“I think that if we tried harder, we couldn’t have made this budget more complicated….Abbott and Costello couldn’t have done it better.” Christine Fox, Acting Deputy Defense Secretary (Defense News)
Even judging by the Department of Defense’s (DoD) long legacy of confusing budgets, the most recent version is setting new standards for head scratching.
For one thing, there is more than one budget. There’s the:
- Overseas Contingency Operations (OCO, which is a way of funding wars without using the base Defense budget)
- Opportunity, Growth, and Security Initiative, which is “…basically a $26.4 billion stand-alone fund designed to evade the budget cap set to avoid the caps in the Bipartisan Budget Act” (Breaking Defense)
- Something called the “Unfunded Requirements Lists”
Furthermore, the “regular” defense budget is a hybrid of sequestration-mandated and non- sequestration funding. The DoD is sending out contradictory signals about how additional funding will affect which program. If sequestration cuts can be avoided, does that mean the Army drawdown will be canceled? Depending whom you ask, that is a definite yes and a definite no.
As Sen. Carl Levin, Chairman of the Senate Armed Services Committee, diplomatically observed, “I think there’s a disconnect between the public comments and the budget documents, and I’ll leave it at that.” (Defense News)
In addition to the multiple-budget mess, there’s the time-honored tactic of claiming cuts, when what’s really being decreased is the rate of proposed increase. There is also “bean-ism,” in which I count your beans twice and only half of mine, and then complain that you have more. The latter tactic led to false headlines that the Army was shrinking to pre-Word-War II levels. Even if all proposed personnel cuts are implemented (not a sure thing) then “…the Army of 2014 will have 170,977 more people than the Army of 1940.” (The Atlantic)
Three conversations
As I tried to make sense out of chaos that is the Defense budget, I kept thinking about three separate conversations that I have had. Collectively, they reveal a great deal about the current status of the Defense industry.
The first conversation took place several decades ago with a pioneer in the computer industry. His company had been targeted by activists as a “war-profiteer.” The company responded to these accusations by repeatedly and publicly proclaiming that only 10% of their products were used for military purposes. My acquaintance said this was bull; when non-contract, off-the-shelf buys were added, the figure was closer to 25%.
“More importantly,” he said, “these were the sales you could count on.” Even though Defense buys were always a small part of their market, the reliability and stability of those sales were critical to the company’s growth. Not through quantity, but through dependable and predictable sales, did the DoD build the computer industry.
That predictability has been lost. The consumer market, not Defense spending, now drives technology.
While businessmen worry about predictable profits, DoD worries about industry’s ability to sustain a robust supply chain, when no one can state with certainty what is needed to be supplied. Recently, I talked with a former procurement officer who longed for the simplicity of the Cold War.
“Our conventional forces were planning, equipping, and training to slug it out with the Soviets at the Fulda Gap and the plains of Europe,” he said. “Armor heavy, three days, tactical nukes, game over.”
These days, he has absolutely no idea about how the DoD should prioritize and manage resources.
The third conversation happened two years ago, when I found myself talking with a small group of retired Special Forces personnel and intelligence operatives. Even though they no longer worked for the government, it was clear that they maintained lines of communication that kept them well informed. They were idly speculating about the America’s Next Big War, and South Africa was a favored candidate.
I was shocked. I knew that the US military was involved in Libya, Kenya, and the Horn of Africa, but South Africa?
“South Africa is wealthy,” I protested. “They have gold and diamonds, not to mention an extremely strong military tradition. What in blazes do they need our help for?”
“The whole world needs our help,” answered one man. The others nodded in agreement.
“He who defends everything defends nothing”
The last conversation reveals the root of our problems. Every military in history has to ask three questions:
- What kind of war must we be prepared to fight?
- What do we need to fight it?
- How much will this cost us?
It seems to me that politicians will not answer these questions, and the DoD will not force them to. From the comments about the Quadrennial Defense Review (Acting Deputy Defense Secretary Christine Fox says “… it had been crafted not with strategy first in mind but rather with the budget defining it,”) it almost appears as if the military is abandoning strategy in favor of political gamesmanship.
I am not blaming the DoD for playing politics; they have to do that. However, at some point in time, we collectively as a military, as a country, and as an industry, will have to confront one simple truth: the US simply cannot prepare to fight every kind of war everywhere in the world.
In my opinion, this lack of direction coming from the civilian leadership is far more serious than the usual criticism of politicians padding the Defense budget with unwanted and unnecessary projects. For one thing, congressmen are not the only ones guilty of wasting money. Individuals in the DoD and the business community also push programs that further their own self-interest, but have no strategic value.
One could argue that the “Pacific tilt” is an example of civilian leadership providing direction. However, we do not need a Defense budget six times bigger than China’s, just to contain China.
When the way is not clear, hidden opportunities abound
With all this budget confusion, the DoD will be reluctant to commit to any one direction or product. Prototyping will become more important, as does making frequent changes in the development process.
Keep in mind, that there is still a lot of money in the DoD 2015 budget for product development. Not counting all the supplemental budgets, over $65 billion is requested for Research, Test, Development, and Evaluation. However, as long as the DoD remains uncertain about its priorities, vendors will need to be extremely flexible.
At AMREL, we plan to leverage the changes in the procurement environment. Our easily modified computers are the ideal prototyping platforms. Our core capabilities include low NRE, and low volume orders, which can provide hands-on models for every step of the development process.
Yes, the old days are gone, but we firmly believe that are still plenty of opportunities. As R.E.M says, “It’s The End Of The World As We Know It (And I Feel Fine).”
For his invaluable help, many thanks to Rob Culver, AMREL’s Director of Business Development – DoD Programs. He can be reached at (603) 325 3376 or robertc@amrel.com.
