B-ish

Jason Sherman
Inside Defense, 21 Sept 2011

Roman Schweizer, MF Global defense analyst and former chief editor of Inside the Navy, today honed in on a key point about the military budget raised during yesterday's Pentagon press briefing by DOD's top civilian and uniformed leader. In a note to Wall Street investors, Schweizer writes:

Defense Secretary Leon Panetta and Joint Chiefs Chairman Adm. Michael Mullen yesterday disclosed that the first round of DoD cuts required under the Budget Control Act's discretionary caps is actually higher than the widely reported $350 billion.

We expect mainstream media to start adopting the "$450B-plus" terminology even though it has been discussed by defense trade press and experts in recent weeks.

On Sept. 2, InsideDefense.com reported the actual size of the spending cuts the Pentagon was working to adopt was $460 billion:

The Office of the Secretary of Defense, eying what a senior official says is a White House-directed cut of "about $460 billion" over the next decade, has instructed the services to deliver by Sept. 16 their revised spending plans in accordance with the Budget Control Act of 2011.

The explanation for the higher number -- nearly one-third higher than the widely reported $350 billion figure -- is the $110 billion difference between the lower Congressional Budget Office forecast and the Obama administration's long-range budget plan outlined in February along with the FY-12 spending request.

The larger figure underscores the likelihood that the first round of DOD budget cuts will be “much worse and immediate, even without sequestration and particularly when compared to the previous budget plan that had modest real growth for research and development and procurement,” Schweizer notes. “It also makes it harder on those accounts because implementing money-saving reforms in other areas takes time -- but cuts are real for the FY-13 budget, sequestration or not.”

Lastly, he argues:

While there are various political scenarios that make sequestration a possibility but never implemented, we think the Pentagon's FY-13 budget will show significant program changes. That's assuming the budget that is released is not under sequestration. If the Pentagon must release a "doomsday" budget in February because Congress and the administration cannot find $1.2T in savings, it'll show draconian cuts that will have to wait until January 2013 to actually be implemented.

McCain Blasts Appropriators for $10 Billion 'Budget Gimmick'

Megan Scully, National Journal, 21 Sept 2011

Senate Armed Services ranking member John McCain, R-Ariz., on Wednesday sharply criticized appropriators for shifting roughly $10 billion from the Pentagon’s base budget to its war-spending accounts.

McCain, who has long battled appropriators over what he considers wasteful spending, called the maneuver a “budget gimmick” that misleads taxpayers into believing the bill makes sharp reductions in Pentagon spending to help reduce the country’s deficit.

Senate appropriators shifted the funds from the Pentagon’s base budget to the separate accounts that pay for operations in Iraq and Afghanistan to lessen the blow of a $26 billion cut to the Pentagon’s base budget mandated by the Budget Control Act approved by Congress in August.

During its markup last week, the Armed Services panel fully funded the $117.8 billion in war spending proposed by the Pentagon, but cut $5 billion because of planned force reductions in Afghanistan and $1.6 billion requested for Afghan security forces. Those and other sizable cuts helped make room within the war accounts for about 75 programs that ordinarily would receive funding through the base budget.

A committee spokesman said on Monday that the funding transfers to the war accounts reflect the panel’s recommendation to pay for items related to the war, regardless of where the administration requested it.
“These activities include funding for war-related equipment and war-related operations, other items essential to prepare our men and women in uniform with the best training and equipment before they are sent into harm’s way, and maintaining readiness of the overall force to respond to overseas contingencies,” the spokesman said.
McCain, however, said the cuts in the war accounts could put troops at risk.

“Cutting $10 billion from the president's request for the wars in Iraq and Afghanistan, shifting over $10 billion in nonwar expenses, and then claiming in a press release that the president's request for the war-fighting accounts are fully supported, is not only a gimmick, it is dishonest with the American people,” McCain said. “It is a disservice to the men and women of the military who depend on that funding for critical war-fighting equipment and support.”
McCain asserted that the appropriators cut funds from the war accounts without knowing the “real needs” of deployed forces amid uncertainty about whether – or how many – U.S. troops would remain in Iraq after the end of the year.

“There is no money in the war-fighting accounts of this bill to pay for those additional troops no matter what the final number may be,” McCain said. “Cutting funds from the war-fighting accounts without knowing what our real needs are puts our troops at risk.”

McCain also suggested that some additional funds may be needed if there are any problems reducing the U.S. presence in Afghanistan. “I can only pray that our withdrawal strategy in Afghanistan goes as smoothly as planned,” McCain said.

The Pentagon's Phantom Savings

Commentary by Project on Defense Alternatives -- 10 Sept 2011

DoD claims to have "already saved" $400 billion, but where is it?

 

There is no better example of the dysfunctional political dynamic governing the Pentagon budget than President Obama's affirmation of the claim that former Secretary of Defense Gates had "already saved" the nation $400 billion in defense expenditure.  And there is no better illustration of the poverty of our discourse on this subject than the fact that the claim goes largely unchallenged. 

 

Most of the $400 billion in earlier DoD "savings" that President Obama has attributed to former Secretary Gates are not "savings" in the ordinary sense of the word. They do not show up as reductions in DoD budget plans from one year to the next, as shown below.  At best, they represent DoD marginally adjusting its programs and aspirations to marginally deal with spiraling cost growth.

 

When we look for the $400 billion in "savings,"  what do we find? 

 

Desperately Seeking $400 Billion in Past Pentagon Savings
 

1. Much of the $400 billion that former Secretary Gates is claimed to have saved derives from his April 2009 announcement of program cuts. Gates claims that the systems and programs he cut in 2009 would have eventually cost more than $300 billion. However, at least some of this was immediately reprogrammed, meaning: DoD used the savings to buy other things. 

 

April 2009 Gates Defense Budget Recommendation Statement http://www.defense.gov/speeches/speech.aspx?speechid=1341 

 

2. In August 2010 and January 2011, Secretary Gates outlined additional "cuts" and "savings" totaling $178 billion. Of this, $100 billion was immediately reprogrammed to purchase other things or cover other costs. The remaining $78 billion was supposed to be released from the Pentagon orbit to help pay down the deficit. 

 

August 2010 Gates Statement on Department Efficiencies Initiative http://www.defense.gov/speeches/speech.aspx?speechid=1496 

 

Jan 2011 Gates Statement on Department Budget and Efficiencies http://www.defense.gov/speeches/speech.aspx?speechid=1527 

 

PDA summary chart re: the $178 billion http://www.comw.org/pda/fulltext/Gates-Jan2011-proposal.pdf  (In the August 2010 statement, we find Gates' claiming that his earlier 2009 effort has already saved more than $300 billion) 

 

3. How much (if any) of the earlier "more than $300 billion" in savings was similarly given over for deficit reduction? Looking at actual budget plans, what do we see?  The first $300 billion was announced in April 2009 and it might reasonably have shown up as difference between the last Bush budget plan (FY09) and the first Obama budget plan (FY10). 

 

Comparison between these two budget plans is easy for the years 2010-2013:

– Bush FY09 planned total spending for 2010-2013 = 2.155 trillion

– Obama FY10 planned total spending for 2010-2013 = 2.183 trillion 

 

An increase is not a reduction, therefore: no savings apparent in the near years.

 

4. Obama’s next budget plan (FY11) foresaw a significant increase over his first. So, no savings apparent there either.

 

5. Only in the next plan – the FY12 plan – do we see a reduction in planned spending between FY12 and FY11 plans. In the nine years that overlap between the FY11 and FY12 plans, we see a reduction of about $233 billion. But the FY12 plan follows Gates’ second announcement of cuts and savings (summarized in #2 above).  So, at least, $78 billion derives from that and not the earlier cuts. Indeed, when we compare the FY12 plan with the FY11 plan for the years 2012-2016, there is a reduction in planned spending of $76 billion. Still no apparent impact from the April 2009 "cuts," however. 

 

6. Well, as noted above, the total difference between the FY11 and FY12 plan for the years 2012-2020 is $233 billion. 233 minus 78 = 155. This additional planning rollback of $155 billion shows up for the years after 2016. So maybe we’ve found at least $155 billion of the earlier supposed cut?  Maybe it just took 2 years to register? 

 

Maybe. 

 

"Maybe" because the Obama FY12 budget rolls back planned spending almost exactly to the levels foreseen in the Obama FY10 budget ...being the budget that was larger than the final Bush budget and being the budget that showed no impact from Gates’ April 2009 offer.  To put it another way: Obama's FY12 budget simply rolls back the future spending plan he produced in FY11 to the level he had proposed in FY10.  The FY12 plan simply disappears the increase proposed in FY11. 

 

7. The other possible (likely) reading of all this is that:

 

(i) None of the original $300 billion "saved" ever left the Pentagon, 

 

(ii) The $78 billion that Gates offered up to deficit reduction is the only "savings" really specified so far to actually show up as a reduction in planned spending, and

 

(iii) The other $155 billion that the FY12 plan subtracts from the FY11 plan involves as yet unspecified cuts and efficiencies.

Navy Of Tomorrow Could Have Fewer Cruisers, Aircraft Carriers

Potential cuts eyed
Navy Of Tomorrow Could Have Fewer Cruisers, Aircraft Carriers
Inside the Pentagon - 09/01/2011

To save billions of dollars in the coming years, the Navy may keep fewer cruisers and aircraft carriers in its fleet while preserving major investments in attack submarines, destroyers and littoral warships, according to former service officials and industry sources.

The Pentagon is hunting for savings in the fiscal year 2013 budget process to implement required security spending cuts totaling hundreds of billions of dollars over the next decade. The Navy, meanwhile, is mulling how to retreat from its goal of a 313-ship fleet to a more affordable target in the 200s.

To that end, the service is considering retiring at least a handful of its aging Ticonderoga-class cruisers, these sources said. This would be a departure from the ongoing multibillion-dollar program to modernize the fleet's 22 cruisers. An industry source said the department will likely "significantly cut" modernization funding for the cruisers, slashing money for upgrades to the ships and their Aegis combat systems. Initially, the Navy might retire six cruisers, former service officials said. But the ultimate goal might be to retire them all, one former official added.

Last year, the Navy killed its next-generation cruiser program, CG(X), opting instead to develop new warships based on the design of Arleigh Burke-class DDG-51 destroyers. Sources said the Navy's high priorities include Aegis-equipped destroyers, which are assigned key missions such as missile defense, and Littoral Combat Ships, which are designed to combat fast boats, hidden submarines and mines close to enemy shores.

Although the numbers of cruisers and destroyers in the fleet are already slated to fall substantially below required levels in the coming decades, that officially acknowledged gap could fade away if the Navy, as anticipated, significantly lowers its goal for the size of the fleet. Today, the fleet has 284 ships in its battle force, despite the 313-ship goal. Describing the range of options pondered for the new goal, an industry source said, "I have heard as low as 225, but nothing more than 285."

In another potential major change, Navy is looking at reducing the number of aircraft carriers in the fleet to nine or eight, sources said. A force of nine carriers would be accomplished by not refueling the nuclear-powered George Washington (CVN-73), said a former service official, noting the Navy is also mulling cutting six aircraft squadrons. Another source noted the Navy is also considering delaying the purchase of the John F. Kennedy (CVN-79) by two years, as Defense News reported in July. An industry source said scenarios discussed within the Navy include a 240-ship fleet with eight carriers and seven strike groups and a 250-ship fleet with 10 carriers and nine strike groups.

As the fleet shrinks, Navy officials want to preserve the department's plans to continue building two nuclear-powered Virginia-class attack submarines per year, sources said, noting the stealthiness of these subs makes them especially valuable warfighting assets.

But the cost of another submarine program -- SSBN(X), also known as the Ohio-class replacement -- remains a concern for the Navy. The 12-sub program could be delayed and cut by two subs, sources said. And it will be funded within the shipbuilding account, not in a separate account as the sea service's top admiral has advocated, Defense Department acquisition chief Ashton Carter told Inside the Pentagon in March. But the program's massive cost would consume a major portion of the account. Buying and operating a dozen new nuclear ballistic missile submarines will cost the department $347 billion over the life of the boats, Carter wrote in February in an acquisition decision memorandum.

DOD also faces concerns about the fate of the FY-12 defense budget. All eyes are on Senate appropriators, who are slated to mark up their FY-12 defense bill sometime after Labor Day. A former service official said the Senate appropriations defense subcommittee is expected to cut DOD's $553 billion baseline request to roughly $526 billion. This cut of about $27 billion -- "a tall order" -- is needed to keep the budget under the security spending caps that were agreed to in a deficit-reduction deal this summer, the source said. A subcommittee spokesman declined to comment on the panel's forthcoming spending recommendations.

Another key question is how DOD's budget will be impacted by the work of a congressional supercommittee tasked with proposing $1.5 trillion in new deficit-reduction measures. If the panel fails to come up with at least $1.2 trillion in savings, a trigger in the deal could confront DOD with additional cuts totaling hundreds of billions of dollars over the next decade. Defense Secretary Leon Panetta has said such cuts are unlikely but would be unacceptable.

Given the unlikelihood that the FY-12 defense budget will be finalized before the fiscal year ends on Sept. 30, defense officials are readying once again to operate under a continuing resolution. "The department expects Congress to complete the appropriations process by Oct. 1," said a Pentagon spokeswoman. "As in most fiscal years, the department is prepared to execute its program under a continuing resolution. The department will work with Congress to make sure it has the critical legal authorities to keep operating and support the deployed troops." During the last budget cycle, Congress subjected DOD to a string of continuing resolutions.

"The biggest concern about operating under a string of continuing resolutions is the uncertainty which undermines any planning efforts," the Pentagon spokeswoman said. "Any new starts will be precluded and contracting for support services will have to be broken into smaller increments with all the attendant inefficiencies." -- Christopher J. Castelli

Navy Examining How Attack Sub Shortfall Will Affect Force

Navy mulls SSGN payload on VA-class subs
Richardson: Navy Examining How Attack Sub Shortfall Will Affect Force
Inside the Pentagon - 09/01/2011

The Navy must factor in the looming attack submarine shortfall in the 2020s as well as strategic needs when planning deployments and positioning the undersea force in the future, Vice Adm. John Richardson, commander of submarine forces, told reporters last week.

At the current rate, the Navy will dip to a low of 39 attack subs at some point in the 2020s as aging Los Angeles-class subs retire, well below the requirement of 48 subs. Richardson's predecessor, Vice Adm. Jay Donnelly, said the Navy could implement mitigation measures such as changing deployment cycles and altering surge capability. Richardson told reporters at the Pentagon Aug. 25 that the service is looking at some of those adjustments now.

"All of that is kind of part of the discussion," he said. "Right now, we have the six-month deployment model. That's what we use as our baseline. When emergent combatant commander requests come in, we can stretch that some, and we have. And then in terms of . . . responding to a crisis, we want to make sure that we've done what we can to increase the pool of ready forces so that they're ready to go if called."

He said the "trough" in the 2020s is a "function of the shipbuilding plan and what the budget can sustain." He said his job was to inform Navy leadership what kind of options the service has.

"I see it as our role to make sure that we've got sort of an array of options that will provide them some trade space, both in the positive direction if they wanted to invest more, or if we had to take cuts, how we might do that most gracefully," he said. "They'll come up with the best decision that they can make. Then it kind of comes [to], 'OK, how do we optimally deploy that force that's been decided on?'"

Richardson recently unveiled a "Design for Undersea Warfare" document that seeks to "streamline" and better define the role of undersea forces in today's world where concerns such as anti-access and area-denial are preeminent.

"It was not our goal to come up with something revolutionary," he said. "We really just wanted to kind of sharpen our thinking and focus.

"What is our unique role, our unique capabilities, our unique responsibilities that emerge in this environment where we've got these emerging technologies?" he continued. "The long-range precision weapons pose a challenge for those sorts of forces that are not concealed, so that opens up, I think, some new potential roles and possibilities for concealed forces like submarines -- undersea forces -- that can go forward and provide the warfighter with some options."

Meanwhile, the Navy is mulling placing a guided-missile payload module aboard a Virginia-class hull as a way to replace the four modified Ohio-class SSGN subs when they go out of service, Richardson said.

While the Navy would not be able to put an entire SSGN payload on the smaller Virginia-class hull, "a smaller version of that would be this payload module, and then you recover the volume by stretching the number of Virginias or something like that," the three-star admiral said.

He cautioned that such a payload is not a program of record, and no formal decision had been made yet. The Navy will need to figure out what to do about the SSGNs in the next five to 10 years, however, he said.

"The payload volume is something we'd like to have," he said. "How we get that, there's a number of different options right now."

Donnelly told Inside the Navy in late 2009 that the Navy was considering modifying a Virginia-class sub to replace the SSGNs, as the guided-missile subs had proved their worth in the fleet and the Navy was interested in keeping the capability.

"In a budget-constrained environment, it may be difficult to find the money to modify the SSBNs and SSGNs," he said at the time, cautioning that it was one of many options under consideration. "It was $1 billion a copy when we did it last time, but that's certainly an option."

Richardson last week cited the payload module option as an alternative, "rather than trying to build a dedicated SSGN." -- Dan Taylor

Army Could Shed Up To 15 BCTs In Push To Meet Budget Savings Goal

End strength cuts seen as inevitable
Army Could Shed Up To 15 BCTs In Push To Meet Budget Savings Goal
Inside the Army - 08/29/2011

The Army has offered to cut up to 15 brigade combat teams to meet defense savings goals negotiated by the White House and Congress, Inside the Army has learned.

The proposal, briefed to the high-level Deputy's Advisory Working Group in recent weeks, offers a range of cuts in personnel that could bring the number of active-duty BCTs from 45 down to 30 in the most extreme case, according to an official familiar with the deliberations.

A plan to reorganize the Army's premiere fighting formations has been in the works for some time. Then-Training and Doctrine Command Chief Gen. Martin Dempsey last year ordered an exploration of the effects that a plus-up of maneuver forces in BCTs would bring. The force-design move, as envisioned then, was expected to reduce the total number of BCTs by 10, but increase their size and fighting capability.

Dempsey became Army chief of staff in the spring. President Obama selected him to serve as chairman of the Joint Chiefs of Staff only weeks after taking the Army job.

The goal of fewer but bigger and more fighting-capable BCTs still holds as the number of reductions possible is now pegged at 15, according to the official. While planning continues toward $350 billion in savings over a decade, the possibility of even greater cuts has created a sense of uneasiness. "If sequestration comes into play, who knows what the number is," said the official, referring to an automatic reduction of hundreds of billions of dollars in security-related spending that would take effect if Congress is unable to pass new saving proposals produced by a bipartisan debt "super committee."

The Army proposal leaves intact the service's 28 Reserve-Component BCTs, according to the official. The units are less expensive than their active-duty counterparts; tweaking their numbers is considered politically sensitive, and their capabilities are needed by governors to deal with domestic crises, the official said.

An Army spokeswoman did not return a request for comment on the service's BCT plans by press time (Aug. 26).

While the expectation among defense insiders has been that the Army's response to the nation's fiscal woes would involve reducing end strength (beyond reversing temporary increases and a cut of 27,000 already planned), the matter has so far been discussed only behind closed doors.

Army Chief Information Officer Lt. Gen. Susan Lawrence, in a teleconference with reporters last week, noted "directions" from Defense Department leaders to that effect. "We . . . anticipate, based on the reduced budget, depending on how reduced the budget is -- then we're probably talking taking forces out of the inventory," she said. "I think we can say with pretty high confidence that there'll be forces taken out of the inventory. We just don't know how many at this time."

The number of Army BCTs is a fundamental yardstick in a defense-wide strategy for the employment of land power. Internally, the figure is tied into the Army Force Generation concept and equipping strategies, and it plays a role in the tempo of unit rotations in and out of war zones during extended conflicts.

From an operational perspective, fewer BCTs would mean the Army "can't be in as many places; they can't be in as many cities at the same time, because they won't have the headquarters to control independent operations," the service official said. But the goal is to retain sufficient combat power for a "big fight" as well as a set of smaller fights in which units would need to operate independently, the official added.

Some analysts see the appetite for long ground engagements, like Iraq or Afghanistan, waning among administration officials and the public. Inside the Army reported last month that Joint Staff officials readying their annual Operational Availability study had been instructed to identify force cuts that could be made under the assumption that the U.S. military would no longer take up the hugely expensive mission of rebuilding wartorn nations (ITA, July 7, p1).

Brigade combat teams are the Army's response to demands for a more nimble organization than a division-centered force could offer. The service had 33 BCTs when the reorganization, known as modularity, began in 2003. -- Sebastian Sprenger

The U.S. Defense Budget: Get Real, Pentagon

Defense News editorial, 16 May 2011                                                                                                                    

 

 

 

One of the natural laws of government is that many of the numbers cited as totems of progress are less than they appear.  Take the Pentagon's claim that it's already cut defense spending by some $400 billion over the coming years. Of that, according to a Defense News analysis, some $330 billion reportedly was from the termination of key, high-profile programs announced by Defense Secretary Robert Gates in April 2009. The rest is from an aggressive effort to slash overhead spending to the tune of $178 billion, $78 billion of which went to the Treasury and the rest staying in the services' budgets for "reinvestment."

President Obama lauded Gates for the cuts and called for another $400 billion to be slashed from broader national security spending through 2023. Gates did it once, Obama said, and - pending a roles and missions review - he can do it again.

That rang alarm bells in the Pentagon, where officials recognized that their "we saved $400 billion" bumper sticker was based largely on plans not to spend funds in out-year budgets.

And some of the programs that were canceled - such as a new Air Force bomber - were resurrected in other, similar programs.


In fairness to the outgoing defense secretary, the follow-on bomber program that came back may be less ambitious and cheaper than the one that was canceled. And analysts say the Transformational Communications Satellite System needed to be ended after it consumed $3 billion in research and development spending without showing much actual technology development. But in any true accounting, replacement programs and their costs must be netted against the claimed savings.

There is an old Washington saying that no money is less real than out-year money. This means that anything that is beyond the immediate spending bill is purely notional. The problem is, the Pentagon apparently hasn't come to grips with the reality that defense spending, at best, will remain flat as manpower, medical, materials, energy and maintenance costs continue to soar, forcing cuts in investment accounts.

The timing could hardly be worse as the nation needs to modernize its fighter jets, bombers, aerial tankers and warships and fund recapitalization programs for the Army, which has gained much new gear through robust supplemental spending.

cuts are coming, and DoD must make its own before having to make forced cuts. Requirement control is a popular method of limiting the costs of new weapons, but it's equally important to control the growing number of missions.
The first step should be to ensure the roles-and-missions review ordered by Obama slashes unnecessary and costly redundancies in capabilities. Unmanned aircraft programs, for example, have proliferated to the point that each service will build a fleet of aircraft, each with differing mission equipment, training and logistics streams.

Second, the Pentagon must avoid doing what it did - portraying soft numbers as hard ones that do little other than expose it to criticism.

Lastly, to make wise cuts, the Pentagon must improve its internal financial management processes to pinpoint what it's spending and how. Without hard data, it's hard to come up with hard savings.

Citation: Defense News editorial, 16 May 2011.   http://www.defensenews.com/story.php?i=6508896&c=FEA&s=COM (16 May 2011)

Pentagon's Phantom Savings: $330B Claim Erodes as Programs Reappear

by Marcus Weisgerber, Defense News, 16 May 2011
Pentagon leaders love to tout the $330 billion they saved by cutting or killing weapons programs over the past two years, but that's not the whole story.

Nearly 40 percent of that sum is going straight back into U.S. military programs that replicate the canceled ones, and it's unclear where another 10 percent came from at all, according to a Defense News analysis and to several analysts.

“Even if somehow it does add up to $330 billion in savings that were cut from these programs … it’s not net savings because there’s going to be replacements for a lot these things anyway,” said Todd Harrison, an analyst with the Center for Strategic and Budgetary Assessments, a Washington think tank. “These were hypothetical savings anyway, because there weren’t hard programs.”

Defense Secretary Robert Gates first used the $330 billion figure in February 2010, nearly a year after lowering the boom on dozens of programs the previous April.

“The FY10 budget proposal cut, curtailed or ended a number of programs that were either performing poorly or in excess of real-world needs,” Gates told reporters as Pentagon leaders rolled out the Department of Defense’s 2011 budget request. “These programs, had they been pursued to completion, would have cost the American taxpayer approximately $330 billion.”

In the days that followed, Gates repeated the figure numerous times during congressional testimony.
And the figure played the lion’s share, along with $78 billion squeezed out of overhead, in shaping President Barack Obama’s order last month to cut national security spending by “another $400 billion” over the next 12 years.
But asked to provide a program-by-program breakdown of the $330 billion, DoD officials declined, and provided only a simple list of names of weapons.

“The estimated cost savings demonstrated the cost over the life of the program had it continued to completion,” one defense official said. “This estimate was made in 2009 for the FY 2010 budget process. We do not have an estimate of what the breakdown would be today.”

So Defense News used budget justification documents, DoD officials’ public statements, annual acquisition reports and Government Accountability Office estimates to project program costs. For classified and far-term programs not on the books — but factored into DoD’s projections — think tank and analysts’ estimates were used.

Based on public data, the cancellation or scaling back of nine of the largest programs accounted for about $298.9 billion of those savings.

Yet many of the military services’ capability requirements remained in place. More than $130 billion is back on the books, or will be soon, for follow-on or replacement programs. Of the programs canceled in 2010, at least five have already been relaunched, or are in the planning stages to begin again.

Among them are the Air Force’s Combat Search-and-Rescue helicopter (CSAR-X) and Next-Generation Bomber, an Army vehicle segment of the Future Combat System (FCS) and Armed Reconnaissance Helicopter, and the Marine Corps’ VH-71 Presidential Helicopter.

Collectively, DoD had spent about $27.3 billion on those five programs at the time of cancellation, according to budget documents.

“Most of the $400 billion in earlier DoD ‘savings’ that President Obama has attributed to Secretary Gates are not ‘savings’ in the ordinary sense of the word,” said Carl Conetta, co-director of the Project on Defense Alternatives. “At best, they represent DoD marginally adjusting their programs and aspirations to marginally deal with spiraling cost growth.”

Gordon Adams, who oversaw defense budgets during the Clinton administration, said DoD’s calculations appeared “extremely loose at the edges.”

“The $330 [billion] to me was always a political number,” Adams said. “It was a hyperventilation on what was actually happening and in a way, it’s kind of too bad that they did that because it’s so susceptible to this kind of correction.”

Calculating Savings

If allowed to continue in 2010, these programs would have cost about $234 billion over their lives, with FCS — a $159 billion effort to network soldiers, vehicles and aircraft on the battlefield — accounting for more half of the tab. The Army had already spent more than $18 billion on FCS when it was canceled, according to budget documents, and it is negotiating a termination fee with defense giant Boeing.

The Chicago-based prime contractor also won the Air Force’s $15 billion CSAR-X contract, which was mired in industry protests when Gates killed the effort.

Gates also canceled the Air Force’s classified Next-Generation Bomber program in 2010, but announced in January that the service would start a scaled-back stealth aircraft program in 2012.

Since the original program was classified, its costs were not reported to the public. But a Center for Strategic and Budgetary Assessments analysis found it would have cost at least $40 billion.

Sources said the Air Force likely spent at least $4 billion on the bomber program and that Northrop Grumman and another major defense contractor had each received $2 billion contracts to build prototype aircraft.

The new bomber is to be based largely on existing technology, but analysts still expect the program to cost at least $40 billion, with each plane costing around $500 million.

“They’ve scaled it back to be a less risky approach,” Harrison said. “The price … it’ll probably be similar” to the old Next-Generation Bomber, since its price tag was likely understated.

Air Force officials say the service currently plans to buy 80 to 100 planes.

The Navy’s CG(X) cruiser and EPX signals intelligence plane never had firm requirements or fleet sizes publicly released, yet DoD listed them as having been included in the $330 billion savings estimate. The sea service was eyeing 19 CG(X) cruisers with cost estimates ranging from $3 billion to $7 billion per ship. Using the more conservative estimate, procurement would have cost at least $57 billion, with as much as $10 billion needed in research and development.

“Some of these things were just so early in the acquisition life cycle that they weren’t real programs yet,” Harrison said.
Instead of buying the cruiser, the Navy will buy at least an equal number of DDG 51 Flight III destroyers at about $2 billion per ship, meaning a $38 billion price tag.

Gates also canceled the Air Force’s Transformational Satellite Communications System (TSAT), which carried a $26 billion price tag. Instead, it opted to purchase two Advanced Extremely High Frequency (AEHF) satellites at about $2 billion each. About $3 billion was spent on TSAT before its demise.

“Of course, eventually we will have a follow-on satellite program that takes the place of TSAT,” Harrison said. “The question is: How long can we put that off and what are the capabilities of that program when it comes along?”
The DoD also cites not purchasing additional C-17 cargo planes and F-22A stealth fighters as cost savings.

“That’s a calculating foul because there were no out-year projections for either program,” Adams said. “You can’t count two programs toward your $330 [billion] when you didn’t have them in the” five-year future years defense plan.
Classified programs, as well as “various Army and missile defense programs,” also contributed to the savings, according to DoD.

And that’s just one more thing that clouds the $330 billion number, Harrison said.

“Classified programs that might have been killed … they wouldn’t have been named explicitly and … they may have already been restarted and we don’t know it,” he said.

citation:  Marcus Weisgerber,  "Pentagon's Phantom Savings: $330B Claim Erodes as Program Reappear," Defense News, 16 May 2011.  http://www.defensenews.com/story.php?i=6508886&c=FEA&s=CVS (15 May 2011)