Short-term Continuing Resolutions (CRs) for FY2011 are causing inefficiencies in DoD operations and contracting, according to Robert Hale, Under Secretary of Defense (Comptroller/Chief Financial Officer).  Testifying at a Senate defense subcommittee hearing on DoD efficiencies in the FY2012 budget, Hale said “we are talking a lot about efficiencies, but unfortunately, in FY2011 we are moving in the opposite direction.”  He said DoD is directing contracting officers to go to short-term contracts to maintain capabilities and has placed hundreds of military construction contracts on hold.  Hale said he is concerned that when the FY2011 funding issue is finally resolved, DoD’s undermanned and under experienced acquisition workforce will have “a hard time catching up.”

Hale, testifying with the military service Under Secretaries/chief management officers (Joseph Westphal, Army; Robert Work, Navy; and Erin Conaton, Air Force), described the DoD cost cutting and efficiencies included in the FY2012-2016 budget plan.  He said that $178 billion in savings are included in the plan:  $100 billion will be reinvested to increase combat capability and $78 billion in DoD-wide savings will be used to reduce the DoD budget plan. 

Of the $78 billion in budget reductions, Hale said $68 billion will come from overhead savings, improved business practices, reduced personnel casts, and revised economic assumptions.  He highlighted changes to health care programs, such as increased pharmacy co-pays and modest increases in TRICARE enrollment fees, a civilian workforce freeze (except for some relief for the acquisition workforce), reductions to contractor support, reductions and downgrades in general/flag officer and civilian Senior Executive positions, and organizational closings (Joint Forces Command and the Business Transformation Agency) and consolidations.  The remaining $10 billion will come from restructuring the F-35 (Joint Strike Fighter) program ($4 billion) and Army and Marine Corps end strength decreases beginning in FY2015 ($6 billion).

Hale said the $100 billion in reallocated savings includes $28 billion to pay for higher than expected operating costs for depot maintenance, base support, and flying hours and other training costs.  The budget plan calls for the military services to reinvest $70 billion of the savings in high priority military capabilities and the Special Operations Command to reinvest $2 billion.  The Army plans to reinvest $29.5 billion to modernize its tanks and fighting and wheeled vehicles, accelerate fielding of its new tactical communications network, buy more reconnaissance aircraft, and begin to develop a new vertical unmanned reconnaissance aircraft.  The Navy budget reinvests $35.1 billion to buy more of the latest F-18s and extend the service life of some existing F-18s, repair and refurbish Marine Corps equipment, develop a new sea-borne unmanned strike and surveillance aircraft, and buy more ships.  The Air Force pans to reinvest $33.3 billion to buy more REAPER UAVs, increase the buy of the Evolved Expendable Launch Vehicle (EELV), modernize F-15 radars, and develop a new long-range, nuclear-capable penetrating bomber.

Subcommittee Chair Sen. Claire McCaskill (D-MO) said she understood and supported DoD’s efforts to extract efficiency savings from the budget, but questioned reallocating those savings to new unplanned spending.  She asked the witnesses why Congress should approve spending funds saved through efficiencies on programs that were not originally planned for the FY2012 budget.  The witnesses agreed that that the projects to be funded by reinvesting savings were not in the budget they prepared before the efficiencies savings were identified.  However, they said that these programs are service priorities and most would likely have been put in the budget had the funds been available. 

McCaskill’s comments reflect the pressure the defense committees will be under to find additional savings during the FY2012 budget congressional budget review.  There are indications that the committees may target some of these reallocated funds to meet lower defense funding targets that are sure to be set in the congressional budget resolution.