Defense Budget and Financial Management

Hagel outlines new innovation initiative

Tuesday, November 18th, 2014

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Secretary of Defense Chuck Hagel announced a new department-wide initiative designed to “identify and invest in innovative ways to sustain and advance America’s military dominance for the 21st century.”

Speaking at the 2014 Reagan National Defense Forum, Hagel said in order to “overwhelm challenges to our military superiority” within the current constrained resource environment the U.S “must change the way we innovate, operate, and do business.” The innovation Initiative is based on the lessons learned from previous offset strategies and will “sustain our competitive advantage over the coming decades,” he said.

Hagel has tapped Deputy Secretary of Defense Robert Work to direct the development of the initiative and to head an Advanced Capability and Deterrent Panel implement and integrate the effort throughout DoD. Work will provide quarterly progress reports to Hagel.

In a memo to Department of Defense and Military Service leaders, Hagel called the initiative a “third offset strategy that puts the competitive advantage “firmly in the hands of American power projection over the coming decades.”

The memo describes three main components of the initiative. A long-range research and development planning program will develop and field “breakthrough technologies and systems” to sustain and advance capabilities. This program will look particularly at robotics, autonomous systems, miniaturization, and 3-D printing.

Secondly, a reinvigorated wargaming effort will develop “alternative ways of achieving our strategic objectives.” Thirdly, a new operational concepts will utilize resources for more strategic effect and to address emerging threats more innovatively.

The new initiative will also look at DoD business practices “to find more ways to be more efficient and effective through external benchmarking and focused internal reviews.”

In describing the challenges DoD faces as a modern enterprise, Hagel told the Reagan Defense Forum that the department must upgrade its business and IT systems and processes. And, he reinforced the goal to be “fully, completely, audit-ready by no later than 2017.” Hagel said DoD is on track to meet this goal, which “is essential for DoD’s effectiveness, efficiency, and accountability into the future.”

President requests $3.4 billion for DoD operations against ISIL

Tuesday, November 11th, 2014

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A FY2015 budget amendment submitted to the Congress yesterday would provide the Department of Defense (DoD) $3.4 billion to conduct operations against the Islamic State of Iraq and the Levant (ISIL).

This request comes after the president announced that he is increasing the number of U.S. forces advising and training Iraqi and Kurdish troops by 1,500 to about 3,000.

Operations against ISIL are currently being funded from existing OCO funding, according to DoD. However, DoD has cautioned that additional funding would be required as the pace of operations increased. Secretary of Defense has repeatedly warned that operations against ISIL are long-term.

The $3.4 billion requested for Operation INHERENT RESOLVE will fund: the operations and maintenance (O&M) costs of air, ground and naval forces engaged in the operation; sustain and support forces deployed to “provide training, advice, and assistance to partner security forces engaged in the fight against ISIL;” and replenish and replace munitions expended during airstrikes against ISIL forces. According to DoD justification documents, $2.0 billion will be for In-Theater Support, $0.3 billion for equipment reset, and $1.2 billion for classified programs.

Over two-thirds of the $3.4 billion will be for O&M appropriations ($2.3 billion). Military Personnel costs account for $141 million, Procurement funding will be $827 million, and RDT&E programs will require $145 million.

Air Force requirements are $1.581 billion (46 percent of total funding). The Army receives $957 million (28 percent) for its operations, the Navy gets $260 million (8 percent), and Defense-wide activities are allocated $632 million (18 percent).

In addition to the $3.4 billion, the president requested $1.6 billion to set up the Iraq Train and Equip Fund (ITEF) ”to develop and support Iraqi national security forces, including Kurdish forces, as they confront ISIL in Iraq.”

These amounts (totaling $5 billion) are to be funded in DoD Overseas Contingency Operations (OCO) accounts and are in addition to the $58.6 billion DoD Overseas Contingency Operations (OCO) request the president sent requested in June. The total DoD OCO request for FY2015 is now $63.6 billion.

A DoD spokesperson said Congress will have to act on the president’s funding request before the additional 1,500 troops can be deployed. Congress will begin a lame duck session this week with hopes of completing action on FY2015 appropriations bills, including DoD OCO funding, before adjourning.

Hagel and Army leaders call for sequestration fix in 2016

Friday, October 31st, 2014

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Secretary of Defense Chuck Hagel blamed many of the readiness problems the Army and other military services are experiencing on the deep cuts forced by sequestration

Speaking at the Association of the United States Army (AUSA) Annual Meeting and Exposition earlier this month, Hagel warned that failure to fix sequestration risks a return to an Army that is undertrained, under-equipped, outnumbered, and unprepared.” Because of sequestration, last year the Army had to cancel so many training rotations that we had only two active-duty brigade combat teams who were fully ready and available to execute a major combat mission,” he charged.

Hagel acknowledged that some budget relief has been enacted, but stressed that sequestration is still law. Unless there is an agreement to fix sequestration, Hagel said, “it will return in 2016—stunting the Army’s readiness just as we’ve begun to recover, and requiring even more dramatic reductions in force structure.”

Hagel also pressed for congressional approval of DoD’s proposed program reductions, trade-offs, and compensation reforms to mitigate the stress on readiness levels and modernization plans. If Congress does not act, Hagel warned, DoD “could face a $70 billion cut in our budget over the next five years.” As a result, the military services “would have little choice but to make up the differences through cuts to readiness,” he said.

Hagel urged Congress to be “a partner in responsible, long-term planning and budgeting” and to end sequestration, which he called “an irresponsible deferral of responsibility.”

Army Secretary John McHugh, opening the AUSA meeting, voiced similar concerns. He warned that if sequestration is implemented in 2016 “another round of indiscriminate cuts will gut our force so we’re unable to meet the president’s defense strategic guidance.” He called on Congress to support predictable, long-term funding plans. “This is a time for predictability,” he said

Army Chief of Staff Gen. Ray Odierno has echoed Hagel’s and McHugh’s remarks. Odierno called 2016 a “breaking point.” He said if sequestration returned in 2016 it would take the Army budget down $9 billion from the current plan. He emphasized this cut would significantly degrade the force “because I cannot take people out fast enough.”

Odierno called for a “balance” between manpower, modernization and training, which sequestration make difficult to maintain. “This is a lousy way to do business,” he said.

OMB gives agencies guidance for operating under FY2015 CR

Monday, October 6th, 2014

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The Office of Management and Budget (OMB) has issued guidance setting the rules under which federal agencies will operate during the FY2015 Continuing Resolution (CR) enacted (H.J. Res 124) late last month. The CR period runs from October 1 through December 11, 2014.

Under this guidance, OMB will apportion (distribute funds to agencies to be available for obligation) funds automatically to appropriations accounts during the CR period, unless language in the CR provides for specific levels of funding or special rules.

The amount provided in the FY2015 CR is the “rate for operations provided in the applicable appropriations acts for fiscal year (FY) 2014 and under the authority and conditions provided in such Acts,” according to the OMB memo.  The amount is net of any rescissions, plus or minus mandated transfers, and includes a 0.0554 percent reduction required in the CR (Section 101(b). However, funds designated for Overseas Contingency Operations/Global War on Terrorism and disaster relief are excluded from the 0.0554 percent cut.

OMB calculates the automatic apportionment rate by multiplying the annualized amount by the percentage of the year covered in the CR.  In this case the automatic apportionment rate is 19.73 percent to cover the 72-day CR period.

Not all accounts receive funding during the CR period.  Agencies cannot obligate funds for accounts for which no funding was included in an FY2015 appropriations bill that has been passed or reported out of committee in either the House or the Senate. If a program (PPA) within an account has not been funded (zero-funded) by the House or Senate, the account will receive an automatic apportionment and the agency can fund the program within the account total.

OMB notes that the CR provides limited authority (in Section 112) to mitigate civilian furloughs during the CR period   Apportionments for civilian personnel compensation and benefits can be apportioned at an “accelerated rate.”  However, OMB advises that agencies must receive written pre-approval to receive a higher rate, but expects few if any written apportionments using this authority.

The OMB memo addresses specific CR issues of interest in a “Frequently Asked Questions” format in Attachment A of the memo. 

Cost of U.S. military operations against ISIL is increasing

Tuesday, September 30th, 2014

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The cost of military operations in Iraq and Syria to combat the Islamic State of Iraq and the Levant (ISIL) is growing as Department of Defense (DoD) operations continue and expand.

The Pentagon announced a few weeks ago that the cost of the operations in Iraq were averaging $7.5 million dollars per day. Since then the air operations have been expanded to include strikes against ISIL forces in Syria and costs have increased. The U.S. and its partners have conducted 43 air strikes against ISIL forces in Syria, according to Hagel.

Last week, in a news conference Defense Secretary Hagel said the cost of DoD’s operations is now running between $7 and $10 million per day. A study prepared by the Center for Strategic and Budgetary Assessment (CSBA) estimated that DoD spent between $780 and $930 million through September 24.

Secretary Hagel stressed that the costs for these operations are being funded from the Overseas Contingency Operations (OCO) appropriations provided by Congress for FY2015.

Hagel also underscored that the U.S. is not acting alone in this effort. “A broad coalition has been and will continue to be a cornerstone of our strategy against ISI, he said.

But, he warned, the “diplomatic economic and military campaign will require a long-term commitment from the United States and all of our partners and allies.” “We are at the beginning, not the end of our effort to degrade and destroy ISIL” he cautioned. And, he said, the costs of ongoing operations will “require additional funding from Congress.” He said the administration is working with Congress to determine the source of this funding.

Some members of Congress have been calling for hearings to assess the cost as well as a debate on the goals and strategy underlying military operations against ISIL. However, the full Congress does not return until after the November elections so these hearings and congressional debate will probably not happen until mid-November.

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