Defense Financial Highlights

House committee approves FY2017 Defense Authorization bill with more base budget funds and a 2.1 percent military pay raise

Thursday, April 28th, 2016

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The House Armed Services Committee (HASC) today approved (60-2) the FY2017 Defense Authorization Bill (H.R. 4909). The HASC bill authorizes $543.4 billion for the Department of Defense (DoD) and the Department of Energy (DoE) nuclear weapons program. The authorized amount for the base DoD budget would be $523.6 billion, essentially the same as the president’s request.

HASC Chairman Rep Mac Thornberry (R-TX) praised the bipartisan vote on the bill. “It is encouraging that for the 55th straight year, this Committee can come together, work through difficult issues, and pass a defense policy bill that supports our servicemembers and our national security,” he said. Thornberry emphasized that the bill “stops cuts to our Armed Forces, provides a pay raise for our troops, and makes major reforms in several critical areas, including military health care, the commissary system, the Uniform Code of Military Justice, and the acquisition system.

The bill authorizes $35.7 billion for Overseas Contingency Operations (OCO) available until April 2017. After that the new Administration would, if needed, have to request additional OCO funds for FY2017. The president’s request included $58.8 billion for OCO in FY2017.

The HASC bill also authorizes another $23.1 billion in OCO funding to be used for base budget requirements. The administration request assumes that only $5 billion of OCO funds will be used for base requirements. Providing this amount brings the total funding authorized by the HASC for DoD in FY2017 to $602 billion, equal to the administrations request.

The HASC uses this extra base budget funding, which would not be counted against the budget cap because OCO funding is considered emergency, to pay for additional troops and readiness funding not included in the presidents budget request.

The HASC bill provides military personnel with a 2.1 percent pay raise, 0.5 percentage points higher than the administration’s 1.6 percent request. The bill rejects administration proposals for new fees for military retirees and enrollment fees for TRICARE for Life. The committee also approved giving at least 14 days leave to servicemembers whose spouses give birth. Also, couples who are both in the military and adopt a child would get two weeks leave.

The bill would increase active duty strength by 27,000 over the president’s budget request (20,000 for the Army, 3,000 for the Marine Corps, an 4,000 for the Air Force). The HASC would also set total Army Guard and Reserve strength levels 25,000 higher than the administration requested.

The HASC rejected an administration proposal to initiate another Base Realignment and Closure (BRAC) round. The committee dismissed DoD’s recent report on facilities and force structure levels as not realistically describing the needed future force structure. HASC Ranking Minority member Rep. Adam Smith (D-WA) introduced an amendment to establish a base closure commission for another BRAC round. However, as he did last year, Smith withdrew the amendment before a vote could be taken.

The full committee added a provision on a vote of 32-30 that would require the registration of women for the draft. The amendment, offered by Rep Duncan Hunter (R-CA) who opposes drafting women, was proposed to openly discuss the issue. Opponents of drafting women hope that this provision will be soundly defeated on the House floor.

The HASC bill adds funding for 14 more F/A-18′s, 11 F-35s, three C-130J, and two MV-22 aircraft. The bill also funds additional Army AH-64 and UH-60M helicopters and two more ships (one LCS and one DDG-51).

The committee-approved bill rejects the administration’s proposal to retire the A-10 fleet and replace it with F-35’s.

The HASC bill includes acquisition reform proposals that accelerates the fielding of new technology more efficiently. It requires the design of weapon systems with open architectures to allow for easier upgrades. The plan also provides flexible funding to allow experimentation of new technologies and simplifies processes to expand “new avenues of competition for suppliers of all sizes,” according to the committee. The bill would provide DoD with “more tools to manage and and approve cost, schedule, and technological risk for major acquisition programs.” And, in a shift of decision authority, the bill would “grant Milestone Decision Authority for Joint Programs to Military Services after October 1, 2019.”

The full House is expected to take up the FY2017 Defense Authorization bill in May before the Memorial Day recess.

Total cost of DoD major acquisition programs increased slightly in 2015

Thursday, April 21st, 2016

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The total cost of 79 selected Department of Defense (DoD) major acquisition programs increased by $7.0 billion (+.43 percent) in 2015, according to a report issued by DoD last month.

The small increase reflects increased planned quantities (+$17.9 billion), higher costs due to engineering changes (+$7.1 billion) and program schedule changes (+$1.3 billon). Offsetting some of these increases were decreased program cost estimates (-$9.7 billion), lower escalation rates (-$4.8 billion), and a drop in support costs (-$4.8 billion).

When $7.1 billion is added to extend the funding for the Ballistic Missile Defense System (BMDS) through FY2021 (previous reports limited BMDS funding through FY2020) and adjustments are made for final and initial reports (+$8.3 billion), the total cost of DOD major acquisition programs as of December 31, 2014 is $1.644 trillion.

The cost estimates for selected programs are reported in the congressionally-required Selected Acquisition Reports (SAR).  SAR estimates of total program costs include actual costs to date and estimated future costs.  Program costs include research and development, procurement, military construction, and operations and maintenance costs that are acquisition-related. 

The DoD report for the December 2015 period also identified one program that experienced critical Nunn-McCurdy unit cost breaches—unit cost increases of 25 percent or more to the current Acquisition Program Baseline (APB) or 50 percent or more to the original APB. The breach occurred for the Navy Remote Minehunting System (RMS) was terminated after 2016 in the FY2017 president's budget resulting in a significant reduction in quantities (from 54 to the 10 already delivered).

Programs submitting their initial SAR reports are not represented in the total cost growth estimates for a particular year. For this reporting period, the initial report was submitted for the Armored Multi-Purpose Vehicle (AMPV) and the Joint Air-to-Ground Missile (JAGM) program.

DoD prepares these congressionally-required reports annually (with submission of the budget).  Quarterly reports are prepared for programs that experience cost increases of 15 percent or more, and schedule delays of at least six months.  DoD also submits quarterly reports for a program’s initial and final report, or for programs that are rebaselined during major milestone reviews.

House Armed Services Committee set to mark up FY2017 Defense Authorization bill

Tuesday, April 19th, 2016

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The House Armed Services Committee (HASC) will begin to mark up the FY2017 Defense Authorization bill on Wednesday, April 20.

The HASC markup schedule calls for three subcommittees to mark up on Wednesday April 20: the Military Personnel Subcommittee (11:30 AM); the Tactical Air and Land Forces Subcommittee (1:30 PM) and the Seapower and Projection Forces Subcommittee (3:00 PM).

On Thursday, April 21 the remaining three subcommittee will mark: the Readiness Subcommittee (9:30 AM); the Emerging Threats and Capabilities Subcommittee (11:00 AM); and the Strategic Forces Subcommittee (12:00 NOON).

All HASC subcommittee markups will be open.

Check the committee website for information on live streaming of the markups on the committee's YouTube channel.

The full committee markup is scheduled for the following week on Wednesday April 27 at 10:00 AM. HASC chair Rep. Mac Thornberry (R-TX) hopes to take the bill to the House floor in early May.

Subcommittees may release draft markups on the HASC website before the subcommittees meet.

Proposed FY2017 House Budget Resolution would cut the deficit by $7 trillion, but increase defense spending

Wednesday, April 6th, 2016

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The budget resolution reported out by the House Budget Committee (HBC) on a 20-16 vote would cut the federal deficit by almost $7 trillion over the next 10 years and reach a balanced budget in FY2026, according to the committee.

HBC Chairman Rep. Tom Price (R-GA) said the plan would balance the budget through commonsense reforms and greater economic growth; to create a healthier economy, more secure nation, and a more accountable Washington.”

The HBC emphasized that the proposal 1) balances the budget in 10 years by cutting spending and promoting fiscal discipline, 2) strengthens national defense by providing increased resources to the Department of Defense and closing the Guantanamo Bay detention facility, and 3) empowers U.S. Citizens and communities by repealing Obamacare, strengthening Medicare, and dismantling the Department of Commerce.

The annual budget resolution, often referred to as a “congressional budget blueprint,” sets revenue and appropriations targets for the tax writing and appropriations committees, so they can begin work on the president’s budget request.  This is an internal congressional procedure, so the passed budget resolution is not sent to the president for approval.

The HBC plan, using the same name as last year “A Balanced Budget for a Stronger America,” would set the FY2017 total federal spending level at $3.9 trillion, $186 billion less than current policy.

The $7 trillion reduction in the deficit for FY2017-2026 would come from $6.5 trillion reductions in spending, a small increase in revenue (+$225 billion ), and $241 billion cuts from resulting economic changes. Of the $6.5 trillion in spending cuts, $2 trillion would come from repealing Obamacare, $2.9 trillion from reforms to Medicare (-$449 billion), Medicaid (-$1 trillion), and other mandatory programs (-$1.5 trillion). The remaining reductions would result from cuts to discretionary programs (-$690 billion) and lower interest payments on the debt (-$856 billion).

The HBC took no action to end sequestration.

The discretionary budget authority for national defense (DoD plus other defense-related spending such as the Department of Energy’s nuclear program) would increase over the budget caps by $268 billion from FY2017 to FY2026, while non-defense budgets would be cut by $759 billion over the same period, according to the HBC budget. The budget agreement set the budget caps for 2017-2021 and the budget resolution calculates cap levels for 2022-2027 budget authority using Congressional Budget Office (CBO) baseline estimates.

For FY2017, the proposed budget would keep defense at the sequester level of $551 billion, would allow $23 billion in Overseas Contingency Operations (OCO) funding to be used for base budget requirements. 

The Defense budget proposal may prove to be a sticking point as defense hawks are pushing for a larger number than included in the budget agreement and there is still disagreement in Congress (primarily from Democrats) on whether or not to use the OCO account to fund base priorities as the HBC proposes.

To placate calls from the House Republican Caucus for larger cuts to total spending in FY2017, the HBC resolution includes an amendment calling for a separate vote on a proposed $30 billion cut to mandatory spending.

House floor action has not been scheduled.

House appropriations subcommittee approves FY2017 Military Construction spending bill

Monday, March 28th, 2016

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Last week, the House Appropriations Military Construction/Veterans Affairs Subcommittee (HAC-MilCon/VA) approved FY2017 funding for Military Construction (included in the total Department of Defense (DoD) budget request) and the Department of Veterans Affairs.

The bill now goes to the full appropriations committee for consideration.

The MilCon/VA bill is the first FY2017 appropriations bill to advance in Congress. Noting the beginning of the appropriations season in the House, House Appropriations Committee chair Rep. Harold Rogers (R-KY) said “once again, the Committee is getting off to a fast and productive start. This Military Construction and Veterans Affairs bill is a critically important piece of legislation that will provide the resources our veterans and servicemen and women need and deserve.”

The Military Construction portion of the FY2017 MilCon/VA bill provides $7.9 billion for military construction projects, family housing, Base Realignment and Closure (BRAC), and the NATO Security Investment Program. This amount is $250 million billion above the president’s request. The bill also funds $172 million in the Military Construction Overseas Contingency Operations (OCO) appropriation.

Funding for specific active and reserve component military construction projects in the bill is set at $5.6 billion. However, another $515 million is provided in FY2017 for the Army ($41 million), Navy and Marine Corps ($294 million), Air Force ($26 million), Army national Guard ($68 million) and Army Reserve ($86 million) to be used for projects (identified in priority order) in unfunded priority lists provided to Congress.

The HAC subcommittee bill would fully fund the request for Family Housing projects ($1.3 billion) and the NATO Security Investment Program ($178 million) to support fixed and mobile infrastructure projects for NATO operations.

The bill also would rescind $144 million from prior appropriations Acts.

A provision in the bill would continue to prohibit the closure of the Guantanamo Bay Naval Station and would prohibit the use of funds for a facility within the United States to house detainees.

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