Wednesday, January 28, 2015

25 issues in coming Dept. of Defense budget fight and likely outcomes

On Feb. 2, the Pentagon will submit its fiscal 2016 budget request to Congress. Defense News reporters teamed up with budget analytics firm VisualDoD to highlight the most important issues to watch.
Issue: Return of the caps
Context: The Ryan-Murray budget agreement kept 2014 and 2015 funding fairly stable. But without a new deal, DoD's 2016 budget will revert to the 2011 Budget Control Act sequestration caps. The question is: how will DoD prepare?
Possibilities: Be on the lookout for proposed force structure changes, discrete personnel reductions, major program delays or deferments, and plus-ups in specific areas in anticipation of multi-year sequestration.
Issue: Living without OCO
Context: As the overseas contingency operations (OCO) budgets shrink, recent attempts to fund base requirements out of OCO will be increasingly difficult to pull off, even as the growth of operations and maintenance (O&M) and personnel costs puts pressure on investment.
Possibilities: Look at the percentage of the procurement, research and development, personnel and O&M. Are there changes in composition by service or account? What are the possible changes in the composition of R&D by budget activity and/or defense technology area? How will OCO be used?
Issue: New program starts
Context: In the 2014 budget request, DoD added about 60 new budget lines. The 2015 version added around 100 lines back into the budget. Based on comparisons with previously anticipated new starts (the budget documents identify about 30 future procurement programs), most expected programs were funded, but some at reduced levels and some not at all.
Possibilities: New funding lines might reflect a particular focus. How well will they track with new starts anticipated in the 2015 budget? Look for whether future procurements in the 2016 budget show a shift in some plans to the right. Also watch for patterns or emphasis in the types of programs funded.
Issue: UAV funds
Context: The last fighter pilot has not been born yet and the services have tried to pare back UAV spending in recent years. The Navy has taken some heat for a relatively unambitious set of requirements for the Unmanned Carrier-Launched Airborne Surveillance and Strike (UCLASS) program. Will that continue – or will cost and personnel pressures push the services to expand existing UAV programs or shift to the next generation of tactical combat-capable drones?
Possibilities: Look for changes in the mix of types or numbers of proposed UAV procurements and R&D. That includes the fate of the Global Hawk and the mission for the UCLASS. Will other unmanned underwater and ground programs receive increased focus?
Issue: Cyber, IT spending
Context: Rapid growth in cyber spending has been a market mantra. The coming "IT New Entrants" has been talked about relentlessly.
Possibilities: Look for major increases or decreases, overall or internal shifts (by line item, service or title) into discrete cyber/IT lines. Are there clear purchasing priorities in technology or delivery terms, such as buying equipment or services? Do non-traditional DoD players gain share by virtue of evolving DoD requirements?
Issue: Classified spending
Context: According to VisualDoD analysis, DoD classified spending has steadily grown as a percentage of the DoD budget, from about 5 percent in 2001 to a steady state around 10 percent projected in 2019. Classified budgets contain the seeds of future technological leaps. However, they also represent long-term, high-overhead contracts that are generally tilted toward entrenched players instead of newcomers.
Possibilities: Watch the absolute classified amounts by service and title and budget authority, along with growth as a percentage of overall spending.
Issue: Tactical aviation changes
Context: Delays and cost overruns in the F-35 Joint Strike Fighter program have fueled a debate about the affordability of 5th- versus 4th-generation fighter aircraft. Debate remains vigorous about the F-35's suitability for various missions, such as close-air support and air dominance.
Possibilities: DoD might hedge fighter inventories with further 4th-generation buys, following Congress' inclusion of EA-18G advance procurement. Will increasing plans for F-35 buys stay on track or get hindered by recent technological issues? Will A-10s be put on the chopping block again only to be revived late in the year?
Issue: Missile defense
Context: Despite general technical progress, missile defense investments remain politically contentious. How will missile defense budgets – particularly for ground-based missile defense – fare versus previous congressional priorities?
Possibilities: DoD could incorporate congressional changes from 2015 or propose new initiatives. Ground-based plans could be affected by the overall budget environment.
Issue: Long Range Strike-Bomber
Context: Little is known about the bomber, largely a black program. The Air Force intends to procure 80 to 100 bombers at a price of $550 million each.
Possibilities: Will we see more budget details revealed in the "white" portion of the budget this year? And if so, will it be enough to give confidence that the program is protected as the Navy ramps up the Ohio-class replacement program?
Issue: KC-46A Tanker
Context: After a brutal fight in the latter half of the 2000s between Boeing and Northrop, the Air Force finally selected the KC-46A design for its next-generation tanker. The first flight of a full-up tanker model is expected in the spring.
Possibilities: There have been technical delays, and Boeing's margin is shrinking. Costs on the program are going to be very closely monitored by Congress.
Issue: A-10 Warthog
Context: A venerable plane best known for its 30mm cannon, the A-10 is beloved by troops on the ground for its ability to get in close during firefights. However, the service spend most of last year trying to retire the plane in the face of Congressional opposition.
Possibilities: The Air Force is expected to move to retire the plane once again this year. But with Congress keeping it afloat, that simply may not happen.
Issue: Global Hawk and U-2
Context: The U-2 spy plane and the Global Hawk high-altitude unmanned system have been at odds for the last several budget cycles. After years of the Air Force trying to end work on Global Hawk in favor of the U-2, the service flipped last year; Congress has allowed neither plane to be retired.
Possibilities: Does the Air Force stick with its plan to retire the U-2, or does it flip again and support the manned plane? Or does it try and find money enough for both in the budget?
Issue: Navy Department's topline
Context: The department's 2016 budget request was scheduled a year ago to rise to nearly $159.5 billion, or $11.5 more than the $148 billion asked for in 2015.
Possibilities: That $159.5 billion figure could change.
Issue: Navy shipbuilding and aircraft plans
Context: These always see some year-to-year tweaking, but the service is expected to stick to last year's 2016 plans: two submarines, two destroyers, and three littoral combat ships.
Possibilities: Congress provided money in 2015 to buy about half another LPD amphibious transport dock – a ship the Navy did not request – and the remainder could be included in the 2016 request. Year-to-year aircraft procurement figures are likely to be altered to some degree, but no major changes are expected.
Issue: Aircraft carrier George Washington
Context: The 2015 budget envisioned canceling the carrier's nuclear refueling overhaul and inactivating an air wing, but Congress vehemently denied the requests, instead directing the Navy to refuel the carrier and keep the planes.
Possibilities: The restored funding is likely to appear in several areas, including ship overhauls and aircraft requests. Procurement in 2016 of MH-60R multimission helicopters from Sikorsky, for example, was canceled, blamed on the air wing being dissolved, so look to see whether those aircraft have been restored.
Issue: Navy weapons procurement
Context: These accounts also took a big hit in 2015, when the Navy dramatically reduced buys in favor of supporting the ship and aircraft accounts. Congress took note, however, and restored some of the weapons funding.
Possibilities: Look to see whether the Navy again reduces its requests – possibly figuring Congress will add them back in – or asks for the weapons straight up.
Issue: Navy five-year plan
Context: The new future years defense plan (FYDP) now extends to 2020, and several new programs could begin to appear – chief among them the LX(R) amphibious ship replacement program. Research and development funding for the Ohio-class replacement program also is expected to have an increasing effect on the budget, as construction funding for first ship is expected to be included in 2021.
Issue: Army and Marine force structure vs. vehicles
Context: Despite budget turbulence, the Army and Marine Corps have pledged their commitment to the Joint Light Tactical Vehicle (JLTV) program, with buys of 49,000 and 5,500 respectively.
Possibilities: Congress could opt to compare the JLTV requirements and proposed Army and Marine force structure cuts to determine if JLTV requirements have decreased proportionally.
Issue: Army active-reserve force structure and aviation
Context: Shrinking budgets and continued mobilization of reserve troops have fueled debates over a greater role for reserve units, which are cheaper, replacing active units, which respond quicker to crises. Meanwhile, the Army – to reach sequestration funding levels – wants to move attack helicopters from the reserve to the active component to replace retiring armed reconnaissance helicopters and send utility helicopters to the reserve.
Possibilities: What budget language will be included in relation to force mix? How will the budget requests for aviation programs have changed?
Issue: Congress and cyberspace
Context: Some argue the military lacks what it needs to fight and win in cyberspace, and that it should be given jurisdiction domestically or new authorities to lure cyber talent from the private sector.
Possibilities: Will Congress provide DoD with new authorities to aid its acquisition of cyber talent? Will it create ways for Cyber Command teams to legally coordinate with civilian agencies during peacetime? Could it create an entirely new service dedicated to cyber?
Issue: Congress and sequestration
Context: Unless Congress acts this year, tens of billions will be cut from all non-exempt accounts within the budgets of the Defense Department and other national security agencies next year.
Possibilities: A few weeks into the new congressional session, only members of the House and Senate Armed Services committees are even talking about sequestration. The next move resides with the leaders of the House and Senate Budget committees, who will craft a 2016 budget resolution that could raise spending caps.
Issue: GOP priorities
Context: No one doubts Rep. Mac Thornberry, R-Texas, and Sen. John McCain, R-Ariz., the chairs of the Armed Services committees, and their allies want to increase defense spending. But what about House and Senate leaders?
Possibilities: Just a few weeks ahead of the next Pentagon budget request, House Speaker John Boehner, R-Ohio, and Senate Majority Leader Mitch McConnell, R-Ky., are talking about a list of issues. But not defense spending. GOP sources say the leaders care more about deficit reduction than increasing defense spending.
Issue: Congressional powers
Context: There was much shock and debate last year when the congressional defense panels blocked just about every major budget-cutting plan the Pentagon and White House proposed.
Possibilities: Expect a sequel. Thornberry last week delivered a meaty defense of the legislative branch's constitutional powers, arguing the country's founders wanted Congress to judge the executive branch's plans – and, oftentimes, change them.
Issue: Regular order
Context: Due to partisan squabbling over amendments and process in the Senate, annual defense spending bills haven't exactly sailed to passage before the start of recent fiscal years.
Possibilities: McConnell says that squabbling will end under his leadership. But Democrats already are complaining about his handling of their amendments on the Keystone XL Pipeline bill. These disputes have escalated quickly and taken down other bills before.

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