Defense Financial Highlights

Senate passes FY2017 Defense Authorization bill over White House veto threat

Thursday, June 16th, 2016


This week the Senate passed the FY2017 Defense Authorization bill by a large majority.

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

Senate Armed Services Committee (SASC) chair Sen. John McCain (R-AZ) praised the bipartisan support for the bill saying “I’m very proud that the Senate passed the National Defense Authorization Act for Fiscal Year 2017 with an overwhelming bipartisan vote of 85-13.” Forty-eight Republicans, thirty-six Democrats, and one Independent voted for the bill.

The House passed its version of the defense authorization bill in May 277-147.

The Senate bill would authorize a total of $602 billion, including $543 billion for the FY2017 DoD base budget. The bill also would provide $59 billion for Overseas Contingency Operations (OCO) costs in FY2017, the same amount requested by the president for OCO. 

The House bill also authorizes $543 billion for DoD, but provides another $23.1 billion in OCO funding to be used for base budget requirements.  The House bill authorizes only $36 billion for OCO through April 2017.

The Senate failed (56-42) to garner the 60 votes needed to approve an amendment by Sen. McCain that would have added another $18 billion to the Senate bill. A proposal by Sen. Jack Reed (D-RI) to add $18 billion to nondefense budgets also failed.

The Senate bill would approve the president’s request for a 1.6 percent military pay raise, rather than the 2.1 percent military raise included in the House bill.  The Senate also did not follow the House increases to the authorized active duty and reserve strength levels.  Proposals to match the House bill's military pay raise and higher military end-strength levels failed on the Senate floor.

The Senate bill also differs fro the House bill in changes to TRICARE. The Senate would authorize three new TRICARE health plans—TRICARE Prime, TRICARE Choice, and TRICARE Supplemental, while the House bill provides two TRICARE options—TRICARE Prime and TRICARE Preferred.

The Senate bill would require the registration of women for the draft. The House Rules Committee did not allow House consideration of a narrowly approved (32-30) House Armed Services Committee proposal that supported draft registration for women.

The Senate did join the House in rejecting the administration's call for another Base Realignment and Closure (BRAC) round.

Sen. McCain emphasized the bill's support for DoD organization and acquisition reform, calling the bill “the most significant piece of defense reform legislation passed by the Senate in 30 years.”

The Senate bill would reset “the roles and missions of the senior officials in DoD, as well as their relationships with each other.”  Legislation would limit the National Security Council (NSC) staff to 150, clarify the role of the Chairman of the Joint Chiefs of Staff (CJCS), and clarify the primary duties of the Combatant Commanders (COCOMs). The Senate 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 

The bill would lower the number of general and flag officers by 25 percent, reduce the number of authorized four-star billets from the current 41 to 27, cut the number of Senior Executive Service (SES) civilian employees by 25 percent, and reduce spending on contractors by 25 percent by January 2019 from a FY2016 baseline.

The Senate bill's acquisition reforms focus on accountability, new sources of innovation, and an improved 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 and create a new Assistant Secretary of Defense for Acquisition Policy and Oversight to set defense-wide acquisition and industrial base policy.

The bill would streamline the regulation of commercial items and off the-shelf commercial items and establish preferences for commercial services and fixed-price contracts. 

The Senate 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.

The White House, like it did with the House bill, issued a Statement of Administration Policy (SAP) threatening a veto of the Senate bill as passed. The SAP expressed strong objections to the bill's organizational changes, rejection of another BRAC, prescription of contractual methods, and the restrictions regarding detainees at Guantanamo Bay.

House and Senate conferees will now have to adjudicate the differences in the two bills to try to achieve a bill the president will sign.

Carter announces military and civilian personnel initiatives for the Force of the Future

Friday, June 10th, 2016


Secretary of Defense Ash Carter announced new initiatives intended to improve the officer promotion system and enhance the civilian recruiting and retention program.

Speaking to an all-hands meeting at the Pentagon, Carter cited the security challenges and the demographic, economic, and social changes facing the U.S.  He said his job was “to make sure that amid all this change DoD continues to recruit, develop, and retain the most talented men and women America has to offer.”

Carter billed the new initiatives for the military promotion system as fixes to a rigid “one size fits all” system that works most of the time, but “most of the time isn’t good enough for the Force of the Future.”  Carter said the current “up-or-out” policy can be too rigid and “can limit the ability of our services to achieve the right force mix they need.”  Often the system inhibits officers from specializing or deviating from a career path even if such a move would benefit the service and the individual, he said.

Carter identified four changes to the Department Officer Personnel Management Act (DOPMA) to improve the effectiveness of the force by bringing the 100-year old system into the 21st century.

To incentivize the best performers, the secretaries of the Military Departments could adjust the so-called lineal numbers (based on seniority) of officers that are selected for promotion in order to recognize superior performance.  Currently, when officers are selected for promotion, they are promoted in order of seniority based on when the officer was commissioned.  Carter called this change a “key part of good talent management.”

Under another proposal, the Military Departments could approve an officer’s request to “opt out” of the promotions cycle to pursue opportunities to broaden their experience without hurting chance of promotion.  This change would enhance retention objectives and bring new skills and ideas into the management pool, according to Carter.

To enhance the recruitment of experts in critical fields (e.g., cyber and scientific fields), civilians with such skills would be able to join at a mid-career level, as is the case for civilian doctors.  This authority would “fill critical gaps in our force” and “make us more effective,” Carter said.

In order to be able to respond to future needs in critical career fields, the Military Departments would be allowed (if approved by the Secretary of Defense) “to waive select DOPMA constraints to very quickly build up expertise in a critical career field.”  This authority will enable the services the flexibility to tailor their response to future capability needs within the current system, Carter said.

Carter also identified specific changes to civilian personnel management DoD is pursuing to “make sure our future civilian force is just as great as it is today.”

To improve the department’s ability to hire the “best and brightest” in colleges and universities, the department is requesting authority to directly hire students and recent college graduates into the DoD civilian workforce.  This non-competitive authority would allow candidates to circumvent the current processes and be given a tentative job offer “on-the-spot.”  Carter called this a “game changer” in civilian recruiting.

DoD would also establish a public-private talent exchange program.  Under this program, DoD and innovative private sector companies would temporarily exchange employees for a minimum of three months and a maximum of four years.  Carter said that this program could benefit both DoD and the private sector and will “help DoD stay on the cutting edge, and be more efficient and effective.”

To enhance employee retention, DoD is requesting the authority to provide six weeks of paid parental leave for civilian employees.  Currently, military personnel receive paid parental leave.  Cater said this authority would bring DoD’s parental leave policy for military and civilians in line and would be very effective in retaining experienced civilian employees.

Both the military and civilian personnel management initiatives require congressional approval of new legislative authorities.  Carter said he would continue working with the House and Senate Armed Services committees to complete this work.

These new initiatives are the latest in a series of proposals to reform the rules and regulations on how DoD recruits, develops, and retains personnel for the future.  Previous initiatives, or “Links” as Carter calls them, involved “building and expanding on-ramps and off-ramps for talent flow between DoD and the technology sector” and promoting retention by “expanding maternity and paternity leave, extending childcare hours on bases, and giving families some geographic flexibility;” In addition, Carter said DoD had opened all combat jobs to women, and was working with Congress to make joint duty requirements more flexible.

Senate committee approves FY2017 Coast Guard funding

Thursday, June 2nd, 2016


Last week, the Senate Appropriations Committee (SAC) approved FY2017 appropriations for the Coast Guard, which are included in the FY2017 Department of Homeland Security appropriations bill.  The SAC approved the FY2017 Homeland Security Appropriations bill 30-0.

The SAC approved $8.7 billion in discretionary appropriations (to be appropriated by Congress) for the Coast Guard, $129 million more than the budget request. The bill also identifies $1.7 billion in Coast Guard mandatory spending for retired pay. The SAC bill includes in the base Coast Guard budget $162 million for Overseas Contingency Operations (OCO).

Operating expenses totaling $7.1 billion are funded in the bill, $153 million higher than the request. The bill fully funds a 1.6 percent military pay raise, requested by the president.  Coast Guard OCO operations costs ($162 million) that were requested in the Navy budget are provided directly to the Coast Guard budget.

The bill would increase the FY2017 request for acquisition, construction, and improvements by $120 million to $1.257 billion.  The SAC would fund $95 million for long-lead time materials for the 10th National Security Cutter (NSC) and an additional $30 million for Structural Enhancement Dry-dock Availability for work on two NSCs.  An additional $85 million will allow for the purchase of two more (total six) Fast Response Cutter (FRC) hulls.  With $1 billion included in the SAC-approved FY2017 Department of Defense Appropriations bill, $133 million is cut from the president’s Coast Guard request for Polar Icebreaker Recapitalization Project, leaving about $18 million for management and support costs.  Another $15 million in the bill would provide In-Service vessel sustainment.  The bill would also add $22 million to the request for shore-side and waterfront planning for future operations in Kodiak.

The SAC would double the Coast Guard research, development, test, and evaluation (RDT&E) request to $36.8 million.  The bill would add $18 million to test the use of ultra-long endurance Unmanned Aircraft System (UAS) for intelligence, surveillance, and reconnaissance (ISR) in source and transit zones.

FY2017 DoD Appropriations bill cleared by Senate panel

Tuesday, May 31st, 2016


Last week, the Senate Appropriations Committee (SAC) approved the FY2017 Department of Defense Appropriations bill by a vote of 30-0.

SAC Chairman Sen. Thad Cochran (R-MS) said the bill “has broad bipartisan support” and “sustains a strong U.S. force structure, and it makes significant investments in readiness, shipbuilding programs, aircraft procurement, and missile defense.”

The SAC bill would provide $515.9 billion for the DoD base budget (excluding military construction), almost $2 billion less than the request, and $58.6 billion for Overseas Contingency Operations (OCO), the same amount as requested.  The House Appropriations Committee (HAC) approved its version of the bill last month.

Unlike the HAC bill the SAC funded OCO for the entire year (rather than through April 2017) and did not use OCO funding for base budget requirements.  The HAC bill used $15.7 billion in OCO for unrequested base requirements. To provide additional funding for committee priorities and unfunded needs identified by the military services, the SAC made over 450 specific cuts totaling $15.1 billion.

The SAC bill would fund a 1.6 percent military pay raise as proposed by the president and recommended by the  Senate Armed Services Committee (SASC).  The HAC bill would fund a 2.1 percent military pay raise as authorized in the House-passed FY2017 Defense Authorization bill.

The SAC would fund the Defense Health Program (DHP) at $34 billion (and includes over $900 million more for defense medical research.

The bill includes funds to buy 10 ships: two Virginia class submarines; three DDG-51 destroyers; three Littoral Combat ships (LCS); an LHA amphibious assault ship; and a Polar Icebreaker.  The committee noted that the last U.S. icebreaker was funded in the FY1990 DoD Appropriation bill.  The Obama administration has planned to start icebreaker production ion 2020, according to the committee   But the SAC bill includes $1 billion in FY2017 for the first ship in the Polar Icebreaker Recapitalization Project due to “the strategic importance of polar operations to the nation’s future security.” 

The SAC bill would make significant increases to the administration’s request for aircraft, including:  12 F-18’s; four F-35’s (including two vertical take-off F-35s for the Marine Corps); 15 Blackhawk and 28 Lakota helicopters for the Army; two Air Force C-130J’s; and two Marine Corps MV-22 helicopters.

The committee would also add $454 million to the request for Israeli missile defense programs, for a total of $601 million.

No announcement was made regarding the timing of full Senate consideration of the FY2017 DoD Appropriations bill.

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.

Nonprofit Website Design Custom Web Design