House passes FY2015 DoD Appropriations bill

Monday, June 23rd, 2014


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. 

DoD issues annual acquisition performance report

Friday, June 20th, 2014


The Department of Defense (DoD) last week released the annual performance review of the DoD acquisition system.

Initiated last year, this year’s report “provides a review of the efficiency of incentives in improving costs and performance as well as updating earlier analyses with more recent data,” according to a press release issued at the pentagon.

The report provides includes background material on acquisition budgets and trends, analyzes performance outcomes by commodity type, military department, and by prime contractor, and discusses insights and lessons learned.

The review focuses on incentive techniques (contract types, profits, fees, etc.) used by organizations in the acquisition process. It placed special attention on how effective the incentive techniques are in controlling costs, schedules, and technical performance.

Frank Kendall, Under Secretary of Defense for Acquisition, Technology, and Logistics, noted in the report that analysis is showing that not all the incentives being used work. For example, the report concludes that contractual incentives are effective only if “they are significant, stable, and predictable and they are tied to our [acquisition] objectives.”

The report notes that the use of either Cost-plus or Fixed-price contracts is not clear cut when evaluating their effectiveness. Not all cost type contracts effectively control costs. And, while fixed-price contracts can effectively control costs, evidence shows that they should not be considered the “magic bullet” that solves all acquisition problems.

It is not the type of contract that necessarily controls costs the report concludes. Rather, incentives that link profit to performance, control price, and share costs savings are the best determinants of the effectiveness of controlling costs. The findings from this analysis may lead to a wider variety of contract type, Kendall said.

Kendall called uncertainty about defense budgets the primary obstacle to improving the efficiency of the defense acquisition process. He said that sequestration is the main driver of this uncertainty.

He also cited declining budget levels as having limited the number of opportunities to achieve more effective competition. But, he said many opportunities still remain especially in the area of improving tradecraft by the acquisition workforce in acquiring services. He said DoD has done much to educate and train the acquisition workforce to be creative and think critically. Current analysis is looking beyond that however, seeking to determine correlations between workforce factors—technical background, certifications, and experience—to program outcomes..

Kendall said much progress has been made to improve DoD’s acquisition process, but much work remains. He cautioned that “defense acquisition is complicated and varying and there are no simple ‘schoolhouse’ solutions that should be mandated.” The performance report and its findings provide “fresh insights into what generally works in what circumstances, and why,’ he stressed.

ASMC/Grant Thornton 2014 Survey

Monday, June 16th, 2014


The ASMC Annual Survey on issues facing the defense financial management community is now available here.

We need your input!  Your opinions in response to the survey questions will be absolutely anonymous.

ASMC, in partnership with Grant Thornton LLP, is conducting our annual online survey of defense financial managers.  This survey will take only a few minutes of your time to complete and asks respondents about issues facing the financial management community, such as budget/cost management, audit readiness, and workforce development.

Within each of our chapter size categories (A1, A, B, and C) the ASMC chapter that achieves the highest percentage response rate to this survey will receive a $200 cash award.

These awards will be based on the number of responses received per chapter divided by the total paid membership of a chapter as of May 31, 2014.

You must access the survey not later than June 30, 2014!  Please be sure to enter your chapter’s name when you fill out the survey. Aggregated results of this survey will be published and made available on the ASMC website.

House committee approves FY2015 Coast Guard appropriations

Monday, June 16th, 2014


Last week, the House Appropriations Committee (HAC) approved FY2015 appropriations for the Coast Guard. Coast Guard appropriations are included in the Department of Homeland Security appropriations bill.

The HAC approved $8.5 billion in FY2015 discretionary appropriations (to be appropriated by Congress) for the Coast Guard, $316 million more than the budget request. The bill also identifies $1.6 billion in Coast Guard mandatory spending, including retired pay.

Operating expenses totaling $6.8 billion are funded in the bill, about $120 million higher than the request.  The 1 percent pay raise requested for Coast Guard military personnel would be fully funded in the bill. Funding would be increased to reduce depot maintenance backlogs (+$73 million), to restore operations hours (+$15 million), and for surge counterdrug surge operations. Additional funding is included to prevent the proposed decommissioning of two High Endurance Cutters. The HAC would also restore funding for cuts to special pays (+$7.5 million).

The bill would increase the request for acquisition, construction, and improvements by $203 million to $1.3 billion.  Funding would be increased to buy two additional Fast Response Cutters (+$95 million), to replace one HH-60 helicopter (+$12 million), and to buy one missionized Long Range Surveillance Aircraft (+$95 million).

The bill would cut a net $10 million for unjustified cost growth in the NSC-8 program, $10 million for schedule delays to the Offshore Patrol Cutter, and $6 million due to excess carryover funding in the polar icebreaker program.

The HAC report expressed the committee’s concern that the Coast Guard did not submit a Capital Improvement Plan (CIP) with the FY2015 budget request as required. As a result of what the Committee called the “Coast Guard’s repeated noncompliance with the requirement in annual appropriations acts,” the HAC bill would withhold $150 million from Coast Guard Headquarters offices funding until the CIP is submitted.

Senate confirms Mike McCord for DoD Comptroller post

Friday, June 13th, 2014


Yesterday, the Senate confirmed Mike McCord to be the next DoD Under Secretary of Defense (Comptroller) and Chief Financial Officer.

McCord succeeds Bob Hale (DoD Comptroller since 2009) who has served three Secretaries of Defense—Bob Gates, Leon Panetta, and Chuck Hagel—during his tenure.

McCord brings almost 30 years of experience in defense budgetary matters to the job of Comptroller. He has been Principal Deputy Under Secretary of Defense (Comptroller) since 2009. Prior to that, he served as a professional staff member of the Senate Armed Services Committee (SASC) for 21 years. His areas of expertise on the SASC were installations and global basing matters, readiness accounts, and defense budget matters.

During his confirmation hearing, SASC chairman Sen. Carl Levin said of McCord, “many of us remember his great expertise, his work ethic, his commitment. And they qualify him well for this job.”

He also was a budget analyst on defense and veterans issues for the House Budget Committee. At the Budget Committee he specialized in military personnel programs, including personnel strength levels, pay and benefits costs, and military retirement.

McCord began his career as a military personnel analyst for the Congressional Budget Office, specializing in military personnel issues.

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