Hagel plans budget in trying times

DOD needs flexibility and budget certainty to address acquisition, personnel, and overhead costs in smart ways, but is going to have to do its best without them.

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Defense Secretary Chuck Hagel said April 3 that defense officials must be "steely-eyed and clear-headed" as they challenge long-held assumptions about departmental operations in light of budget pressures. Principally, he said people and purchasing have driven up the costs for DOD, but sequestration has stolen away, for one, flexibility to address the problems.

Hagel, in addition to detailing his planned review and the growing importance of cybersecurity efforts, stressed that acquisition would be a key part of DOD efforts to adjust to the new budget realities.  (Read the speech transcript.)

"It is already clear to me that any serious effort to reform and reshape our defense enterprise must confront the principal drivers of growth in the department's base budget namely acquisitions, personnel costs, and overhead," he said during a speech at the National Defense University in Washington, DC.

"To address acquisition, personnel, and overhead costs in smart ways that have not been done before, we need time, flexibility, and the support and partnership of Congress," he said. "We also need long-term budget certainty."

At the minimum, lawmakers have not given defense officials that certainty or flexibility. DOD and other agencies are in the midst of sequestration that Hagel said limits any wiggle room for reassessing DOD. In addition, Congress has forced departments to survive under continuing resolutions for many years because they have failed to pass appropriations bills.

Regarding procurement, Hagel said the defense acquisition system needs responsiveness and quick moves.

"We need to continually move forward with designing an acquisition system that responds more efficiently, effectively and quickly to the needs of troops and commanders in the field," he said. He went into few details beyond that though.

In November 2012, Frank Kendall, undersecretary of defense for acquisition, technology and logistics, laid out 36 goals for DOD to address in the coming years as the Better Buying Power Initiative. He launched the Better Buying Power 2.0, an offshoot of the 2010 initiative. Kendall's primary aspect of this iteration is professionalizing the workforce. As with its predecessor, the main emphasis of Better Buying Power 2.0 is to find savings.

Hagel has his worries nonetheless.

"I'm concerned that despite pruning many major procurement programs over the past four years, the military's modernization strategy still depends on systems that are vastly more expensive and technologically risky than what was promised or budgeted for," he said.

The Government Accountability Office pointed to a few improvements. In the last five years, defense officials conducted more preliminary design reviews on their programs' systems before they started developing them. It provided a more solid foundation to avoid cost overruns and schedule problems, according to a report released March 28. The prototypes can avoid problematic cost overruns later in the program when a prototype proves the system will work as intended.

However, sequestration remains Hagel's chief enemy.

"The sequester cut, because it falls heavily on operations and modernization accounts, is already having a disruptive and potentially damaging impact on the readiness of the force," he said.

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