DoD acquisition programs remain alive, but sequestration damage is real

Friday - 10/25/2013, 3:46am EDT

Jared Serbu reports.

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The military services' top acquisition officials told Congress this week that sequestration dealt a blow to virtually every modernization program in the Defense Department during fiscal 2013, and that the impacts will get progressively worse the longer Washington stays in short-term crisis budgeting mode.

Each of the military services say they managed to avoid outright cancellation of any major acquisition programs in 2013, but only through a lot of harried restructuring of programs. They also were helped by a combination of unspent 2012 money and reprogramming of funds from Congress.

In 2014, the services say they won't have the luxury of unobligated prior year dollars, and it remains to be seen how much flexibility Congress will give them to move money between accounts in the absence of a spending plan for the fiscal year.

"I would say that every program was impacted, and we were able to absorb some of the impact," said Sean Stackley, the assistant secretary of the Navy for research, development and acquisition, during a House Armed Services Committee hearing Wednesday. "But frankly, the Department of the Navy had to push a significant amount of that impact into the out years. So the impact is still staring at us across the board in those same programs. Did we cancel any? No. Our priority was to not cancel, which would create more harm over and above what the sequestration caused."

Space Fence one example

Across the military's acquisition programs during 2013, officials cut back on the quantities of items they planned to buy, pushing up unit costs, and delayed the development of new capabilities into future years.

And if programs continue to be delayed, history shows they'll soon be canceled, said Dr. William LaPlante, the Air Force's principal deputy assistant secretary for acquisition.

"The way it works is, the step to cancellation is delay, and that's already started," he said. "Space Fence, the major Air Force program for space situational awareness, has been put on hold, OK? That doesn't mean the program's been canceled, but contractors were told to stop work on that program about Sept. 15."

The Air Force had the Space Fence program ready to go, LaPlante said, and assuming it starts up again, delaying it by just one year will increase its cost by at least $70 million.

Also, as long as the government keeps operating under a continuing resolution, the military is barred from starting new programs. The Navy, for example, can't award contracts for any new ships — since the current bill funding the government is a copy of 2013's sequestered spending plan, the Navy only has authority to buy the exact same ships it bought last year.

Under the Budget Control Act, sequestration in 2014 would reduce DoD's overall budget by 10 percent from the levels it's been planning for. But since President Barack Obama has used his authority under the same law to wall off military pay accounts from the cuts, the rest of the military's accounts will take a larger hit. For acquisition, that would mean a 14 percent reduction in 2014.

Heidi Shyu, the assistant secretary of the Army for acquisition, logistics and technology, said with personnel spending off the table, the areas of the DoD budget that will pay the bills will be primarily modernization and military readiness.

"We don't have any more buffer room left," she said. "We're going to defer maintenance on 172 of our aircrafts, more than 900 of our vehicles, over 2,000 of our weapons systems, over 10,000 pieces of communication equipment. This is going to have a rippling effect in terms of fielding to our units. Our contractors who are looking for stability of their workforce and of the contracts that they have can no longer plan for it. They continuously ask me what I anticipate the budget is going to be so they can plan for their workforce, and it is very difficult to give them any numbers. The other rippling effect it has created for us is an enormous amount of additional work for our internal government folks to plan for what-if contingencies. We go through multiple iterations of planning that's very, very disruptive."

Furloughs delay programs too

During 2013, some programs suffered directly from the workforce impacts of sequestration. Even in cases where the military services managed to reallocate enough money to keep contracts intact, the programs were still thrown off because the civilian workforce that was supposed to help execute them was on mandatory unpaid vacation this past summer.