Defense Budget

DOD strategy review paints bleak outlook

dollar question

In a July 31 press briefing discussing findings of a recent comprehensive strategy review, Defense Secretary Chuck Hagel underscored the tough choices Pentagon decision-makers face amid cuts that could reach nearly $1 trillion.

Hagel, accompanied by Joint Chiefs Vice Chairman Adm. James Winnefeld, said that the sweeping strategic choices and management review he directed earlier this year examined three central scenarios, and that all of them fell short of savings targets.

"To help DOD balance strategic ends, ways and means under these budget scenarios, the Strategic Choices and Management Review scrutinized every aspect of DOD's budget, including: contingency planning, business practices, force structure, pay and benefits, acquisition practices, and modernization portfolios," Hagel said. "Everything was on the table."

The three different scenarios include President Barack Obama's fiscal 2014 budget, which "backloads" $150 billion in defense cuts over a 10-year period; Budget Control Act sequester cap figures, which cuts $52 billion in fiscal 2014 and $500 billion over the next 10 years; and an "in-between" scenario, in which defense spending is reduced by $250 billion over 10 years.

The review was designed to help Pentagon leadership prepare for the possibility of continued sequestration cuts into 2014, as well as to inform out-year budget planning for the services and set the stage for the upcoming Quadrennial Defense Review. Hagel stressed that the review is not a blueprint but an evaluation that produced the three different options.

One area of focus is reducing DOD's overhead costs, which take up as much as half the Pentagon budget. Hagel said some options should be implemented immediately, regardless of the fate of sequestration.

The focus on overhead and management efficiencies includes measures such as reducing personnel at major military headquarters by 20 percent, starting with the Office of the Secretary of Defense, the Joint Staff, combatant commands and defense agencies. The measures would also consolidate functions in OSD and in intelligence analysis and production,  saving up to $40 billion over the next decade.

To help overcome hurdles in executing the cuts, Hagel said he has directed Deputy Defense Secretary Ash Carter to find an expert from outside DOD to help direct implementation.

Force structure and modernization stand to take significant hits in all three scenarios;  the cuts would "bend" and could possibly "break" national security strategy, the officials noted.

"Given that reality, the review examined two strategic approaches to reducing force structure and modernization that will inform planning for sequester-level cuts," Hagel said. "The basic trade-off is between capacity – measured in the number of Army brigades, Navy ships, Air Force squadrons and Marine battalions – and capability – our ability to modernize weapons systems to maintain our military’s technological edge."

Trading capacity for capability would result in a more technologically dominant military, but one that is smaller and able to perform fewer missions. Opting for size over capability would sustain power projection and presence, but would seriously slow or curtail modernization programs and cripple cyber development, Hagel said.

"Cuts on this scale would, in effect, be a decade-long modernization holiday," he said. "The military could find its equipment and weapons systems – many of which are already near the end of their service lives – less effective against more technologically advanced adversaries. We also have to consider how massive cuts to procurement and research and development funding would impact the viability of America's private sector industrial base."

And even if DOD combined all the different options, it leaves the Pentagon well short of the targeted reduction levels under sequestration, Hagel and Winnefeld noted. They also warned that it will be even worse if Congress does not cooperate with proposed cuts – any proposal to freeze military pay, for example, could be expected to meet stiff resistance on the Hill.

"The reality is that cuts to overhead, compensation and forces generate savings slowly. With dramatic reductions in each area, we do reach sequester-level savings – but only towards the end of a 10-year timeframe. Every scenario the review examined showed shortfalls in the early years of $30-35 billion," Hagel said. "These shortfalls will be even larger if Congress is unwilling to enact changes to compensation or adopt other management reforms and infrastructure cuts we proposed in our fiscal year 2014 budget. Opposition to these proposals must be engaged and overcome, or we will be forced to take even more draconian steps in the future."

About the Author

Amber Corrin is a former staff writer for FCW and Defense Systems.

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