Defense Budget and Financial Management

Senate committee approves FY2015 DoD appropriations bill

Wednesday, July 23rd, 2014

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The Senate Appropriations Committee (SAC) approved its version of the FY2015 DoD Appropriations bill last week.

The SAC bill provides $490 billion for DoD appropriations in the base budget (excluding military construction, which is provided in a separate bill), $1 billion below the request. The bill also includes $58.3 billion for Overseas Contingency Operations (OCO), $200 million below the president’s request.

Sen. Barbara Milkulski (D-MD) called the bill “a good bill for our men and women in uniform.” “It emphasizes readiness, cares for our wounded warriors, takes steps to improve health on our military bases and provides resources needed to keep our nation secure”, she said.

The House bill, passed last month, provides $491 billion for the base DoD budget and $79.4 billion for OCO.

The SAC bill would provide funding for 1 percent military pay raise as proposed by the president. The House-passed bill funds a 1.8 percent military pay raise as authorized under the House-passed FY2015 Defense Authorization bill. The SAC also approves the administration request to freeze pay for general and flag officers and allow for slower Basic Housing Allowance (BAH) growth.

The bill also funds a 1 percent civilian pay raise requested by the president.

The SAC bill would fund the Defense Health Program (DHP) at $31.6 billion ($400 million below the request), essentially the same level as the House-passed bill. The bill would add $200 million to the Defense Commissary Agency funding request to maintain operations and block the president’s proposed cut to the commissary subsidy. The bill also cuts $20 million from Office of the Secretary of Defense (OSD) funding to reflect a five percent personnel reduction.

Operations and Maintenance (O&M) funding in the SAC bill would total $165.8 billion, only slightly below the administration’s request, but $1 billion more than the House-passed bill. The SAC includes funding increases for facility sustainment (+$1 billion) and depot maintenance ($+360 million).

The SAC bill includes about $850 million to refuel the USS George Washington, denying the administration’s plan to defer a decision on refueling until the FY2016 budget. The House also provided funding for refueling. The SAC also funds continued operations of A-10 aircraft, blocking (like the House) the administration proposal to retire the A-10 fleet.

Procurement funding in the bill totals $91.4 billion, $1.7 billion higher than the request and about $200 million over the House-passed bill. Included in the SAC procurement funding are: two attack submarines and three Littoral Combat Ships; 34 F-35 (Joint Strike Fighter) and 7 KC-46A tankers, 12 EA-18G Growlers, and 79 H-60 Blackhawk and 37 MH-60S/R helicopters.

The SAC bill includes $62.6 billion for research and development, almost $1 billion less than the request and about $200 less than the House. Among the programs receiving R&D funding are: the Armored Multi-Purpose Vehicle (AMPV); the long-range strike bomber; and the KC-tanker. The SAC also added almost $800 million for medical research with a special focus on Peer-Reviewed Medical Research and Peer-Reviewed Cancer Research.

To reallocate funding to higher priorities identified by the Committee, the SAC made 517 separate program cuts totaling $11.7 billion. The funding reductions include: $6.6 billion for excess prior-year unobligated balances and forward financing; $2.7 billion due to schedule delays, cost growth, program concurrency and poor contractor performance; $1.3 billion to eliminate unnecessary program growth; and $1.1 billion for program redundancy, insufficient documentation, and program terminations. The SAC bill also cuts $500 million (3 percent) form the IT budget request to encourage prioritization of non-cybersecurity investments.

Given the Senate’s stalemate over the amendment process for floor action on appropriations bills, it is unclear when the defense bill will be considered on the Senate floor. To date the full Senate has not considered any FY2015 appropriations bill, while the House has passed seven (including the DOD bill). It is also unclear whether the defense bill will be a stand-alone bill or will be included in a continuing resolution (CR). With the August recess less than two weeks away and the mid-term congressional elections looming, it is becoming more likely that a CR may be considered sooner rather than later and final congressional action on most appropriations bills will be deferred until after the election.

President requests $58.6 billion for FY2015 Overseas Contingency Operations

Monday, June 30th, 2014

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The budget request for DoD Overseas Contingency Operations (OCO) for FY2015 is $58.6 billion, the White House announced late last week. The enacted level of OCO funding in FY2014 was 85.3 billion.

The amended budget request submitted by the president is $20.8 billion less than the $79.4 billion funding placeholder included in the budget request sent to Congress in March.

The OCO request will fund $54.3 billion for DoD costs for Operations Enduring Freedom (OEF) in Afghanistan, $0.3 billion for transition activities in Iraq, $4 billion for the Counterterrorism Partnership Fund (CTPF), and almost $1 billion for the European Reassurance Initiative (ERI).

Based on the president’s recently-announced redeployment decision, U.S troop levels in Afghanistan will decline to 9,800 by the end of December 2014, with further decrease to 5,000 by December 2015. Average troop levels in Afghanistan will decline from 37,234 in FY2014 to 11,661 in FY2015.

However, the DoD costs for war-related support will not decline proportionately, according to DoD justification material. DoD’s forward presence around the Middle East in support of OEF will not decline significantly in FY2015. Costs for transporting troops and equipment back to the United States and to retrograde equipment and reset the force will continue, as will costs to close bases, conduct associated environmental remediation, and to dispose of unexploded ordnance. Continued costs are also necessary to meet the demands for high-end Intelligence, Surveillance, and Reconnaissance (ISR) and to support the Afghan National Security Forces, according to DoD.

The OCO request includes $11 billion for operations and force protection in Afghanistan. These costs support special pays and the pay and allowances for mobilized Reserve Component personnel, deployed civilian personnel costs, ground combat and aviation operating costs, C4I, and supplies and sustainment costs.

The funding request also will provide $18.1 billion for in-theater support outside of Afghanistan. Forces providing this support include afloat and expeditionary forces, engineers and fire support, and other capabilities that support troops operating in Afghanistan. In addition to OPTEMPO costs and transportation, this funding includes maintenance and contractor logistics and Defense Logistics Agency (DLA) services, fuel losses, and fuel transportation.

Investment and equipment reset costs of $9.2 billion in the request will fund the replenishment of ammunition and missiles expended in combat ($0.6 billion), replacement of equipment that was lost in combat ($0.3 billion) and worn out equipment for which repair was not considered economical ($1.4 billion). This reset request also includes $6.6 billion to repair tactical vehicles, radios, and support equipment at the depot or field level. Another $0.3 billion will fund the reset of force protection equipment, including communication and electronic, physical security, and aircraft survivability equipment.

Non-DoD and other classified costs totaling $6.5 billion, funding for the Afghanistan Security Forces Fund ($4.1 billion) for training and operations, coalition support ($1.7 billion) to reimburse key coalition partners and provide support for specialized training and equipment, and $4 billion for the Counter Terrorism Partnership Fund (CTPF) account for most of the remaining $4 billion.

House passes FY2015 DoD Appropriations bill

Monday, June 23rd, 2014

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Last week the House passed the FY2015 DoD Appropriations bill 340-73. The bill (H.R. 4870) provides $491 billion for the base DoD budget (except Military Construction, which is funded in a separate bill), $200 million above the request.

The House bill also includes $79.4 billion for Overseas Contingency Operations (OCO) in FY2015. This amount is the same as the placeholder request included in the president’s budget.

House Appropriations Committee (HAC) chairman Rep. Hal Rogers (R-KY) said the House bill “helps to meet the most pressing needs to address current and arising threats to the security of our nation, while finding ways to trim excess and reduce lower priority programs without negatively affecting our troops or the success of our military missions.”

The House bill funds a 1.8 percent military pay raise that is authorized in the House-passed FY2015 Defense Authorization bill, almost twice the 1 percent raise proposed in the president’s budget request.

The bill rejects the president’s proposals to reduce the cost of military personnel benefits. The House denies the proposed cut in the Basic Allowance for Housing (BAH), the $1 billion reduction to the annual commissary subsidy, and proposals to modernize and consolidate TRICARE programs for retirees under age 65, including some TRICARE co-pay increases. The House approved a floor amendment to prohibit funding to initiate another Base Realignment and Closure (BRAC) round.

The House bill also denies the administration proposal to defer a decision on refueling the USS George Washington until the FY2016 budget. The bill provides almost $800 million in FY2015 to refuel the aircraft carrier.

The House approved a floor amendment offered by Rep. Candice Miller (R-MI) that prohibits funding to retire the A-10 aircraft fleet that was proposed in the administration’s budget request. This action overturns the decision by the House Appropriations Committee, which had rejected pressure to keep the program alive. However, because the floor amendment does not add funding necessary to keep the program operational, the Air Force would have to absorb the cost by reducing other programs. Another House floor amendment blocks retirement of the KC-10 tanker.

The White House issued a Statement of Administration Policy (SAP) that strongly criticized the House bill’s positions on the administration’s savings and reforms proposals. “Without congressional support for meaningful compensation reforms and other costs savings measures, force structure changes and flexibility to manage weapons systems and infrastructure, there is an increased risk to the Department’s ability to implement the President’s defense strategy,” according to the SAP. However, the statement stopped short of threatening a presidential veto of the House bill.

The House now awaits Senate action on the FY2015 DoD spending bill. 

House Appropriations Committee approves FY2015 DoD spending bill

Wednesday, June 11th, 2014

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Yesterday, the full House Appropriations Committee (HAC) approved the FY2015 Department of Defense (DoD) Appropriations bill. The HAC bill would provide $491 billion for the DoD base budget (excluding military construction), $200 million higher than the president’s request.

The HAC bill also includes $79.4 billion for Overseas Contingency Operations (OCO) in FY2015. This amount is the same as the placeholder request included in the president’s budget. The White House has recently announced its plan for reducing U.S. troop levels in Afghanistan and is expected to submit a detailed OCO request soon.

Committee chairman Rep. Hal Rogers (R-KY) called the bill “fiscally responsible” and said it reflects current and future threats. “By prioritizing the security of the American people, the readiness of our military, and the health and well-being of our brave warfighters, this bipartisan legislation will help create a safer America,” he said.

The HAC bill would fund a 1.8 percent military pay raise that is authorized in the House-passed FY2015 Defense Authorization bill. The president’s budget requests a 1 percent pay raise for military personnel. The bill rejects the administration’s proposal to reduce the Basic Allowance for Housing (BAH).

The bill would fund the Defense Health Program (DHP) at $31.6 billion, $360 million below the request. The bill would also add $100 million to the Defense Commissary Agency funding level. The president’s budget request proposed a cut in the subsidy to commissary operations.

Funding in the HAC bill for Operations and Maintenance (O&M) programs would total $165 billion, $1.4 billion below the request. Within the amount provided in the bill, an additional $1.2 billion is provided for readiness shortfalls and $791 million to restore funding cuts to facility sustainment and modernization. Offsetting some of these increases are savings from favorable foreign currency fluctuations ($547 million) and overestimated civilian personnel costs ($592 million). The committee also cut about $900 million from O&M accounts for what it called “unjustified program growth.”

The bill would provide $91.2 billion for procurement programs, $1.6 billion more than the request.  Included in the bill are funds to build six new ships, buy 38 F-35 (Joint Strike Fighter) and 7 KC-46A tankers, 12 EA-18G Growlers, 87 H-60 Blackhawk and 37 MH-60S/R helicopters. The HAC rejects the administration’s proposal to delay a decision on refueling the USS George Washington aircraft carrier until 2016 and provides $789 million for the refueling.

The HAC bill approves the administration’s request to retire the A-10 aircraft. The committee defeated an amendment offered by Rep Jack Kingston (R-GA) to fund the program in FY2015. Both the House-passed and the Senate Armed Services Committee (SASC) versions of the FY2015 Defense Authorization bill would keep the program alive. The Senate Appropriations Committee (SAC) has not yet acted on the DoD appropriations bill.

Funding in the bill for research and development (R&D) would be $63.4 billion, $171 million below the president’s request. Programs receiving R&D funding include: a new Air Force bomber, next generation JSTARS, Future Unmanned Carrier-based Strike System, Army Ground Combat Vehicle, and Marine Corps Joint Light Tactical Vehicle.

No date has been set for House floor action on the DoD appropriations bill.

CRS updates defense acquisition process overview

Wednesday, June 11th, 2014

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The defense acquisition process is so complex and involves so many different organizations, laws, and regulations that comprehending the main points and flow of the process and the relationships among the players can be difficult, especially for non-acquisition personnel.

The Congressional Research Service’s (CRS) updated overview on how DoD acquires weapon systems may help you navigate through this maze.  This report does not provide a detailed cookbook approach to the acquisition process, but it is a good overview that can help resource managers and analysts more easily understand the defense acquisition process. 

The CRS report “Defense Acquisitions: How DOD Acquires Weapon Systems and Recent Efforts to Reform the Process” provides a description of the acquisition process with relevant charts and timelines. The report includes a history of the statutory and regulatory underpinnings of the defense acquisition process, the major components of the process with a timeline, a description of the organizational structure supporting the process, and definitions of important terms. 

The report also describes recent DoD acquisition reform efforts and legislation affecting defense acquisition passed between 2008 and the present.

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