Defense Budget and Financial Management

Pushing an aggressive appropriations schedule, the Senate passes the FY2017 Transportation/HUD and Military Construction/VA spending bills

Thursday, May 26th, 2016


The Senate continues its aggressive effort to move FY2017 appropriations bills to completion. 

Last week the Senate passed the second and third appropriations bills for FY2017:  Transportation/HUD bill and Military Construction/Veterans Affairs (MilCon/VA).  The two bills were combined in a single bill and passed the Senate by a significant majority, 89-8.  The Senate passed its first FY2017 appropriations bill, Energy & Water on May 12.

In addition to providing appropriations for military construction spending in the Department of Defense (DoD), the VA, the Departments of Transportation and Housing and Urban Development, the bill also would make available $1.1 billion “for medical and public health preparedness and response capabilities related to the Zika virus.”

Touting the Senate’s progress on FY2017 appropriations bills, Senate Appropriations Committee (SAC) Chairman Sen. Thad Cochran (R-MS) said, “Senators have now worked through three appropriations bills and I look forward to additional cooperation as other FY2017 bills are brought to the [Senate] floor.”

The SAC has approved another five bills (Agriculture, Commerce/Justice/Science, DoD, Homeland Security, and Legislative), which are now ready for full Senate action.

The House also has proceeded apace on FY2017 appropriations bills.  To date, the full House has passed one FY2017 appropriations bill (Military Construction/VA), while another (Energy and Water) failed to achieve enough votes to pass.  The House Appropriations Committee (HAC) has approved another five bills (Agriculture, Commerce/Justice/Science, DoD, Legislative, and Transportation/HD) that await final action by the full House.

The Military Construction portion of the Senate MilCon/VA bill would provide $7.9 billion for military construction projects, family housing, Base Realignment and Closure (BRAC), and the NATO Security Investment Program.  This is $486 million above the FY2017 request.

The House-passed FY2017 MilCon/VA bill provides $250 million more than the request.

The Senate bill would provide $5.9 billion for active and reserve military construction projects: $5.2 billion for active components construction ($170 million above the request) and $673 million for guard and reserve components construction (the requested level). Funding in the bill for Family Housing totals $1.320 billion, the requested amount.

The bill would fund the requested amounts for the North Atlantic Treaty Organization Security Investment Program (NSIP), $187 million and Base Realignment and Closure (BRAC), $200 million

The Senate-passed bill includes another $515 million to be used by the military services for projects identified on the service’s unfunded priority list provided to Congress.

Funding totaling $200 million would be rescinded from prior-year programs if the bill became law.

House passes FY2017 Defense Authorization bill after White House veto threat

Thursday, May 19th, 2016


Yesterday, the House passed its version of the FY2017 Defense Authorization bill, (H.R.4909) 277-147.  In the final vote, 40 Democrats joined 237 Republicans in the affirmative, while only five Republicans along with 142 Democrats voted against passage, 

House Armed Services Committee Chairman Rep Mac Thornberry (R-TX) said the bill protects U.S. national security by “beginning to correct shortfalls in our military readiness, reversing troop cuts, increasing investments in training and maintenance programs, and rebuilding crumbling facilities.”

During its two-day consideration of the bill, the House considered 180 floor amendments of which 170 were approved. Earlier, the House Rules Committee struck a provision from the House Armed Services Committee-approved bill that would have required women to register for the draft.

The House 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.

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 House bill would also authorize another $23.1 billion in OCO funding to be used for base budget requirements.  The administration request assumes that only $5 million of OCO funds will be used to pay for additional troops and readiness funding not included in the president’s budget request.

This approach to funding OCO caused the White House to issue a veto threat.  The Statement of Administration Policy (SAP) called it “dangerous” and “wasteful.”  “By gambling with warfighting funds, the bill risks the safety of our men and women fighting to keep American safe, [and] undercuts stable planning,” according to the SAP.  Secretary of Defense Ash Carter called the proposal a “raid on war funding that risks stability.”

The White House also takes strong issue with the bill’s restrictions on detainees at Guantanamo Bay, failure to adopt a proposal to begin another Base Realignment and Closure (BRAC) round, and rejection of reform proposals for military compensation and health care. 

The House 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 also would increase active duty strength by 27,000 over the president's budget request and set total Army Guard and Reserve strength levels 25,000 higher than the request.

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

House Appropriations committee approves FY2017 DoD spending bill

Wednesday, May 18th, 2016


Yesterday, the House Appropriations Committee (HAC) approved the FY2017 Department of Defense (DoD) Appropriations bill. The HAC bill would provide $517 billion for the DoD base budget (excluding military construction).

Committee chairman Rep. Hal Rogers (R-KY) said the bill “provides the resources needed to keep our military trained and well equipped, to ensure success in our missions now and in the future.”

The HAC followed the House Armed Services Committee’s (HASC) plan for funding Overseas Contingency Operations (OCO) only through April 2017 and using some requested OCO funding for base budget requirements.  The HAC bill would appropriate $42.9 billion for OCO requirements and another $15.7 billion to be used to meet base budget requirements.  This total for OCO matches the president’s $58.6 billion OCO request.

The HASC plan for funding OCO was one of the reasons the administration’s Statement of Administration’s Policy (SAP) cited for a potential veto of the HASC bill and will probably draw a veto threat on the HAC bill. Secretary of Defense Ash Carter called the proposal a “raid on war funding that risks stability and gambles with war funding.”

The HAC bill includes an additional $340 million to fund a 2.1 percent military pay raise that is authorized in the HASC-approved bill.  The president’s budget requests a 1.6 percent pay raise for military personnel.  The HAC also would fund the higher active duty (+27,000) and guard and reserve (+25,000) strength levels that would be authorized in the HASC bill.

The base budget bill would fund the Defense Health Program (DHP) at $33.4 billion, $100 million above the request, but another $450 million for base requirements in funded in the HAC OCO account.

Funding in the HAC bill for Operations and Maintenance (O&M) programs would total $179.3 billion for the base budget, about $2.4 billion above the total O&M request. OCO O&M funding of $30 billion includes $5.6 billion for base requirements.  The increase in the base bill funding includes $6.4 billion more than requested for readiness, $1.6 billion more for facility, sustainment, restoration, and modernization programs and another $750 million for depot maintenance.

The HAC bill would provide $104.2 billion for base budget procurement programs ($2.3 billion above the request).  OCO procurement funding totals $16.6 billion, with $7.3 billion for base requirements (including $3.1 billion for shipbuilding and conversion).  The bill would fund the procurement of 15 ships (including three Littoral Combat Ships), 74 F-35 aircraft, 16 F/A-18E/F planes, 72 UH-60 helicopters, 15 KC-46 tanker aircraft, and 123 Stryker upgrades.

Research and development (R&D) funding in the base budget would be $70.3 billion ($1.1 billion less than the request) with another $163 million for base requirements in OCO funding.  Major programs receiving R&D base budget funding include: the new Air Force bomber; a next generation JSTARS aircraft; RQ-4 Triton Unmanned Aerial Vehicle; the Ohio-class submarine replacement; and STRYKER lethality.

The bill rescinds $1.95 billion from prior-year programs in the base bill and $669 million in in prior-year rescissions from OCO funding.  The HAC also would achieve savings of $1.5 billion from lower fuel costs, and almost $600 million because of more favorable economic conditions.

The bill is now ready for consideration by the full House.

Senate committee approves the FY2017 Defense Authorization bill with major organizational and acquisition reforms

Friday, May 13th, 2016


Yesterday, the Senate Armed Services Committee (SASC) approved (23-3) its version of the FY2017 Defense Authorization bill.

The bill authorizes force levels, programs, and policies (including military pay raises) for DoD budgets and the programs and policies for the Department of Energy (DoE) nuclear weapons program.  Appropriations bills provide actual funding.

SASC Chair Sen, John McCain (R-AZ) praised the “collaborative, bipartisan process” that led to the committee’s approval.  He called the bill one of reform and innovation saying the bill “contains the most sweeping reforms of the organization of the Department of Defense in a generation” and” refocuses Pentagon leadership on preserving America’s military technological advantage and advances reforms to the defense acquisition system to harness American innovation.”

The SASC bill authorizes total of $602 billion, including $543 billion for the FY2017 DoD base budget and the DOE nuclear weapons program and $59 billion for Overseas Contingency Operations (OCO) costs in FY2017, the same amount requested by the president for OCO.  The House Armed Services Committee’s (HASC) bill provides only $36 billion for OCO through April 2017. The White House and DoD Secretary Ash Carter have been highly critical of the HASC approach to funding OCO for only part of FY2017.

The SASC approves the president’s request for a 1.6 percent military pay raise, rather than the 2.1 percent military raise included in the House Armed Services Committee (HASC) bill.  The SASC also did not follow the HASC in increasing the authorized active duty and reserve strength levels.  In another difference with the HASC, the SASC would authorize three new TRICARE health plans—TRICARE Prime, TRICARE Choice, and TRICARE Supplemental.  The HASC bill provides two TRICARE options—TRICARE Prime and TRICARE Preferred.

Citing the significant changes in the “strategic landscape” since the Goldwater Nichols Act was passed 30 years ago, the SASC bill seeks to recalibrate “the roles and missions of the senior officials in DoD, as well as their relationships with each other.”  The bill limits the National Security Council (NSC) staff of “permanently assigned professional staff and detailees from DoD and other U.S. departments and agencies” to 150.  The SASC also clarified the role of the Chairman of the Joint Chiefs of Staff (CJCS) emphasizing joint readiness and leadership.

The bill would clarify the primary duties of the Combatant Commanders (COCOMs) “to execute the national defense strategy in consultation with the Chairman of the Joint Chiefs of Staff, to prepare and plan for conflict, to take necessary actions to deter conflict, and command U.S. armed forces in combat.”  The SASC would establish a Combatant Commanders Council (COCOMs, Chairman and Vice Chairman of the JCS, and the Secretary of Defense) to assist in the execution of strategy and the global integration of military activities.  The Secretary of Defense would convene the council and set the agenda.

The bill would reduce by 25 percent the number of general and flag officers and cut the number of authorized four-star billets from the current 41 to 27.  The committee believes that the general and flag officer corps “has become increasingly out of balance with the size of the force it leads.”  The bill also would reduce the number of Senior Executive Service (SES) civilian employees by 25 percent.  In keeping with these reductions the bill would reduce spending on contractors by 25 percent by January 2019 from a FY2016 baseline.

The SASC bill continues the committee’s acquisition reform efforts by focusing on improving acquisition outcomes.  The bill establishes accountability, assesses new sources of innovation, removes unnecessary processes and requirements., adopts best business practices, and improves the acquisition workforce.

The bill would replace the Under Secretary of Defense for Acquisition, Technology, and Logistics (AT&L) with an Under Secretary of Defense for Research and Engineering (R&E) and an Under Secretary of Defense of Management and Support.  The bill would also create a new Assistant Secretary of Defense for Acquisition Policy and Oversight to set defense-wide acquisition and industrial base policy eliminate four Assistant Secretaries and three Deputy Assistant Secretaries.

To improve access to commercial and global innovation, the bill includes provisions “to improve rapid acquisition authority and rapid prototyping and rapid field processes.”  Regulation of commercial items and off the-shelf commercial items is streamlined under the bill.  The SASC would also establish a preference for commercial services.

The bill would establish a preference for fixed-price contracts.  To curb the use of cost-type contracts, the bill would assess military department and agency heads a penalty for using of some cost-type contracts awarded over the next five years.

To improve the acquisition workforce, the bill would authorize more flexible hiring and compensation practices, improve the Defense Acquisition Workforce Development Fund, and establish competitively-selected senior military acquisition advisors in the Defense Acquisition Corps.

Senate leaders have not announced a schedule for full Senate consideration of the SASC bill.

OMB issues FY2018 budget guidance to support transition to next administration

Wednesday, May 4th, 2016


Federal agencies will not formally prepare a FY2018 budget in September, according to a memorandum issued last week by Shaun Donovan, Director of the Office of Management and Budget (OMB).

Donovan said OMB will “lay the groundwork" for the next budget by gathering “budget and programmatic information from which the incoming administration can develop its budget proposals.”

With a new administration coming into office next January, OMB has told agencies they will not submit a budget request in September, as is usually the case, and OMB will not do a formal review or issue a budget “Passback” this year.  Rather, OMB will “prepare a budget database that includes a complete current services baseline.” 

Agencies will also not have to submit the usual set of policy materials that support budget requests until the new administration is “in place.”  However, agencies may be asked to provide some information on selected issues.

OMB said that agencies should continue with “internal review procedures” for the FY2018 budget and work with OMB staff by providing recurring and non-recurring cost information and personnel levels and costs so they can develop program-level current services estimates.  Agencies will also work with OMB to” identify key programmatic and budget issues that may require attention from the incoming administration.”

Agencies will also not have to submit the FY2018 performance plan, but should continue with internal review procedures so that the next administration can produce performance plans.

OMB directed agencies to continue to meet scheduled reporting requirements for information technology (IT) and cybersecurity.

A revised OMB Circular A-11 will be issued in June to include transition-related updates.  During the transition after the election OMB will issue guidance on policy development and the timing for submitting FY2018 agency requests.

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