[House Hearing, 113 Congress]
[From the U.S. Government Printing Office]
[H.A.S.C. No. 113-12]
IMPACTS OF A CONTINUING RESOLUTION
AND SEQUESTRATION ON ACQUISITION,
PROGRAMMING, AND THE INDUSTRIAL BASE
__________
HEARING
BEFORE THE
SUBCOMMITTEE ON TACTICAL AIR AND LAND FORCES
OF THE
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
FEBRUARY 28, 2013
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SUBCOMMITTEE ON TACTICAL AIR AND LAND FORCES
MICHAEL R. TURNER, Ohio, Chairman
FRANK A. LoBIONDO, New Jersey LORETTA SANCHEZ, California
JOHN FLEMING, Louisiana MIKE McINTYRE, North Carolina
CHRISTOPHER P. GIBSON, New York JIM COOPER, Tennessee
JON RUNYAN, New Jersey JOHN GARAMENDI, California
MARTHA ROBY, Alabama RON BARBER, Arizona
PAUL COOK, California DANIEL B. MAFFEI, New York
JIM BRIDENSTINE, Oklahoma JOAQUIN CASTRO, Texas
BRAD R. WENSTRUP, Ohio TAMMY DUCKWORTH, Illinois
JACKIE WALORSKI, Indiana WILLIAM L. ENYART, Illinois
MAC THORNBERRY, Texas PETE P. GALLEGO, Texas
WALTER B. JONES, North Carolina MARC A. VEASEY, Texas
ROB BISHOP, Utah
John Wason, Professional Staff Member
Doug Bush, Professional Staff Member
Julie Herbert, Staff Assistant
C O N T E N T S
----------
CHRONOLOGICAL LIST OF HEARINGS
2013
Page
Hearing:
Thursday, February 28, 2013, Impacts of a Continuing Resolution
and Sequestration on Acquisition, Programming, and the
Industrial Base................................................ 1
Appendix:
Thursday, February 28, 2013...................................... 35
----------
THURSDAY, FEBRUARY 28, 2013
IMPACTS OF A CONTINUING RESOLUTION AND SEQUESTRATION ON ACQUISITION,
PROGRAMMING, AND THE INDUSTRIAL BASE
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
Sanchez, Hon. Loretta, a Representative from California, Ranking
Member, Subcommittee on Tactical Air and Land Forces........... 3
Turner, Hon. Michael R., a Representative from Ohio, Chairman,
Subcommittee on Tactical Air and Land Forces................... 1
WITNESSES
Davis, Lt Gen Charles R., USAF, Military Deputy, Office of the
Assistant Secretary of the Air Force for Acquisition, U.S. Air
Force; and Lt Gen Michael R. Moeller, USAF, Deputy Chief of
Staff for Strategic Plans and Programs, U.S. Air Force......... 10
Shyu, Hon. Heidi, Assistant Secretary of the Army for
Acquisition, Logistics and Technology, U.S. Department of the
Army; and LTG James O. Barclay III, USA, Deputy Chief of Staff,
G-8, U.S. Army................................................. 5
Stackley, Hon. Sean J., Assistant Secretary of the Navy
(Research, Development & Acquisition (RDA)), U.S. Department of
the Navy; VADM Allen G. Myers, USN, Deputy Chief of Naval
Operations, Integration of Capabilities and Resources (N8),
U.S. Navy; and LtGen John E. Wissler, USMC, Deputy Commandant
for Programs and Resources, U.S. Marine Corps.................. 7
APPENDIX
Prepared Statements:
Davis, Lt Gen Charles R., joint with Lt Gen Michael R.
Moeller.................................................... 68
Shyu, Hon. Heidi, joint with LTG James O. Barclay III........ 42
Stackley, Hon. Sean J., joint with VADM Allen G. Myers and
LtGen John E. Wissler...................................... 53
Turner, Hon. Michael R....................................... 39
Documents Submitted for the Record:
Follow-up Written Testimony of LTG James O. Barclay III...... 85
Witness Responses to Questions Asked During the Hearing:
Ms. Sanchez.................................................. 93
Questions Submitted by Members Post Hearing:
Mr. Maffei................................................... 109
Mr. Turner................................................... 97
IMPACTS OF A CONTINUING RESOLUTION AND SEQUESTRATION ON ACQUISITION,
PROGRAMMING, AND THE INDUSTRIAL BASE
----------
House of Representatives,
Committee on Armed Services,
Subcommittee on Tactical Air and Land Forces,
Washington, DC, Thursday, February 28, 2013.
The subcommittee met, pursuant to call, at 9:08 a.m., in
room 2118, Rayburn House Office Building, Hon. Michael R.
Turner (chairman of the subcommittee) presiding.
OPENING STATEMENT OF HON. MICHAEL R. TURNER, A REPRESENTATIVE
FROM OHIO, CHAIRMAN, SUBCOMMITTEE ON TACTICAL AIR AND LAND
FORCES
Mr. Turner. Good morning. We will call to order the hearing
of the Tactical Air and Land Forces Subcommittee.
The Tactical Air and Land Forces Subcommittee meets today
in open session to receive testimony on the impacts of
sequestration and the continuing resolution, CR, its impacts on
acquisition, programming, and the industrial base.
Before I continue with my opening statement, I want to
pause for a moment just to say I voted against this mess. And I
voted against this mess because I thought we would be right
here, right where we are, with this clock ticking, 14 hours and
15 minutes until sequestration hits in what I believe will be
devastating impacts upon our national security and our
Department of Defense.
Now, it is noted that there is a pause button there, and I
truly believe that the President of the United States is the
only one who can hit that pause button. We need him to come to
the table with a workable plan. And we certainly are hopeful
that once sequestration does hit and the effects that we hear
today, that a responsible plan will be brought forward in order
to set this off.
I noted that in talking to some of the witnesses before we
opened, that they thought that perhaps this clock was their
opening statement clock, but they don't get 14 hours for their
opening statement.
But I think this demonstrates the fact that it is imminent;
it is upon us. Today, the panel that we have that will be
speaking will be the last word on sequestration before we are
in the post-implementation of sequestration, before we begin to
see its effects. And that is why this committee continues its
efforts on oversight and our detailed examination of the
harmful impacts of the continuing resolution on sequestration,
on the military's ability to protect national security
interests of our Nation.
We have already heard very candid testimony from the
military service chiefs during the full committee hearing on
February 13th, on how these forced budget cuts will be
devastating to military training and force readiness.
General Dempsey, chairman of the Joint Chiefs of Staff,
stated, ``We built a strategy last year that we said we can
execute and absorb $487 billion. I can't sit here today and
guarantee you that if you take another $175 [billion] that that
strategy remains solvent. . . . What do you want your military
to do? If you want it to be doing what it is doing today, then
we can't give you another dollar.''
Today, we plan to leverage the information gained from that
hearing and provide our members with the opportunity to gain a
better understanding of how the CR and sequestration would
impact defense acquisition, programs, projects and activities,
and their associated industrial bases across the country.
One of the most tragic aspects of our current situation is
that sequestration was never supposed to happen, and there were
numerous opportunities to avoid it.
By laying out the details of the impacts of sequestration,
the Department of Defense could have helped us in our education
campaign to avoid the catastrophic cuts we are now facing.
On the eve of sequester, it is my hope that this hearing
will aid to provide greater clarity concerning the details and
levels of risk that will be associated with the arbitrary cuts
mandated by sequestration on all major defense acquisition
programs, including how these severe reductions will impact
local communities, small businesses and ultimately the
military's ability of meeting the national military strategy.
These details will help to illustrate the depths of these
impacts and help us make our case to Congress and the Nation.
And I want to underscore what I just said. The Department
of Defense has been very slow to provide information, both to
Congress and to the Nation, as to what the impacts of these
cuts will be. Because of that, it has stunted the debate and
the conversation about how to avoid them, because many of the
actual details of their effects could not be evaluated and
known.
Ironically, the sequestration conversation has been seated
in a context of savings and fiscal austerity. However, it seems
apparent that allowing these cuts to take place would,
ultimately, cost our country more than it saves, while
simultaneously costing jobs.
Second- and third-tier vendors, mostly small businesses,
will be affected if these cuts are enacted, many of which are
referred to as ``single points of failure vendors,'' meaning
only one company is qualified to provide a particular part. And
once that capability is lost, it will take significant capital
and time to regain that capability. This, in turn, will put
people out of work and dramatically drive up cost.
We need to be assured that the Department and the military
services are conducting the appropriate level of analysis to
assist the impact of sequester on our industrial base. For
example, the Army indicates that every procurement program
would be affected. Quantities would be reduced by 10 to 15
percent, and that these mandated sequester reductions affect
more than 1,000 companies in more than 40 States.
For the Army alone, over 3,000 vendors will be affected.
The Army has stated the total economic impact would be
approximately $15.4 billion, the Marine Corps, $2.4 billion,
the Navy is over $20 billion. I witness the devastating effects
of these reactions each time that I return home.
My community, in southwest Ohio, includes Wright-Patterson
Air Force Base, the home of the Air Force Materiel Command and
the Air Force Research Laboratory. Recent information provided
by the Air Force has indicated that over 14,000 civilian
employees at the base face potential furloughs.
The base provides cutting-edge research and development, as
well as real-time intelligence, surveillance, and
reconnaissance that enhances the lethality and survivability of
our warfighters who are in harm's way. Every State is going to
be impacted by sequestration.
As I stated before, I voted against this. And I think,
certainly, our discussion today will be incredibly important as
we try to learn the information that will give us the ability
to advocate for these cuts to be set aside.
I would like to welcome our distinguished panel of
witnesses. Representing the Army today, we have Ms. Heidi Shyu,
Assistant Secretary of the Army for Acquisition, Logistics and
Technology. We have Lieutenant General James Barclay III,
Deputy Chief of Staff, G-8.
Representing the Navy and Marine Corps, we have Mr. Sean J.
Stackley, Assistant Secretary of the Navy, Research,
Development and Acquisition, RDA. We have Vice Admiral Allen G.
Myers, Deputy Chief of Naval Operations, Integration of
Capabilities and Resources; Lieutenant General John E. Wissler,
Deputy Commandant for Programs and Resources.
And then representing the Air Force, we have Lieutenant
General Michael R. Moeller, Deputy Chief of Staff for Strategic
Plans and Programs; Lieutenant General Charles R. Davis,
Military Deputy, Office of the Assistant Secretary of the Air
Force for Acquisition.
We thank each of you for being here. We appreciate that you
will, on the House side, be the last word on the effects of
sequestration before we are actually implementing
sequestration.
And it is my pleasure to introduce my good friend, and
bipartisan colleague, Ms. Sanchez.
[The prepared statement of Mr. Turner can be found in the
Appendix on page 39.]
STATEMENT OF HON. LORETTA SANCHEZ, A REPRESENTATIVE FROM
CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON TACTICAL AIR AND
LAND FORCES
Ms. Sanchez. Thank you, Mr. Chairman. And as always, it is
a pleasure to serve with you on this subcommittee. And to the
young lady and the gentlemen before us, thank you for being
here to discuss the effects of sequestration, especially on our
second- and third-tier suppliers, and the need to have the type
of tactical equipment, in particular, that is required to train
up our troops and to keep our troops out in the field. So I
appreciate that.
Obviously, we have had many hearings on sequestration in
the Congress. And the fact that we are, you know, less than a
day away from the trigger of sequestration coming about is--I
don't think that this hearing, quite frankly, is going to have
an impact on what starts tomorrow. I am glad that recently the
President said that this will be a continuing, ongoing sort of
situation, once it starts in place, because it really signals
to the fact, I hope to the American public, that this isn't a
fiscal cliff. This is a concern. And the Congress really needs
to get back to the table and do its job.
I think it is a little frustrating--I think it is a little
frustrating for my colleagues on this committee, myself, too,
to really want to sit down at the table in a very bipartisan
manner and figure out where some of these cuts need to be made.
The fact that we have sequestration is really because many of
us in the Congress have not been either asked to be at the
table, or the people at the table who want to be at the table,
who can really help to make some of these cuts, not just in
defense, but in all areas of the budget, much, for example, in
a sense, to what the Simpson-Bowles report told us 2 years ago.
Americans want Washington to tighten their belt. And to do
that, we need to find waste. We need to find programs that
don't work. We need to, maybe, make decisions between several
different types of programs and decide which one will we invest
in for the future, and which one do we just not have the
resources to do that.
And I think the people in front of us have--so many of you,
I mean, although you all look young--believe me--decades of
acquisition and procurement and, you know, really understanding
how the military is one of those operating pieces of the
Government that works well.
So, for me, it is a shame when we see sequestration coming,
whether the program is good or not, whether it has been working
well or whether people have been under budget, whether they
have been ahead of time, and say, ``well, we just need to cut
10 percent from that.''
And those programs, you know, we all look around, and
whatever job we have, and we see, you know, some waste or some
inefficiencies, and then those programs will be able to say,
``You know, this program is not working. This is the piece that
we have to eliminate from here.''
Quite frankly, that is our job. That is Congress' job. It
is not the President's job. One person cannot sit there and
have an eyeball to everything, to every first-, and second-,
and third-tier situation that is going on.
So I hope that you will give us information so that we can
work together, if the leadership gives us that ability, from
both sides and from both Houses, to sit down and really get
this done in the right way.
I am more worried, quite frankly, about what comes about on
March 27th. That is the appropriations process. Now, I have
been here 17 years. When I first came to the Congress, we
actually got several appropriation bills passed and put
through. Maybe not all--at that time, I think it was 13; maybe
now it is 12. Maybe not all of them, but certainly defense bill
was one of those that we were able to put through as an
appropriations process.
And you know, especially in the last couple of years, we
have seen the CR process, over and over and over again, tied to
politics of who will win the election and maybe we will get a
better chance, and one side will get more of what they want,
and the other side will get less or what have you.
But, you know, now we are just at a 2-month, 4-month, 6-
month, end-of-the-year CR and the American public doesn't, in a
lot of ways, understand what that means. But it basically is a
lurch and a start, a lurch and a start, a stop and a start,
sort of a process for all, not just the military, but for all
our departments at the Federal level.
So, March 27th comes along, and what type of a CR extension
will we have? Or will we not have one? I mean, I have a lot of
my colleagues saying, you know, that they are willing to see
the Government shut down. I don't want to see that happen,
because I understand what the impact is to production line. I
understand what the impact is. I understand the nervousness of
our troops and our families about what that means.
And it is not just for the military, but it is our Federal
workers. I happen to be one of those people that believe that
the majority of our Federal workers go to work every day
wanting to do a good job for Americans. And they have already
not had raises in the last 3 or 4 years. Now they are looking
at maybe up to 20 percent of what, effectively, is a pay cut
for them and for their families. And, believe me, most of them
make a lot less than what you and I make, Mr. Chairman.
So, I hope this hearing will really paint a picture for us
of what the CR process also will do with respect to our
readiness, our ability to do what is one of the number one
things our Government should do, which is to keep Americans
safe and be ready to be out there and do this.
So, I look forward to this hearing, Mr. Chairman. And thank
you.
Mr. Turner. Thank you, Ms. Sanchez.
Turning first then to each of our panelists. Secretary
Shyu, we will begin with you.
STATEMENTS OF HON. HEIDI SHYU, ASSISTANT SECRETARY OF THE ARMY
FOR ACQUISITION, LOGISTICS AND TECHNOLOGY, U.S. DEPARTMENT OF
THE ARMY, AND LTG JAMES O. BARCLAY III, USA, DEPUTY CHIEF OF
STAFF, G-8, U.S. ARMY
Secretary Shyu. Thank you, very much.
Chairman Turner, Ranking Member Sanchez, and members of the
subcommittee, thank you for the opportunity to testify before
you today.
Mr. Turner. Ma'am, would you please move the microphone
closer?
Secretary Shyu. Okay, how about now? Okay, so I will start
over. Chairman Turner, Ranking Member Sanchez, and members of
the subcommittee, thank you for the opportunity to testify
before you today on the impact of sequestration and a
continuing resolution and its effects to the Army acquisition
programs, as well as the industrial base.
I will ask that my statement be entered into the record. I
would like to take this opportunity to highlight some key
points. The reality is that the sequestration provision in the
Budget Control Act would cause sharp reductions in soldier
equipment investment.
Every single piece of soldier equipment under development
or in production will be affected in the implementation of
sequestration in some manner. All of our carefully planned
timelines for delivering new capability to soldiers will be
necessarily delayed. Costs to the Army, over the long term,
will likely increase. The impact will be felt long after this
fiscal year.
As we consider the impacts of these budgetary decisions
today, the Army's equipment needs are significant. We are
conducting combat operations in Afghanistan today. Equipment
use over the past decade must be reset, while deferred
modernization is now in need of attention and investment.
We must also continue to prepare for the uncertain and
emerging threats of the future, which holds an increasingly
complex and less predictable environment.
The fiscal impacts to Army acquisitioning and equipment
modernization programs are attributable to the estimated $12
billion reduction to the Army's budget during the remaining
months of the current fiscal year, using the DOD's [Department
of Defense] planning assumptions for sequestration.
This incorporates a $6 billion reduction in Army's
operation and maintenance accounts, representing approximately
51 percent of the total Army's reduction due to sequestration
in fiscal year 2013, a significant reduction of about $3
billion in Army procurement accounts, applied equally across
over 400 Army programs, and almost a billion dollars reduction
in RDT&E [Research, Development, Test & Evaluation] investment
across the Army.
Every Army acquisition program will be affected by these
cuts. Schedules for RDT&E-funded programs will be impacted.
Procurement programs will be reduced across the board by
roughly 9 percent.
The impacts to the industrial base will be significant.
Based on our current assessment, impacts of sequestration and
the CR could result in thousands of jobs lost or not realized,
which affects 40 States and the District of Columbia.
The almost a billion dollars in reduction to RDT&E accounts
may result in the closure of some of the DOD's high-performing
computing centers, impacts on grants and partnerships with
universities and other affiliated research institutions, and
potential loss of critical expertise through indiscriminate
budget cuts.
Moreover, the broad effects of sequestration will
significantly impact the acquisition workforce. Overall, we
anticipate that the funding shortfalls will result in a large
number of contract changes relating to the program quantities
and schedule.
These changes will increase the burden on contracting
workforce. Contracting personnel, program management, and cost
analysts who are charged with the responsibility of getting the
best value for the taxpayer will be potentially subject to a
22-day furlough.
Compounding our difficulties is the effect of a yearlong CR
with sequestration on all programs. These impacts include the
Army being unable to award the multiyear contract for Chinook
[CH-47 heavy-lift helicopter] production; the Army will be
unable to commence Paladin PIM [M109 Paladin Integrated
Management self-propelled howitzer] low-rate initial
production; reduced Apache helicopter [AH-64 attack helicopter]
production quantities in the current fiscal year; and the
inability to procure the new common sensor payload for the Gray
Eagle [MQ-1C unmanned aircraft system], which provides high-
definition intelligence, surveillance, and reconnaissance
capabilities to our warfighters.
In closing, the Army will continue to provide soldiers with
the best equipment available. Their sacrifices deserve no less.
We hope that the impacts discussed today will summon a renewed
dedication to the needs of our force, which has consistently
answered the Nation's call for service throughout its history.
Mr. Chairman, members of the subcommittee, we thank you
again for your steadfast and generous support of the
outstanding men and women of the United States Army, its
civilians and families. And we look forward to your questions.
Thank you.
[The joint prepared statement of Secretary Shyu and General
Barclay can be found in the Appendix on page 42.]
Mr. Turner. Thank you, Secretary Shyu.
Secretary Stackley.
STATEMENTS OF HON. SEAN J. STACKLEY, ASSISTANT SECRETARY OF THE
NAVY (RESEARCH, DEVELOPMENT & ACQUISITION (RDA)), U.S.
DEPARTMENT OF THE NAVY; VADM ALLEN G. MYERS, USN, DEPUTY CHIEF
OF NAVAL OPERATIONS, INTEGRATION OF CAPABILITIES AND RESOURCES
(N8), U.S. NAVY; AND LTGEN JOHN E. WISSLER, USMC, DEPUTY
COMMANDANT FOR PROGRAMS AND RESOURCES, U.S. MARINE CORPS
Secretary Stackley. Chairman Turner, Ranking Member
Sanchez, distinguished members of the subcommittee, it is a
pleasure to appear before you today to address the impacts of
the continuing resolution and sequestration on our Department
of the Navy acquisition, programming, and industrial base.
Joining me today are the Deputy Chief of Naval Operations,
Vice Admiral Myers and the Deputy Commandant, Lieutenant
General Wissler.
And with the permission of the subcommittee, I propose to
provide a brief statement and submit a separate formal
statement for the record.
The Navy-Marine Corps team is this Nation's expeditionary
force in readiness, a balanced air-ground naval force, forward
deployed and forward engaged, performing missions around the
globe, on the ground in Afghanistan; providing maritime
security along the world's vital sea lanes; missile defense in
the Mediterranean, the Sea of Japan; intelligence,
surveillance, and reconnaissance where needed, as needed;
persistent presence at sea, with an embarked Marine force ready
to move ashore.
They are conducting antipiracy patrols, global partnership
stations, humanitarian assistance. And they are quietly,
reliably on patrol, providing strategic deterrence, and all the
while training for the next deployment, the next operation, the
next crisis, the next contingency.
The Department of the Navy's 2013 budget request, as
authorized by this committee, provides the resources needed to
meet this full range of missions and the overarching defense
strategy. It balances the resources required to execute today's
mission against today's threat and the investment required to
execute tomorrow's mission against a future threat.
The Department greatly appreciates the committee's work in
passing the 2013 National Defense Authorization Act. Today,
however, we are here to discuss the unfinished work of the
Congress, as it relates to defense appropriations and the
pending sequestration.
Account by account, program by program, the $170 billion
authorized for Navy and Marine Corps by the Armed Services
Committee is severely undercut by the shortcomings of the
continuing resolution and the across-the-board cuts posed by
sequestration.
Further, authorities for the multiyear procurement of 98
MV-22 aircraft [Osprey medium-lift tilt-rotor aircraft], 10
DDG-51 destroyers [Arleigh Burke class guided missile
destroyers], 10 Virginia class submarines [nuclear-powered
attack submarines] and the near $5 billion worth of savings
these multiyear provides, and authority to start construction
of the next aircraft carrier, John F. Kennedy [Ford class
aircraft carrier USS John F. Kennedy], to start the refueling
complex overhaul of the CVN-72 Abraham Lincoln [Nimitz class
supercarrier USS Abraham Lincoln], these lay idle.
In terms of the dollar impact of the continuing resolution,
now about to enter its sixth month, operations and maintenance
funding authorized by this committee is reduced by about $4
billion for the Department of the Navy.
Procurement and research and development funding authorized
by this committee is reduced by about $5 billion; $5 billion in
new start and multiyear authority lays idle. And with no
ability to reprogram under the continuing resolution, in excess
of $14 billion of the funding authorized by this committee for
2013 falters.
To these constraints we add the impact of the budget
reduction imposed by sequestration, approximately $12.9 billion
across the Navy and Marine Corps. And to these numbers we add
the method by which it is applied, indiscriminately, line by
line, and the timing with which it is applied, halfway through
the year, thus compounding its impact.
And we are left with stark choices. In fact, absent the
ability to realign our reduced funding levels in accordance
with our priorities, these are not so much choices as they are
fait accompli results of a distortion of the budget process
which Congress has otherwise faithfully executed in prior
years.
The first impact hits operations, because we operate
forward and maintain the high state of readiness such
operations demand. Therefore, when the flow of funds for our
operations and maintenance is cut, our operations are cut in
real time.
Thus, the Truman [USS Harry S. Truman supercarrier] Battle
Group deployment, scheduled this past month, has been canceled,
and aviation and ship depot maintenance for the third and
fourth quarters, it is next, affecting as many as 300 aircraft
and over 1,000 engines planned for depot work.
Training is curtailed, and readiness will follow because of
cuts to steaming hours and flight hours and maintenance and
procurement of spare parts, thus impacting next year's
operations and our ability to surge our forces in response to
crises.
Procurement of new weapons systems follows next. Pending
determination of whether there will be sufficient funding to
execute our ship and aircraft and missile and vehicle
contracts, decisions regarding cancellation, reduction, or
delay hang in the balance.
Thus, the Abraham Lincoln aircraft carrier sits pier-side
at Norfolk Naval Base, pending sufficient funding to start her
refueling complex overhaul at Newport News. The John F.
Kennedy, the next aircraft carrier, its build plan is in
disarray.
And on factory floors in Tucson, Arizona; and Huntsville,
Alabama; Tewksbury, Massachusetts; and Morristown in New
Jersey, and Amarillo, Texas; and Philadelphia, Pennsylvania; in
St. Louis, Missouri; Dallas-Fort Worth; Lima, Ohio; Bath,
Maine; Groton, Connecticut; Quonset Point; Bethpage, New York;
St. Augustine, Florida; Palmdale, California; and on and on and
on, the skilled workers at critical defense production
facilities across the country are bracing for the potential
indiscriminate drawdown of our force structure, done in a
fashion that will defeat the combined efforts of the Department
and the Congress to improve the affordability of our weapons
systems, thus irrationally compounding the budget challenges we
face today.
Next, modernization; the development of those advance
capabilities that are critical to ensuring our future military
superiority suffers benign neglect under the compounding
impacts of a continuing resolution subject to sequestration.
In total, no less than 15 combat aircraft and unmanned
systems are at risk, and a bow wave of unfunded requirements
for the balance of the aviation program is yet unresolved.
Three hundred missiles and weapons systems are at risk,
cutting our inventory at a time when we are striving to restore
our weapons to levels called for by the combatant commanders.
Most milestones tied to developing, testing, and fueling
new weapons systems will be delayed. Virtually every Marine
Corps major program is delayed or reduced, from the Joint Light
Tactical Vehicle to ground/air task-oriented radar, to the
Amphibious Combat Vehicle, to the modernization of the current
inventory, which has weathered 10 years of warfare.
Greater than 100,000 jobs will be lost across the country
as a result of these cuts to Navy-Marine Corps operations and
programs, first affecting small business and critical
suppliers, for they are the first to receive orders for many of
our contracts. And, in general, they are the least prepared to
weather the financial storm that is about to hit them.
Meanwhile, about 200,000 dedicated career civil servants
face the prospects of being furloughed in 2013, impacting
current and future operations at every military installation
and on every factory floor responsible for the production of
weapons, parts, and supplies for our forces.
Clearly, these examples do not capture the full magnitude,
and they do not begin to approach the impacts that will result
from subsequent budget-year reductions. Unabated, the
reductions will profoundly affect the size and shape and
readiness of your Navy and Marine Corps, and therefore the
roles and missions which they are able to perform.
The Department and the Armed Services Committee share
common responsibilities to protect the Nation, to take care of
our men and women in uniform, and to protect the taxpayer. The
course we are currently on fails to address these
responsibilities in a deliberate way.
Again, I thank the committee for its work on the 2013
National Defense Authorization Act. Our appeal is that Congress
complete its work on the 2013 budget request with the passage
of an appropriations bill, and that this mechanism for
addressing the Nation's budget impasse, which was devised to be
so unacceptable that it would be averted, sequestration,
somehow be reversed before we are driven to irreversible
actions which impair our collective responsibility to provide
for the Nation's defense.
Thank you.
[The joint prepared statement of Secretary Stackley,
Admiral Myers, and General Wissler can be found in the Appendix
on page 53.]
Mr. Turner. Secretary Stackley, thank you so much for that
very good opening statement, and the great examples of not only
the dangers of sequestration, but also the impacts of you
operating under a CR. I really do appreciate that.
General Davis.
STATEMENTS OF LT GEN CHARLES R. DAVIS, USAF, MILITARY DEPUTY,
OFFICE OF THE ASSISTANT SECRETARY OF THE AIR FORCE FOR
ACQUISITION, U.S. AIR FORCE; AND LT GEN MICHAEL R. MOELLER,
USAF, DEPUTY CHIEF OF STAFF FOR STRATEGIC PLANS AND PROGRAMS,
U.S. AIR FORCE
General Davis. Mr. Chairman, Ms. Ranking Member, thank you
very much. And other committee members, I appreciate this
opportunity.
First of all, you will notice right off the bat that I am
wearing a slightly different uniform than my other Service
counterparts here as the acting assistant secretary of Air
Force for acquisition, kind of filling that role. Actually our
Secretary, Secretary Donnelly, is filling that role.
Because of a variety of issues, notably climates and
challenges within the things that are going on within the
Department and the Air Force, we have not had a confirmed
individual for that position for 4 years. And it has actually
been vacant as an acting for over a year.
So right now, I am speaking on behalf of Secretary Donnelly
that is filling the role in our Service acquisition executives.
So thank you for that.
Joining me is Lieutenant General Mike Moeller, who runs our
plans and programs. He will be able to talk to a lot of the
budget issues.
I am going to talk in a slightly different vein this
morning, as an acquisition professional, an individual that has
spent a lot of time testing, flying airplanes, and then running
major programs in major centers. And I will talk to you a
little about what I see going on within our acquisition
programs at a slightly different level.
I think our Chief and Secretary have given you a lot of
information on the specifics of what is going to happen to our
Service. I will tell you that, as we notice it start to evolve
right off the bat, the first thing that gets hit is our small
business, and then it goes very much to readiness from that
point on.
Our small businesses; we are already seeing that we are
about $170 million behind in obligations of where we were this
time last year, because the first thing that will suffer in
this is the operational accounts. You won't buy computers. You
won't bring that individual on to repair the buildings. You
won't bring that individual on to maintain landscape.
So they start to fall off right off the bat.
And then our Chief and Secretary talked about how very soon
in the May timeframe we start losing the combat readiness
capability of many of our squadrons, which is the core
warfighting unit. And then the acquisition impacts become very
insidious. They do not appear devastating in 2013, but I tell
you that is just the bow wave of what comes in 2014 and 2015,
because everything we do not do, every piece of equipment we do
not plan for in terms of how we acquire and sustain, it becomes
less capable and less clear on how you pursue that path next
year.
So, the one thing I wanted to talk about is the fact that
while all this is going on, obviously the Nation demands that
the United States Air Force provide the air superiority and the
ability of freedom of movement for all of our troops and all of
our joint partners all over the world. And it has been over six
decades since an enemy airplane has shot an American airman,
sailor, soldier, anywhere on the ground.
And so one thing that we worry about is how we are able to
maintain that with an aging fleet. And we will talk about that
as the questions go.
We provide the unblinking eye for global intelligence,
surveillance, and reconnaissance through space and a variety of
other means. And we worry about maintaining that aging
infrastructure in space as time goes on.
We also have to provide global mobility for any of our
joint partners across the world, as well as the wounded ones
coming back from the theater. And that becomes challenged,
notably with new programs we are looking at to replace combat
rescue helicopters.
And then, most importantly, we commit to the Nation that we
will have the ability to strike any target anywhere in the
world within a very short period of time. And we worry about
how we modernize the forces to go do that as we go forward.
And to do those tasks, we ask our acquisition folks and our
programmers and program managers to be able to navigate
probably what is the most complex, chaotic, overregulated,
overseen process in the world to be able to deliver the combat
capability to the Nation. And they do a magnificent job with a
significant amount of American treasure every year to go do
that.
But, as we go through this process, the thing that worries
me most is that challenge has become much greater for these
individuals as they work through that, because there are so
many unknowns. Chairman, as you mentioned, the questions that
hang out there that bother us.
Our acquisition program workforce, they fight through these
innumerable policies and laws every year to try to deliver the
combat capability that I said the Nation demands of the United
States Air Force.
In the process, we as the leadership in the Department and
within the Service demand that they build the most exquisite
planned schedules, the most detailed cost estimates, the most,
if you will, exquisite architectures of systems and the systems
engineering that will deliver them, the technical baselines,
the critical paths, the test plans, everything that will
determine just how the systems that we have to meet the
requirements of the Nation will perform.
And as they come to us now in this environment, the
challenge that we have for all those work force individuals in
the side is we cannot tell them some of the most basic
questions that any type of activity demands. We can't tell them
what was their baseline that they begin their program from. We
can't tell them what the changes will be particularly in
sequestration, and the numbers, and the percentages and the
rules that will imply. We can't tell them where the continuing
resolution will allow them to maybe transfer funds or not based
on how that will evolve.
So they come to us with the most simple questions to be
able to keep these programs intact, and we can't answer them.
So what we are able to tell them is that everything that they
produced, and everything that has been reviewed and on the
books now is basically invalid, and that they have to go back
and try to do all the drills and all the ``what if'' questions
again to be able to restructure those programs to be able to
deliver that capability.
And so when they come back and tell us that their programs
and their schedules are not able to be fully fleshed out to the
demands of the system, we just ask them to do more, and we ask
them to go back, and we ask them to try one more time. And they
do, because that is basically what these people do.
And while we are sending them back to redo these programs
all hours of the days and nights and weekends, to be able to
make sure we are prepared as best we can be to answer the
questions that will come as soon as the actions hit, we tell
them that probably you all have to plan for having 20 percent
of your pay cut in the remaining period of time.
And when we have an acquisition work force of about 34,000
folks, all told, about 24,000 of those are civilians--and I got
to tell you, the one question I get most whenever we sit down
with these civilians and ask them, okay, what are your concerns
about the furlough, the first question I have gotten--and I
have gotten it five times--is, can I work during furlough?
And we have to tell them, no you cannot. It is against the
law. It is illegal. And then when they come back from those
periods, we will have asked the military to kind of fill in the
gaps and work for those individuals that are not there. So the
impacts to our programs, our test centers, our acquisition
centers will be dramatic.
We will tell them, we need you to start the exercise again,
and we can't tell you what 2014 will look like; we can't tell
you what 2015 will look like; right now, we can't tell you what
2013 looks like. But we need that program planned so we can try
to start determining the impacts to the very critical missions
we have to deliver to the Nation from the United States Air
Force. And they go out and do it again, because that is just
what they do.
So, I thank you for your comments that you made at the
beginning. You share very much the concerns I know of our
Secretary, our Chief, and certainly all members of the Air
Force. We would be very honored to be able to answer any more
questions you have related to that.
And I thank you for the support you have given, not only
our collective warriors here, but certainly the United States
Air Force.
Thank you.
[The joint prepared statement of General Davis and General
Moeller can be found in the Appendix on page 68.]
Mr. Turner. Thank you, General.
I appreciate your also underscoring the personal affects
that sequestration is going to have, because that is something
that we have to be very mindful of. As you know, we have held a
full committee hearing on the issue of the effects of
sequestration on readiness, on our men and women in uniform, on
our civilian personnel. And the picture is bleak, and the
stories are absolutely compelling.
Our hearing topic today is acquisition, programming, and
the industrial base. So although we are looking at the issue of
acquisition programming in the industrial base, we are still
very mindful of the personal effects and the effects on our men
and women in uniform, on our national security. As we have all
said in all of our comments, this is certainly something that
we shouldn't be doing to those who serve our Nation, especially
those who serve our Nation in a way to keep us safe.
General Davis, you were talking about small business, and I
am going to turn my question to that.
Secretary Shyu and Secretary Stackley, you also referenced
the effects on small business. We know that large contractors
are certainly going to be affected, but the number of vendors
that are going to be affected, those down the chain, small
businesses, will be critically affected.
And the way that we know that they will be critically
affected is because they have less resources. They have less
ability to shift the affects of this onto other assets. And so
that puts them in a situation that they may actually fail.
And one of the things that I know that you are aware of, as
I mentioned in my opening statement, is single-point failure
vendors, and that is their failure can be our failure, where we
currently look to in either a system or a program or a project
the vendors that are down the line and those that have unique
capability, are uniquely qualified, and that their solvency,
their ability to continue to operate can affect overall the
program.
We have a concern because obviously that goes to the issue
of our being able to critically maintain those programs, but
also as we are trying to maintain domestic production, and the
threat that some of these operations, some of these critical
aspects of our industrial base may feel even further pressure
to go overseas, or for outsourcing.
I am going to ask each of you if you similarly share that
concern. And if you do, if you have an example, or if you are
aware of either a small business or a single-point failure
vendor or a program that is subject to perhaps single-point
failure as a result of vendor vulnerability, we would greatly
appreciate that.
And before I begin asking you to answer this, and beginning
with Secretary Shyu, I want to tell you, for all the generals
and the admiral who did not give opening statements, at the end
of this hearing, I will, as I traditionally did in the
Strategic Forces Subcommittee, ask each of the panel members if
they have anything that they would like to add to the record at
the end.
So each of you will be able to make any additional
statement that you would like at the end of this. I also will
have the record open for an additional 5 days, if after you do
leave this hearing, if you would like to submit in writing any
additional comments or thoughts that you have that you would
like to be included in this record. Please feel free to avail
yourself of that also.
But I wanted to give you advance warning before I called on
you at the end.
So on the question of single-point vendors and the effect
on small business, we will begin with Secretary Shyu.
Secretary Shyu. Thank you very much for the question. This
is an area that we have significant concerns. As you well know,
due to the instability of the financial budget, it is very
difficult for the primes even to do the planning, much less
telling them the impacts to their immediate suppliers, the
second tier, or the third tier, or the fourth tier on down.
And that is the biggest concern that we all have across the
board. We look at our industrial base impacts continuously,
okay? We look at not just on the production side. We look at
the design aspect. We also look at component suppliers as well.
So, my fear is due to the instability of the current budget
environment, it is very, very difficult to tell these companies
that is multiple layers down, that provides a niche capability,
how long they can survive the downturn because we don't have
clear visibility in terms of the gap.
So, that is my biggest concern, sir.
Mr. Turner. General Barclay, any comment?
General Barclay. No, sir.
Mr. Turner. Secretary Stackley.
Secretary Stackley. Yes, sir. Let me throw some numbers
your way to try to characterize this a bit. Something north of
greater than 20 percent of the Department of the Navy's
procurement and service contracting goes directly to small
business. And of the balance that goes to larger defense
contractors, another 20-plus percent goes to small business.
So in total, small business is our base in terms of our
spending, either direct or indirect through the defense
contractors. They bring a cost structure and agility, a degree
of innovation that is critical to development on the front end,
and also response to emerging requirements on the back end. So
they are core to the way we do our business.
And then let me offer you now some more specific examples.
I am just going to quickly tick through some of these. First,
the Department of the Navy is extremely unique in terms of some
of our platforms, specifically nuclear submarines, and nuclear
aircraft carriers. We build them at very low rates and no one
else does. So the components that are assembled into the
construction of these critical platforms, much of that
industrial base is small business, almost a cottage industry
that builds small numbers of critical items.
We have to work that small business base directly to ensure
its long-term viability, its health and welfare come all of the
ebb and flow of the budget cycle. So we maintain a very hands-
on relationship with that particular small business.
Let me shift over to the aviation side. A specific example,
there is one small business manufacturer in the country that is
responsible for the forging, the hobbing and machining of most
of the rotor heads for all of our rotary programs, one small
business manufacturer, a single point of failure. And in fact
he is struggling at this particular time.
So we are working closely with our aviation prime
contractors to ensure that we work with their critical vendor
as we work through the uncertainty of our programs during this
period of time.
On the R&D [Research and Development] side of the house, we
have a small business contractor who has brought forward a
concept for going beyond what we refer to as ``open systems
architecture,'' in terms of automated test and retest.
Extremely innovative, our large defense contractors are turning
to this one source to figure out how to break down some of the
technical barriers in our test programs to drive costs out.
That small business contractor, his cash flow is hurting as a
result of the current sequestration-CR uncertainty.
Further examples abound, but we are working directly with
the small businesses, through roundtables around the country,
as well as through our defense contractors, to identify the
single points of failure and what we need to do near term, long
term to ensure they are not inadvertently taken down by the
current delays and potential cancellations in our contracting.
Mr. Turner. Admiral, General, any comments?
General Davis.
General Davis. Sir, just a couple of points. I will
highlight that probably just under 40 percent of our Air Force
TOA [Total Obligation Authority] falls in the O&M [operations
and maintenance] regime, and that is going to be the first
thing that will start to drop off here very quickly. That is
where our biggest challenges are. And that is where most of the
contracts go to small businesses.
So anything across our bases and installations where just
the most routine services generally are all set aside for small
businesses. So out of roughly $44 million of O&M, a very large
chunk of that goes to small businesses to do maintenance on
buildings; to do military construction, which we have virtually
no money for, to be able to run the services that operate most
of these installations.
So anything related to any of our O&M accounts, which are
certainly going to be the ones to suffer first, will feel the
biggest extent of that.
As I mentioned in the opening statement, we know right now
we are $170 million behind where we were in small business
obligations compared to this point last year, simply because
they have started pulling back the obligations on O&M because
they know what is coming, to be able to just keep our fighter
squadrons flying at a certain level.
Second part of it kind of goes to what Secretary Stackley
was mentioning. For us, it really starts with the old mantra,
``for want of a nail, the shoe is lost, the horse is lost, the
war is lost.'' Our small businesses, the ones I have had
experience with over time, and the ones that we continually
have pop up that surprise us when they have a problem--because
it does not take long for a small business to get in trouble
real quickly.
We have small businesses that basically are responsible for
doing things like building the fuses for most of our weapons.
And it is the most challenging thing. It is the most
underappreciated thing, but it is the one thing that will cause
the reliability of our weapons to fail instantly.
We have had some very good success stories and we continue
to bring these people on. We had a small individual in
California once that manufactured surfboards. He competed and
successfully won, and builds a very key component now as a
bigger business for our joint air-to-surface standoff missile,
JASSM [Joint-Air-to-Surface Standoff Missile], which is a key
component of Global Strike.
We currently have a woman-owned disadvantaged small
business that builds the target drones for our training across
the Gulf and across the Pacific. And it is these weapons, these
missiles, these drones that provide our crews the ability to
employ like in wartime.
So, as you can see, they are not necessarily the leading
edge on our weapons, but they are things we cannot execute if
they are not there. And unfortunately, those would be the first
ones to start fall off, because we will give up on training. We
will give up on those areas first to be able to preserve the
basic readiness we need for the AOR [Areas of Responsibility]
and things like that. So we will see the fall-off in the small
businesses to take hold. And as I mentioned, we are already
seeing that to begin.
So really for us, the capability of the Air Force hinges
on, in many cases, that nail that we don't have for the shoe.
Then we have to wait a year later to figure out just how bad a
shape we are in to try to go reconstruct part of that industry
we don't have.
Mr. Turner. I turn to my ranking member, Ms. Sanchez.
Ms. Sanchez. Thank you, Mr. Chairman.
Secretary Stackley, I actually would love for you to send
over a report that shows that 40 percent of Navy acquisition
goes to small business, because I have this discussion quite a
bit, with all respect to our Services, with Nydia Velazquez,
our ranking member on Small Business. And she feels, over time,
and I have felt over time when I actually see the numbers, that
we have really not ever met our goals probably in any of the
Services with respect to where we want a piece of the action
going to small business.
So, I would appreciate in detail any report you have that
shows me that about 40 percent goes toward small business.
Secretary Stackley. Yes, ma'am.
[The information referred to can be found in the Appendix
on page 93.]
Ms. Sanchez. That is another subject, but just because you
mentioned it, I would love to see that.
Secretary Stackley. Can I clarify here?
Ms. Sanchez. I heard 20-20, but----
Secretary Stackley. Right. Yes, ma'am.
Ms. Sanchez. Okay. So, let me sort of place this in context
because, you know, one of the things that the President has
been doing is to go around the country and to talk about what
sequestration might look like. So let me go down the line,
because you have all been associated with the military in one
way or another for quite a while, and ask you, to each of you,
and I just would like a yes or no answer to this: waste, fraud,
standing around, have you ever seen it in the workplace?
Secretary, have you ever seen any waste or fraud or
standing around or not correctly used resources that the
taxpayers put towards the military? Have you ever seen that?
Secretary Shyu. Yes, ma'am, there is.
Ms. Sanchez. Yes.
General Barclay. Yes, ma'am.
Ms. Sanchez. Yes, of course.
Secretary Stackley. Yes, ma'am.
Ms. Sanchez. Yes.
Admiral Myers. Yes, ma'am.
General Davis. Yes, ma'am.
General Moeller. Yes, ma'am.
Ms. Sanchez. Okay. You know, when taxpayers sit here and
get angry about things, they are paying taxes and they are not
being able to make ends meet or their lifestyle is changing or
their quality of life is changing on them. So, you know, they
believe that there is waste, fraud, abuse and other things
going on. And in any workplace, you see things where efficiency
isn't at 100 percent for whatever reason.
Here in the Beltway, we have the Pentagon, the largest
office building in the world. Now, we have Pentagon, which some
people are calling the ``Pentagon South,'' another huge office
building just south of that, that is going to be filled up with
more Pentagon contractors and everything to it, so we are
definitely growing all of this.
You know, I had a very close person to me who was in the
military--I won't say what Service--who said at the end of the
month, when they had jet fuel left over, they would go out and
burn it down, because they were afraid they wouldn't get the
same allocation the next month.
I have had people tell me--believe me, I sit on planes and
people recognize who I am, a lot of armed forces people. And
they tell me, you know, September comes around--October 1st is
the first date, September comes around, and last month of the
fiscal budget for the Federal Government, and I have got the
``vultures''--that is what one of them called it--``vultures
coming to my door telling me I have got to spend down the funds
at the end of the month. I need new computers; I need new
things, even though,'' he said, ``I just got new computers this
year. And here I am basically signing away contracts or getting
things or requisitions or whatever, and I am getting more stuff
in.''
By the way, this is usually at the lieutenant colonel level
or the major level where I get these, you know, ``If you would
just let me cut the budget, Congresswoman, I would know how to
do it, at least in my area of the Pentagon.''
I say all of this because this is the context on which we
are trying to fight for what we need versus what sometimes the
taxpayer out there thinks is really going on.
So I think when I look at all of you that you have been in
this long enough to understand, you know, we need to figure out
how we get some of this under control. So maybe for, you know,
into the record, but not directly today, you can give us some
suggestions of how we get this more in line so that the
American taxpayer feels confident when we are telling them we
have efficiencies, we are effective, even when we have the type
of cost overruns that they hear about in the newspaper or on
the television.
[The information referred to can be found in the Appendix
on page 94.]
Ms. Sanchez. My question--I am sorry, but I wanted to sort
of give you an indication of where the taxpayer is coming from.
And that is why it is hard, politically, for us not to cut.
Because they do believe there are those inefficiencies, those
abuses, et cetera.
So let's go to an area; Mr. Turner and I will be making a
trip to see the F-35 [Lightning II Joint Strike Fighter]. And I
have just been talking to some of our European allies about
their acquisition of the F-35. And you know, I have been a
strong proponent to do one production airplane that can be used
across the Services, that will, in the long run, we hope, bring
down the operation and maintenance and training cost for that
production plane. But we have had a lot of problems with it.
And, specifically, recently, we have had the problem of the
helmet design, for example. Jitter of images, night vision,
acuity shortfalls; you know, there is a whole bunch of stuff
behind that. So, I understand that we are trying to fix those
problems so that we can make the plane work well.
Can anybody tell me what sequestration or the CR will do
with respect to us trying to get that back on schedule and in
line so that we can provide a top plane for our Services that
is going to do what we think it should do?
Secretary Stackley. Let me start, ma'am.
With specific regard to the Joint Strike Fighter, the 2013
budget request includes about $2.6 billion for continued
research and development and another $6.5 billion for
procurement of aircraft parts, procurement in support of
training, et cetera, et cetera.
The specific question and issue that you raised with regard
to helmet-mounted display system, that is one of many ongoing
developments associated with that critical capability. When we
look at continuing resolution, and we look at sequestration, in
terms of that critical program, our top priority is to keep
development on track. We have about $5 billion remaining in the
FYDP [Future Years Defense Program] in terms of development
funding to complete the remaining development, correction of
technical deficiencies that have been identified thus far,
testing and evaluation for the program.
If we don't keep the development on track, the whole
program goes off track. So that is our top priority. The team
that is in place is keeping focused on resolving those
technical issues and executing the test program that has been
laid out to date. And we will continue to work with Congress to
weather CR, sequestration.
Ms. Sanchez. Do you believe that either the sequestration
or the CR will affect that development and that team keeping
on?
Secretary Stackley. The answer is yes, if we do not have
any flexibility to be able to be able to move money to address
the priorities within the program. So, for example, the $2.6
billion associated with research and development, the 9 percent
across-the-board cut associated with sequestration, is going to
remove about $250 million. That is in 2013. Sequestration goes
against unobligated balances. So, in fact, there is another
couple of hundred million dollars across the program that is
affected by sequestration.
What we have got to do is manage cash flow, manage critical
path, and, hopefully, gain some flexibility to be able to
realign funding to go after those priorities, so that the
development schedule doesn't delay, doesn't protract, doesn't
extend and push ultimate fielding of that aircraft to the
right.
Ms. Sanchez. And my last little piece to that, if you went
the way of an alternate helmet design, would you have the
flexibility as things sit now, if the CR just continued as it
was? Or because of sequestration, would you have the
flexibility to move to an alternate helmet design?
Secretary Stackley. Okay, first I want to be clear. The
progress on the helmet-mounted display system is good. We see
those issues as, basically, being retired in due time. However,
when they first emerged, we did set up an alternative path to
have an exit ramp from the HMDS [helmet-mounted display system]
to a more traditional legacy type of capability. And we are
keeping that on track for a downstream decision.
In the face of sequestration and CR, that would be at risk.
If we do not, as I was describing earlier, have the ability to
move funding to priorities, then we would be staring at, we
have got two efforts, but one capability inside of this
critical program. If the helmet-mounted display system looks
like it is going green, then we would end up dropping the
alternative parallel development.
Ms. Sanchez. Thank you, Mr. Chairman. I have other
questions, but I will put them in for the record.
Mr. Turner. Mr. Bishop.
Mr. Bishop. Thank you, Mr. Chairman.
I suppose, General Davis, this would be addressed to you,
or unless you want to defer to one of your colleagues here on
the panel.
I would like to ask a question about nuclear modernization,
even though I have a hard time saying that word,
``modernization''--no, ``nuclear.'' I just would like to like
to ask for the impact of maybe the Air Force or the Navy--the
impact of sequestration on modernization efforts? Or is there
simply, in the base, a lack of funding that constricts those
modernization efforts in the first place?
General Davis. Sir, I will start, then I will let General
Moeller kind of come. We just, as of 2 days ago, completed a
major review down at Air Force Global Strike Command of all
their programs, their acquisition programs and their issues.
Mr. Bishop. Mm-hmm.
General Davis. And so, there are two issues here, as you
mentioned. We have significant modernization that we have to
undertake now to be able to replace key items in our inventory
that will reach a service life. And that has to start now.
We have three or four major programs we are trying to begin
right now that have some uncertainty as we look at what the
budgets will be. We need to replace the gravity-drop B61
[nuclear bomb]. We need to replace the air launch cruise
missile. We are working very hard to replace the aging 60-plus-
year-old B-52 [Stratofortress strategic bomber] with a new
bomber that is in our program right now.
And that is just the air-breathing side. If you bring in
the complexities of the systems that have to go on that, such
as nuclear command and control, that, in some cases, is on a
single thread type of capability right now, we have major other
programs that need to be started within Global Strike Command,
which we do not have the ability to do so.
And then if you work through the missile side of it, our
fuses are aging out and other issues that we have to deal with.
So, right now, I will tell you, within the budget there is
not the capability within our current constraints to be able to
do all of those programs. So there is very much the debate
going on about where we begin, where we invest, and which ones
we take on next.
Mr. Bishop. Maybe before General Moeller starts, I can try
and narrow the focus a little bit. I do have some concern, at
least personally, about our research and development that we
are putting into the Minuteman III [LGM-30 land-based
intercontinental ballistic missile], the ICBMs
[intercontinental ballistic missiles], the Navy's D-5 [Trident
II fleet ballistic missile], especially when the Russians seem
to be going into a new generation, regardless, into these
particular areas. And we don't even have the money to continue
a warm-line funding past 2020.
Where that takes us in 15 or 20 years, to me, that is a
significant issue and a frightening issue. And as I understand,
you are talking about it is not really going to be impacted by
sequestration because we haven't put enough money in that--we
haven't put a significant amount of money in that funding line
in the first place.
General Davis. Sir, I would say that the sequestration
impacts on our nuclear forces only exacerbate the problem. We
have a much bigger issue as we try to figure out how we divine
the total Air Force budget in the future years to be able to
meet those needs.
Mr. Bishop. General, I cut you off.
General Moeller. I can only add just a small piece here,
Congressman, in that it is a function of delaying programs and
the modernization efforts, but it is not an immediate impact.
It is, in fact, having to determine strategic choices that will
affect us in fiscal year 2016 and beyond.
Mr. Bishop. Thank you.
Secretary Stackley. Sir, I would like to go ahead, and you
touched on the Trident Program. The Trident II D-5 life-
extension program is, in fact, very mature right now. In the
2013 budget request, we have got north of $1.2 billion that we
have requested, that you have authorized to address 36, 37
weapons in 2013 alone. Sequestration, clearly, throttles that
back.
The life-extension program is essential to ensure the
continued service provided by the D-5 out through the 2042
timeframe. And it is closely coupled, not just with the current
Ohio [Ohio class ballistic missile submarine] program, but the
replacement program, which the development is also inside--the
funding request is also included in the 2013 budget request,
which is also throttled.
Mr. Bishop. Gentlemen, I appreciate that answer. I have
said in other venues before, and I truly believe this, if
sequestration was the first cut we were asking of the military,
I wouldn't really have much sympathy for you. But whereas every
other area of our Government has been increasing its funding
over the past 3 years, the military has taken not one, but
three cuts.
So if it hadn't been for the first or the second cut, which
put you back almost $1\1/2\ trillion in some of these funding
areas, this third cut is going to be the one that when you talk
about doom and gloom coming, I actually believe this.
And I am not skeptical of some of the statements that are
coming from our military, simply because this happens to be cut
number three. And so I appreciate--and this is one area in
which I would have basic concerns of where we will be 20 years
from now because of the funding decisions we are making right
now.
Mr. Chairman, I have no more time, but I will yield back
what I don't have.
Mr. Turner. Very good. Thank you.
Mr. Barber.
Mr. Barber. Thank you, Mr. Chairman. And thank you to all
of the witnesses for being here today.
I wasn't here when sequestration was voted in in August of
2011. But I tell you this, I wouldn't have voted for it. As the
chairman pointed out in his opening remarks, it was a disaster
waiting to happen. And now we have less than 14 hours before
the clock ticks down.
When that vote was taken, I had just returned to work
following my recovery from the wounds I received on January
8th. And I saw the Congress inflict a wound on this country
that we thought we would heal by now.
We haven't, and we have failed in our responsibility to do
so.
Instead, we have squandered, week after week, the time we
had to deal with this problem, long before we got to 13 hours,
47 minutes and 15 seconds before the sequester kicks in.
Included in that delay, in that time, we gave ourselves 2
months back on January 1st to come to grips with the problem.
And we failed again.
Instead, we have put on the floor, time and time again,
motions to adjourn, going home. I love to go home, but I would
much rather be here working on this problem with my colleagues
on both sides of the aisle.
I voted against all of those adjournments, because we
should be here, dealing with this issue.
I grew up in a military family. I have worked for a long
time with our men and women in uniform, with the civilians who
work on bases, in garrisons across my district. I work with
private companies that are critical to our defense, our
national defense.
And we have absolutely squandered the time we could have
taken to fix the problems that they are facing.
There is a morale problem in our military as a result of
this uncertainty. There is a morale problem and an uncertainty
in the economy as a result of our inaction.
Last Friday, I met with a group of representatives from my
district, civilian employees of the Department of Defense,
companies that provide for our national defense, firefighters,
and others.
And one of my constituents described what we did in a way
that I think is very apt. He said, ``when Congress approved
sequestration, it built a nuclear bomb which it never intended
to explode. It designed a poison pill it never intended to have
us swallow.''
But here we are, now 13 hours, 45 minutes, 21 seconds and
counting, before the bomb goes off and the pill is ingested.
It is simply unacceptable that we got to this irresponsible
point.
When I came here last June, I came not as a partisan, but
prepared to work across the aisle with anyone who was willing
to find common ground to resolve this and other critical
issues. And I remain here ready to do so.
My district is home to the Army garrison at Fort Huachuca
in Cochise County, to the Davis-Monthan Air Force Base in
Tucson, and just across the line--I claim it as if it was our
own--the Air National Guard Fighter Wing. These are vital
elements in our national defense and in our local economy.
And my question, Secretary, is for you in regard to the
impact that sequestration and the continuing resolution will
have. You made some important points that really struck me.
In your testimony, you said, for example, that every single
piece of equipment used by our soldiers will be impacted if
sequestration goes into effect. And as a result, equipment will
not be modernized, timelines for delivery will be delayed, and
costs will be overrun.
It is clear to me, at least, from your testimony, that
sequestration will not only impact our forces in the next weeks
and months, but will set them back for years.
My question is, since it appears in a few short hours, we
will be allowing sequestration to kick in, we are likely see
furloughs in our Army, could see losses in operability, how
long, in your view, and how, in your view, will the economy
recover from the $479 billion in cuts we have already taken and
the further cuts that will take effect in this fiscal year?
Madam Secretary.
Secretary Shyu. Thank you very much for the question. I
think your data are correct in terms of the impacts. And that
is my biggest fear. The problem is we are facing, with the CR
impact today, to do programs we can't start, production rates
that were supposed to ramp up which we cannot do. There is a
program that is in development that we arbitrarily put a
ceiling on, so it is going to impact in stretching out our
programs and increasing the cost to the Army.
On top of that, now we are having a sequestration, which
cuts uniformly. It is a buzz saw cut across all the programs.
So it is a double whammy on the impact of all of our
programs.
So how do we recover from that? You can only recover if you
have a full understanding of the limitation of the cuts and
what is going to happen next. If we had a budget and if we know
exactly what is going to happen this year and future years, we
can at least start to do the detailed planning.
But the tremendous uncertainty that we are facing today is
posing these challenges, because I can't tell, as my
counterparts have already articulated, since each of our
programs are being cut, we have to rework every single program.
To understand the long-term impact, it is hard to judge,
without knowing what is going to happen to the future budgets.
So I have some significant concerns, sir.
Mr. Barber. Well, I think it is well-said. You know, when I
was at Fort Huachuca a week ago, a week ago tomorrow, I was
talking to some local businesses. They are not involved in the
defense industry, but very much affected by it.
I talked to a woman who runs a car dealership. And she
hasn't had an order for a car in almost a month. And why?
Because people don't know if they are going to have a job or if
their job is going to be cut by 20 percent.
Let me just ask one quick question of you, Lieutenant
General Davis.
I appreciate your testimony. We have taken, I think, a very
irresponsible approach to our fiscal crisis. And just as our
constituents--my constituents--could not cut their budget by 10
percent without going into foreclosure if they cut their
mortgage, or having their car repossessed if they cut that,
neither can companies nor our Department of Defense.
So I want to ask you, General, how do you build 90 percent
of an airplane and how do you build 90 percent, in the case of
the Navy, of a submarine? How do you make these decisions about
which programs and assets to fund and which to leave behind?
How will you determine the priorities given the situation
we are facing, which hopefully still can be reversed in due
course. But if it does not change, how do you make these
decisions? What priorities will you be looking at, from the Air
Force perspective moving forward, if nothing changes?
General Davis. Yes, sir. I think it starts back where our
Chief and Secretary have testified, that there are some very
key priorities within the United States Air Force, and it
starts with modernization.
We have fighters that are approaching 25 years old,
trainers that are 40 years old, bombers that are in excess of
30 years old. So we have had to take what we have within our
current modernization budget of roughly $35, $37 billion a
year, and try to figure where those priorities. Our top three
priority programs, the tanker, the bomber, the F-35, are about
15 percent of that budget.
And it is clearly imperative that, again, back to if we are
going to maintain the missions that you have given the United
States Air Force, that those have to be modernized.
So that means that other programs, of lower priority, if we
are given the flexibility, will have to pay that 10 percent
that will drop from those programs at some point.
And it will be very insidious as we go through this. As you
take 10 percent out of the F-35 program, you lose a couple of
airplanes this year. And then you lose a couple more next year.
And then the challenge as we go through that program in the
outyears, when we ramp up production, it gets quite significant
numbers.
So again, it starts with the priorities that the Nation has
given the Air Force. It starts with how the Chief and Secretary
put those priorities into play within our budget. And then we
go execute the programs to meet those, and we decide where we
fill in that 10 percent and from what program it comes from.
And that bottom 20 percent to 30 percent of our
modernization budget will be the first casualties of those
programs.
Mr. Barber. General, you just said something I think is
very important. You said, ``given the flexibility,'' you will
make decisions in a different way than you would without that
flexibility.
Hopefully, the least we could do is give you flexibility.
But what if it doesn't happen? What if you don't get the
flexibility?
General Davis. Sir, then, if that is the case, and we have
done this in many cases in the past, you take a very surgical
cut to pieces of that program that will move to the next year.
And then, as we often are asked to do, we tell the program
managers, ``tell me how you are going to live with that.'' And
next year, we will tell them the same thing, and we will ask
them the same question.
So what this means is that these programs that already, as
was mentioned, somewhat struggle, they struggle even more as
you push that capability piece out a year or a year or a year,
and that falls off.
So you try to target the least important of those
capabilities. You try to target, as you can, most of the
inefficiencies and waste that may exist in the programs,
because it does.
But very often, after you do that once or twice, you are
now cutting the capability you asked to have in that program to
begin with.
So we will do that, and have to do that across the board.
And that is where the utter inefficiency of the process really
takes hold, and that is where a lot of the waste occurs,
because when you are not given the flexibility to manage the
budget you have against your priorities, it creates extreme
inefficiencies, and you lose capability quickly.
Mr. Barber. Thank you, General.
Thank you, Mr. Chairman.
Mr. Turner. Mr. Barber, thanks for the questions.
General Wissler, Secretary Shyu and Secretary Stackley have
given us a great understanding of the impacts of the CR and
sequestration and the overlying/arching issue of the
uncertainty of the CR and the sequestration, that, in fact,
operating in an environment of uncertainty it makes it
incredibly difficult for planning.
The clock that we have that shows that we are now about
13.5 hours from when sequestration is going to hit, the
sequestration that was never to happen, doesn't illustrate
effectively that, in fact, sequestration is a 10-year program.
This is the first hit of sequestration that is going to go
into place. Even if there is a patch for this fiscal year, we
are facing this again just at the end of the year, with
sequestration coming again, and then for the next, including
this year, 10 in total.
If sequestration is fully implemented--and there are those
who say we should just let it sit. You know, I am very mindful
of the fact that defense spending is less than 18 percent of
the overall Federal budget, and we are going to have 50 percent
of the overall cost-cuts fall on less than 18 percent of the
budget.
But if that happens, could you tell us what your
procurement profile looks like over the next 10 years, assuming
that sequestration is fully implemented?
If it is not just a year after year patch, and the
uncertainty that we heard from the two secretaries impacted,
but actually that the cuts are put and left in place, what
programs would survive?
General Wissler. Mr. Chairman, we have a fairly small
procurement budget as it is, so we have already had to take--as
a result of the previous cuts, we have had to look at all of
our investments in a portfolio approach. And I will use our
tactical vehicle strategy as an example of this 10-year
problem.
So, if we look at our tactical vehicle portfolio, we have
several key pieces in that portfolio that we must have in order
for marines to be successful on the battlefield, not only
today, but in the future. Certainly a future capability would
be the Amphibious Combat Vehicle, and the ability to preserve
our ability to come from the sea to place our forces ashore
wherever the President decides they need to be, in a safe and a
combat-effective manner.
We also have a responsibility to protect our marines as
they go ashore from the threats that occur on the shore. And
our current piece of that is our investment in Joint Light
Tactical Vehicle. But in order to be able to afford a
modernization over time in our entire tactical vehicle
portfolio, we have had to, in a sense, put together timing for
the investments in Joint Light Tactical Vehicle, Amphibious
Combat Vehicle, upgrades and safety upgrades to our seven-ton
truck, our large heavy haulers, as well as our Light Armored
Vehicles and other members of that portfolio.
Sequestration, in the 1st year, will cause delays, delays
in JLTV [Joint Light Tactical Vehicle] that could be as much as
2 years, and depending on the second, or the subsequent impacts
to that program, could delay Joint Light Tactical Vehicle to a
point where we won't be able to buy both Joint Light Tactical
Vehicle and Amphibious Combat Vehicle at the same time.
If that happens, we will have to scale back our purchase on
Joint Light Tactical Vehicle. Figured into that mix, in the
middle, would be our Marine Personnel Carrier. We can't afford
to fully invest in Amphibious Combat Vehicle for our entire
lift requirement. We have a requirement to move marines around
the battlefield in several of our operations plans and other
things around the globe.
What would happen over time is we would be forced to make a
decision on an investment, either level of or continued at all,
in Joint Light Tactical Vehicle or the Marine Personnel
Carrier.
And the reason that we would have to do that is because the
Amphibious Combat Vehicle is replacing an amphibious assault
vehicle that is now 40 years old, and will be 50 years old by
the time we start to field those capabilities, a vehicle that
doesn't have right now the ability to allow us to do what we
need, given the security environment that we will operate in
with our partners in the United States Navy.
That is the 10-year impact in that. It will cause us to
make very hard decisions about our portfolio.
Our program is designed as a 10-year program. We
intentionally looked at a 10-year investment program so that we
could maximize our opportunity over time to use our limited
assets. So that is how that 10-year program will affect us. It
will cause us to make some very significant decisions, not only
in those three vehicles that I mentioned specifically, but
across our entire portfolio.
Mr. Turner. Ranking Member Ms. Sanchez.
Ms. Sanchez. Mr. Chairman, I just wanted to add for the
record that the sequestration talks we are talking about are on
top of the cuts that we have all already worked on, these some,
depending on how you count it, about $487 billion worth of cuts
over 10 years, having started this past year.
So it is not like defense hasn't already taken--started
down a path of taking its set of cuts. Now, Congress can
always, and the President together can always reverse some of
that, but I should note that, for the record, we are already on
schedule, and we have already begun to do the drawdown of $487
billion cuts to our military services.
Just wanted to put that on the record.
Mr. Turner. Mr. Barber, any closing comments before I offer
closing comments to the panel?
Mr. Barber. Thank you, no, Mr. Chairman.
Mr. Turner. Thank you. Well, as I said when I opened this,
I voted against the this mess, because I believed that we would
be right here, right where we are, with this clock ticking
down, 13 and a half hours away from the cuts that were never
supposed to happen.
This obviously is a failure of leadership. But the White
House, the Senate, and the House have all said these are the
cuts that shouldn't happen and wouldn't happen. And on behalf
of, you know, the members of this subcommittee, let me tell you
how sorry we are that we are in this situation and watching the
Department of Defense and our men and women in uniform be
suffering what is a process that is egregious, was set up to be
irresponsible, and certainly needed to be avoided.
With that, I want to give each of you an opportunity, if
you would like, to make any closing statements on both the
impacts and your thoughts as a result of this hearing.
And I will start with you, Secretary Shyu, if you would
like.
Secretary Shyu. Thank you, Chairman.
I appreciate the opportunity to testify in front of you
today. I think the congressmen here certainly fully understand
the impact of not just what we have already taken in terms of
cuts, the significant chunk, but the CR impacts on top of that,
and then the addition of the sequestration. So it has been a
significant amount of turmoil within the building of planning,
replanning, and what-ifs.
This constant turmoil is creating significant impacts on us
looking ahead. And this type of instability has tremendous
rippling effects, not just on the price, but on the second,
third, fourth level of tiers of suppliers that we have.
And in addition to that, it is the unintended consequences
of folks knowing that they will get a budget cut, they are not
going to upgrade their kitchens, they are not going to do
repairs. There is a huge rippling effect that will happen. And
you may not see it exactly tomorrow, in 13 hours, but it is
going to happen as a function of time.
So, anything you guys can do to help us sort through this
mess will be sincerely appreciated.
Thank you.
Mr. Turner. General Barclay.
General Barclay. Yes sir, Mr. Chairman.
Again, thank you for the opportunity to be here today. But
to clearly state the impacts on the Army, if nothing is done to
mitigate the effects of operations under a continuing
resolution, the shortfalls in our funding of overseas
contingency funds and operations, and the enactment of
sequestration, the Army will be forced to make dramatic cuts to
its personnel, its readiness, and its modernization programs,
and hence putting our national defense at risk.
And I thank you for the opportunity to submit in writing
and we will get that to you in the future.
Thank you, sir.
Mr. Turner. Thank you, General.
Secretary Stackley.
Secretary Stackley. Yes sir, I am going to revert a little
bit back to my opening statement with a slightly different
twist. We recruit America's youth to don the cloth of the
Nation. It is incumbent upon us to develop and deliver the most
capable weapons systems we can, to put them in their hands, and
to properly train them before we send them over the horizon to
defend our Nation's interests.
This environment that we are in places that at risk. We owe
those men and women far better, far greater. We need to go
about that business.
Thank you.
Mr. Turner. Admiral Myers.
Admiral Myers. Chairman Turner, Ranking Member Sanchez,
members of the subcommittee, for the Navy, the immediate
impacts are readiness and training will be significant, the
combination of sequestration and a full year of continuing
resolution.
In the long term, without action from Congress to replace
sequestration, we will be compelled to dramatically reduce our
fleet size, limit our ability to support the defense strategic
guidance, and unable to fully support the global force
management allocation plan for our combatant commanders.
As the Chief of Naval Operations testified to the full
committee a couple of weeks ago, the important qualities of our
naval forces are the readiness to respond to crisis, and
persistent forward presence. The Navy and Marine Corps are the
first responders to crisis such as a terrorist attack, military
aggression, or a natural disaster.
Operating forward at the strategic maritime crossroads,
such as the Straits of Malacca, Hormuz, or Gibraltar, naval
forces can contain conflict, deter aggression without
escalation, and build partnerships.
Naval aviation is a critical component to the Navy's
ability to carry out our full-spectrum operations. We do
everything from delivering humanitarian assistance in disaster
relief, at home and overseas, to maritime security operations
to ensure safe passage of commercial vessels, to high-intensity
sea control and power projection in a major contingency.
Helicopters and fixed-wing aircraft operating from nuclear
aircraft carriers, large-deck amphibious ships, and shore
installations, and helicopters operating from cruisers and
destroyers, complimented by unmanned aerial vehicles, are key
contributors to the capabilities of the Navy and Marine Corps.
The continuing resolution is based on fiscal year 2012
funding levels, and therefore includes fewer operating dollars
than we proposed and Congress authorized. Extending for the
whole year in fiscal 2013, the CR would provide the Navy $3.2
billion less in operating and maintenance funds than requested
in our fiscal year 2013 budget.
In addition we have growth, growth that was unplanned in
terms of cost for emergent ship repairs and also for increased
presence in the Arabian Gulf. Adding the combined effect of the
continuing resolution, the emerging cost and sequestration, the
Navy has an $8.6 billion shortfall when it comes to operations
in maintenance accounts.
For naval aviation, this shortfall results in reductions in
our third and fourth quarter aircraft and engine depot
maintenance. This is going to affect upwards of 327 aircraft
that we were expecting to come out of that depot, and over
1,200 engines and engine modules. Our maintenance backlog will
increase and the work to complete critical aircraft end service
repair for our F/A-18 [Hornet fighter jet] high flight hour
inspections is an example of the delays.
Mr. Stackley talked about furloughs and we are going to be
furloughing or planning to furlough upwards of 186,000
civilians. And this will also negatively impact our ability to
complete our depot maintenance repair on aircraft and engines.
Our backlogs are going to increase. We will have fewer aircraft
available for fleet operations and fewer aircraft in the fleet
for our fleet replacement squadrons, which are training the
pilots.
Looking past fiscal year 2013, the readiness for navy
aviation, as well as the rest of the fleet, will continue to
erode. It is going to erode and it is going to be visible with
the material condition that we expect out on the flight line
and on our ships. It is going to also show up in the reduction
in the expected service life of our ships and aircraft. It is
going to show up in the reduced proficiency of our sailors and
their confidence to work on the aircraft and effectively repair
them.
And it is also going to damage the industrial base and
increase the strain in the operational tempo of our sailors and
civilians. We are going to have to look very carefully at the
new capabilities that we are investing in, the things that we
know we need to sustain the ability to defend this Nation. But
we are going to have to fundamentally change the way the Navy
is organized, trained, and equipped.
To do that in a comprehensive and a deliberate manner, we
have got to base our decisions on a careful reevaluation of the
defense strategic guidance.
Now, Mr. Stackley referred to the delay of the USS Harry S.
Truman deployment. And we have reduced our carrier presence in
the Gulf. We have reduced a number of deployments, 13 around
the globe. The reduction and the delay of the Harry S. Truman
deployment was all about trying to preserve longer-term and
still robust naval presence in the Middle East.
But without action from Congress to avert the combination
of sequestration and the reduced discretionary caps, we will be
continued to be forced to make hard decisions that are going to
result in reduced overseas presence. Those decisions are going
to reduce our ability to respond to crises and reduce our
efforts to support vital national security missions like
counterterrorism and illicit drug trafficking.
Now, the Navy understands the importance of getting our
Nation's fiscal house in order. And our role is to be good
stewards of the resources. We should accomplish deficit
reduction in a coherent and a thoughtful manner to ensure that
we have the appropriate readiness, warfighting capability, and
forward presence. And we ask that Congress act quickly to pass
the fiscal year 2013 appropriations bill and avert
sequestration.
If that proves untenable, we ask for the flexibility to
implement these reductions carefully and deliberately versus
the indiscriminate manner of what is in the law today.
Thank you for the opportunity to be here.
Mr. Turner. Admiral, thank you.
We are going to pause on closing statements. Ms. Duckworth
has joined us and I know she has a question. So we will yield 5
minutes to her and then we will conclude with the three of you.
Thank you.
Ms. Duckworth. Thank you so much, Mr. Chairman.
So I continue to be appalled by the continued publication
of reports that speak to DOD contracting and acquisition waste.
It is GAO [U.S. Government Accountability Office] report after
GAO report, and even the DOD IG [Inspector General] itself has
found extreme waste.
In 2003, the DOD's IG showed that $1 trillion that the DOD
had spent could not be accounted for. More recently, in 2011,
the Commission on Wartime Contracting reported that DOD wasted
between $9 million to $12 million a day in improperly
supervised contracts during wartime. In Iraq alone, between $30
billion to $60 billion was lost to waste and fraud.
I am concerned especially with sequestration. You know, as
someone who had to buy my own flight gloves because we did not
have enough to issue flight gloves to all of our pilots, it
bothers me that we are wasting this kind of money.
Ms. Shyu, I know you don't speak for the entire DOD, but
could you speak to what the Army might be doing to ensure that
their practices in terms of acquisition and contracting are
better supervised, that you have a better idea of what is going
on with the various business lines? I see, for example, that in
2010, the Army was spending $119 million annually to lease
3,000 cars at a price tag of $40,000 a year in Iraq, and that
we have spent $36.3 billion alone with KBR. Yet this single
contractor could not account for $100 million in waste of
Government property.
I am looking at the OIG's [Office of Inspector General] Web
page right now, and just this month, the reports include things
like ``recovering organization, OCIE [Organizational Clothing
and Individual Equipment] equipment from civilians and
contractor employees remains a challenge.''
If we are going into sequestration and we are laying off
psychiatric nurses at Fort Belvoir who take care of our wounded
warriors and furloughing them, what are we doing to take care
and ensure that we do a better job of safeguarding the
taxpayers' dollars when it comes to contracting and
acquisition?
Secretary Shyu. Representative Duckworth, that is a great
question. And first of all, I want to thank you for your
service to the Army and to this Nation. You personally have
sacrificed tremendously and I am incredibly grateful for what
you have done. Okay.
I do want to let you know that one of the key things that
we have initiated about a year and a half ago is an overall,
across-the-board look across contracting in our enterprise
procurement review. We conduct those reviews. My deputy
assistant secretary of procurement conducts the review on a
monthly basis. I conduct the review on a quarterly basis.
We now have visibility across every single command on how
we are doing in contracting. We have established metrics. We
have 15 set of metrics that we measure ourselves on. And we
have the visibility to see how well we are doing within
commands.
And this is relayed up. We have now quarterly meeting with
all the parts who are really head of contracting within the
commands. We share lessons learned. We discuss issues and
challenges we have.
There has been a tremendous change, I can tell you. As a
matter of fact, we will be more than happy to come by and brief
you on all the things that we have been doing the last year and
a half to improve this.
Ms. Duckworth. Thank you. I would love to have that meeting
and I would love to have that meeting with your colleagues in
the other Services as well. I hope that it sticks. I hope that
as we get into sequestration, that we are doing everything that
we can. You know, some of these things are minor, improperly
renewed contracts with vending machines on military bases, to
the spectacular cost overruns of the F-35.
But we have a force that has a National Guard where 50
percent of its Black Hawk helicopters are still alpha models
and have been in service for a good 30 years. And those
aircraft need to be modernized. We need to certainly be
modernizing the CH-47s, but we can't do that in a time of
budget restrictions if we are continuing to waste those
dollars.
So I ask the whole panel to please remember that money is
tight. We have to go after the fraud and abuse. And I know you
are all doing the best job that you can, but we in Congress
will do our job in watching you as you do that as well.
Thank you.
Mr. Turner. Thank you, Ms. Duckworth.
Continuing, then, with closing statements, General Wissler.
General Wissler. Chairman Turner, Ranking Member Sanchez,
distinguished members of the panel, thank you.
We have talked a lot today about delays in contracts. We
have talked about inefficiencies that result from the lack of
multiyear procurements. We have talked about the potential for
cancellations, if we look at this in a 10-yearlong piece.
But what we are really talking about in all of this is a
direct impact to readiness and our ability to respond. The
United States Marine Corps acts for the United States, if you
will, as an insurance policy, a capability to respond around
the globe when we are called, when called on, to that crisis
that we may not have planned on; to do things like we did in
Libya in 2011; to do things like we did in the Philippines most
recently in humanitarian assistance and disaster relief; or
Japan before that; or putting people ashore in Afghanistan.
And that insurance policy is important. And what we will do
over this extended 10-year period is reduce our investment in
that insurance policy.
Readiness is not a today thing alone. Readiness is both
today and tomorrow's readiness. In the Marine Corps, we look at
readiness across five pillars. We talk about our quality
people. We talk about unit readiness. We talk about the ability
to meet combatant commanders' demands. We look at it from an
infrastructure perspective. We look at it also from the
modernization perspective. And I talked briefly about
modernization impacts earlier in simply our ground tactical
vehicles.
But what we will do is we will erode readiness both near
and far term. And we will continue to have to pay near-term
readiness, because of the conflict that we are currently
fighting in Afghanistan, in order to be ready to do what we
have to do today, mortgaging our long-term readiness. It will
affect every phase and every pillar of readiness and it will
cause us to reduce that investment in our insurance policy.
And most importantly, it will affect people. And we briefly
touched on some of the people today in our small businesses,
and our people who ultimately won't be able to take the kinds
of cuts and continue to support us with the tremendous service
that they provide across a vast array of capabilities, be it
small businesses that support trailers to the United States
Marine Corps, to people who are working on very high-tech
things like gallium nitride in our ground-to-air task-oriented
radar. From the very complex to the very simple, we will hurt
those people, their businesses.
And more importantly, we will hurt our marines and we will
hurt our civilian marines. It is already been talked about,
furlough. But furlough will attack a very real part of
readiness. It is not just people in the headquarters when we
talk about our civilian marines who will go on furlough.
Ninety-five percent of the civilian marines do not work in the
National Capital Region; 95 percent of the civilian marines are
turning a wrench somewhere fixing a piece of equipment, making
something ready so that as we bring our forces back out of
Afghanistan, they can, in fact, execute that pivot to the
Pacific, that we can rebalance our force to the Pacific to be
ready to deal with the next, most difficult security problem we
have.
In partnership with the Navy, we need to be forward
present, and we won't be, because we won't have the resources
to do it. The impact to our national strategy will be
uncompromising. And then, in the end, as we go out and try and
maintain this tremendous, All-Volunteer Force that has given
their life, blood, and treasure over the last 10 years of
combat, they will return home less trained, with a less
positive view of what service in the cloth of our Nation means.
And that will, in turn, make it more difficult to recruit
the next generation of All-Volunteer Force that will continue
to keep this Nation free. It starts from the very beginning and
rolls through all of those five pillars to modernization. And,
at the end of the day, it attacks the very heart of readiness,
the readiness of the force represented by all the gentlemen and
women on this panel, to do the things that the Nation expects.
Thank you, sir.
Mr. Turner. Well said, General.
General Davis.
General Moeller.
General Moeller. Thank you, General Davis.
Mr. Chairman, thank you, Member Sanchez. Members of the
subcommittee, thank you very much for the opportunity to speak
with you today.
Rather than echo the concerns of the distinguished members
of the panel, I will simply say that my number one concern,
from a strategic planning and programming perspective, is the
unprecedented levels of uncertainty.
As we begin the fiscal year 2015 budgeting cycle and look
out over the next 5 and 10 years, we don't know where the
starting point is. We do know that we will have a bow wave of
readiness, must-pay bills to repair the degradation and
readiness that we see already. We believe that will take
between 2, 3, 4 years, depending on the levels of degradation
that we see over the course of the next year to year and a
half. At the same time, we must also continue to support combat
operations, sustain strategic deterrents, and support to the
Joint Force anywhere on the globe.
As we begin this planning cycle, I was talking to one of my
civilian programmers who, in fact, will face the threat of
furlough coming up. He said, ``this future budget planning is
like painting a color-by-numbers picture while blindfolded in
the back of a C-130 [Hercules tactical airlifter], flying
through a thunderstorm.'' I think that everyone sitting here
would echo that. That accurately describes the level of
uncertainty that we face as we look to the future.
We will have to make tough strategic choices to ensure that
the Air Force balances competing requirements across our
enduring contributions of air and space superiority;
intelligence, surveillance, and reconnaissance; rapid global
mobility; global strike; and command and control.
The bottom line is, in this fiscal crisis environment, we
believe the choice to preserve readiness will drive us to make
tough decisions about slowing the pace of modernization,
sustaining capability or capacity, and looking to programs or
force structure in order to make up the difference.
Through all this, our unchanging responsibility is to
provide the world's most capable Air Force, ready to fly,
fight, and win against any adversary today and tomorrow.
However, in this current fiscal environment, the Air Force will
be forced to make drastic choices that will have both immediate
and far-ranging impact on our capability and capacity to
provide air and space power effectively across the full
spectrum of operational requirements.
Thank you, again, for the opportunity to speak.
Mr. Turner. I want to thank all of our panelists for giving
us a very good understanding of what the impacts of both
operating under a CR and the effects of sequestration will have
on both acquisition in our industrial base. You will be the
last word in the House of Representatives as sequestration
falls into place in approximately 13 hours from now, the cuts
that were never intended to happen.
Thank you for your giving us this perspective. And we look
forward to your continued dialogue, because without the
additional information of what the effects of these cuts will
be, we will not be able to amass the congressional and the
presidential will to offset them. So please make that picture
as clear as possible, even though the full effects won't be
completely known until you are in the middle of implementation.
But thank you.
With that, we will be adjourned.
[Whereupon, at 10:42 a.m., the subcommittee was adjourned.]
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A P P E N D I X
February 28, 2013
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PREPARED STATEMENTS SUBMITTED FOR THE RECORD
February 28, 2013
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Statement of Hon. Michael R. Turner
Chairman, House Subcommittee on Tactical Air and Land Forces
Hearing on
Impacts of a Continuing Resolution and Sequestration on Acquisition,
Programming, and the Industrial Base
February 28, 2013
The Tactical Air and Land Forces Subcommittee meets today
in open session to receive testimony on the impacts of
sequestration and the continuing resolution (CR) on
acquisition, programming, and the industrial base.
This hearing continues the committee's extensive oversight
and detailed examination of the harmful impacts of the
continuing resolution and sequestration on the military's
ability to protect national security interests of our Nation.
We've already heard very candid testimony from the military
service chiefs during the full committee hearing on February
13th of how these forced budget cuts would be devastating to
military training and force readiness. General Dempsey, the
Chairman of the Joint Chiefs of Staff stated, ``We built a
strategy last year that we said we can execute and absorb $487
billion. I can't sit here today and guarantee you that if you
take another $175 [billion] that that strategy remains solvent.
. . . What do you want your military to do? If you want it to
be doing what it is doing today, then we can't give you another
dollar.''
Today, we plan to leverage the information gained from that
hearing and provide our Members with the opportunity to gain a
better understanding of how the CR and sequestration would
impact defense acquisition programs, projects, and activities
and their associated industrial bases around the country. One
of the most tragic aspects of our current situation is that
sequestration was never supposed to happen and there were
numerous opportunities to avoid it. By laying out the details
of the impacts of sequestration, the Department of Defense
could have helped us in our education campaign to avoid the
catastrophic cuts we are now facing. On the eve of sequester,
it is my hope that this hearing will aid to provide greater
clarity concerning the details and levels of risk that will be
associated with the arbitrary cuts mandated by sequestration on
all major defense acquisition programs, including how these
severe reductions will impact local communities, small
businesses, and ultimately the military's ability in meeting
the national military strategy. These details will help to
illustrate the depths of these impacts and help us make our
case to Congress and the
Nation.
Ironically, the sequestration conversation has been seated
in a context of savings and fiscal austerity. However, it seems
apparent that allowing these cuts to take place could
ultimately cost our country more than it saves while,
simultaneously, costing jobs. Second- and third-tier vendors ,
mostly small businesses, will be affected if these cuts are
enacted, many of which are referred to as ``single points of
failure'' vendors, meaning only one company is qualified to
provide a particular part, and once that capability is lost it
will take significant capital and time to regain that
capability. This, in turn, will put people out of work and
dramatically drive up cost. We need to be assured that the
Department and the military services are conducting the
appropriate level of analysis to assess the impact of sequester
on the industrial base.
For example, the Army indicates that every procurement
program would be affected; quantities would be reduced by 10 to
15 percent, and that these mandated sequester reductions affect
more than 1,000 companies in more than 40 States. For the Army
alone, over 3,000 vendors will be affected. The Army has stated
the total economic impact would be approximately $15.4 billion;
the Marine Corps $2.4 billion; the Navy is over $20.0 billion.
I witness the devastating effects of these reductions each time
I return home. My community in Southwest Ohio includes Wright-
Patterson Air Force Base, the home of the Air Force Materiel
Command and the Air Force Research Laboratories. Recent
information provided by the Air Force has indicated that over
14,000 civilian employees at the base face potential furloughs
despite the fact that the base provides cutting-edge research
and development as well as real-time intelligence,
surveillance, and reconnaissance that enhances the lethality
and survivability of our warfighters in harm's way. Every State
is going to be impacted by sequestration.
As I've stated before, I voted against the Budget Control
Act because I knew we would be here today discussing these
types of harsh consequences that I just covered, and I have
been working aggressively with my colleagues on this committee
and Department of Defense to do everything we can to avert
these catastrophic effects on our national security.
I would like to welcome our distinguished panel of
witnesses:
Representing the Army:
LMs. Heidi Shyu, Assistant Secretary of the
Army for Acquisition, Logistics and Technology; and
LLieutenant General James O. Barclay III,
Deputy Chief of Staff, G-8.
Representing the Navy and Marine Corps:
LMr. Sean J. Stackley, Assistant Secretary of
the Navy, (Research, Development & Acquisition (RDA));
LVice Admiral Allen G. Myers, Deputy Chief of
Naval Operations, Integration of Capabilities and
Resources (N8); and
LLieutenant General John E. Wissler, Deputy
Commandant for Programs and Resources.
Representing the Air Force:
LLieutenant General Michael R. Moeller, Deputy
Chief of Staff for Strategic Plans and Programs; and
LLieutenant General Charles R. Davis, Military
Deputy, Office of the Assistant Secretary of the Air
Force for Acquisition.
Thank you all for your service and thank you all for being
with us today.
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DOCUMENTS SUBMITTED FOR THE RECORD
February 28, 2013
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WITNESS RESPONSES TO QUESTIONS ASKED DURING
THE HEARING
February 28, 2013
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RESPONSES TO QUESTIONS SUBMITTED BY MS. SANCHEZ
Secretary Stackley. In examining the small business industrial base
that supports the DON, we identify small business opportunities in two
categories, inaccessible and accessible small business markets. The
inaccessible small business markets are those where the prime
contractor small business industry capacity and capability to perform
is insufficient or non-existent and provides less than 1 percent of the
required effort. Examples of this market, within the Navy, include
nuclear and non-nuclear shipbuilding, submarine production, guided
missile production, and military aircraft manufacturing among others.
Across the Federal marketplace, of the thousands of product service
code areas approximately 200 fall into this category. In Fiscal Year
2012, the DON awarded contracts totaling $85.69 billion. Of this,
$25.85 billion was in the inaccessible small business marketplace.
The accessible small business marketplace was $59.41 billion. Small
business was awarded $13.32 billion or 22.22 percent of these awards
which was the reference point I used during my remarks. When including
both the inaccessible and accessible small business markets, small
business attainment for the DON was 15.59 percent. The Navy is
committed to maximizing accessible small business market opportunities
and has exceeded 20 percent in this area for the past four (4) years as
illustrated in the table below.
In 2012, the Department of Defense (DOD), as reported by the U.S.
Small Business Administration (SBA), achieved a small business
subcontracting performance of 35.2 percent. This only accounts for
first tier small business subcontractors. Small business also plays
critical supply chain roles at the second, third and fourth tier of
many of our contracts. The current available subcontract reporting
system however, does not specifically breakout each service component's
share of the aforementioned report because many of our largest prime
contractors have multiple contracts with each service. An example of
this would be Lockheed Martin and the Joint Strike Fighter (F-35)
program which is providing this advanced fighter jet to both the
Department of the Navy and the Air Force and under the provisions of
the Comprehensive Subcontracting Program (CSP) reports one summary
small business subcontracting report to DOD. These large prime
contractors dominate the inaccessible small business market I
previously described and it is through these and many other
subcontracting opportunities where small business continues to provide
critical support to our programs. I am very confident that the 20
percent figure I spoke of as Navy's share within subcontracting is a
conservative figure especially when we account for second through
fourth tier small business subcontractors not reflected in the figures
captured in DOD's report to the SBA. [See page 16.]
Department of the Navy Accessible Small Business Market Performance
FY2009-FY2012
------------------------------------------------------------------------
Small Business
Total DON Total Small Total Small Accessible
Fiscal Year Awards Business Business Market
Awards Percentage* Percentage
------------------------------------------------------------------------
2012 $85.69B $13.3B 15.59% 22.22%
------------------------------------------------------------------------
2011 $92.3B $14.2B 15.41% 23.97%
------------------------------------------------------------------------
2010 $79.7B $14.1B 14.61% 28.47%
------------------------------------------------------------------------
2009 $87.8B $13.8B 17.57% 26.60%
------------------------------------------------------------------------
*including inaccessible market areas
Secretary Stackley. But, it is vital to note that a one word
response does a great disservice to the hundreds of thousands of
service members, Government civilians, and contractors who work
tirelessly to support our Nation's defense. While each of us may be
aware of rare occurrences of the type you mention, our responsibility
is to take action and we do--just witness the Navy's recent action to
pursue prosecution of those who violated the public trust in Rhode
Island and Southern California. I, for one, can count one hundred fold
the times I've seen both military and civilians standing watch,
standing tall, working impossibly long hours to ensure we are spending
the budget authorized and appropriated by Congress in the most
responsible way possible. For every suggestion of waste or fraud, I can
give you many examples of innovative savings and extraordinary efforts
of our people to be responsible stewards of the taxpayer's money.
Moreover, as you know, we have been working for the last three years to
pursue further efficiency efforts instigated by Secretary Gates and
Secretary Panetta. The implication that elimination of waste or abuse
or further efficiencies can make a serious dent in the impacts of the
shortfalls associated with the continuing resolution or sequestration
is totally false. [See page 18.]
Admiral Myers. But I would like to echo Secretary Stackley's
response and emphasize that the Navy takes very seriously the
responsibility of being good stewards of the taxpayer's money, and our
2013 budget submission makes best use of our resources while still
meeting the requirements of the defense strategic guidance. [See page
18.]
General Wissler. I concur with Secretary Stackley's and VADM Myers'
responses. The Marine Corps values every dollar entrusted to us in
order to be the Nation's expeditionary force in readiness. Any abuse of
this trust is not tolerated in the Marine Corps. We are proud of our
reputation as the ``frugal force'' and don't tolerate actions at any
level that run counter to this moniker. Our FY 2013 budget submission
is ``what we need,'' not simply what we want, and we are committed to
the precise application of those resources to meet the defense
strategic guidance. [See page 18.]
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QUESTIONS SUBMITTED BY MEMBERS POST HEARING
February 28, 2013
=======================================================================
QUESTIONS SUBMITTED BY MR. TURNER
Mr. Turner. How would the Army's planned growth of an additional
combat aviation brigade be impacted by this current budget uncertainty?
Secretary Shyu. To comply with the Budget Control Act of 2011, the
Army continues to plan the drawdown to 490,000 Active Component spaces
and assess our force structure today to achieve the right force mix for
required missions. The 4th Infantry Division Combat Aviation Brigade
(the additive CAB) remains programmed in the force and the Army remains
committed to activating the CAB at Fort Carson with the Brigade
Headquarters, General Support Aviation Battalion, and Aviation Support
Battalion in April 2013, and the Assault Helicopter Battalion and two
Attack Battalions in the summer of 2014.
Mr. Turner. How did the Army determine that 1,100 companies (over a
third of the critical vendor industrial base) were in moderate to high
risk of bankruptcy?
Secretary Shyu. Our initial assessment in February showed that
sequestration and the continuing resolution could result in the loss of
over $7.1 billion, 17,800 job across over 200 programs impacting 39
States and DC. As we adapt to a rapidly shifting fiscal environment, in
the current year and beyond, we will continue to closely monitor
projected impacts to the industrial base.
Mr. Turner. If the continuing resolution is in place for a full
year, what impact does this have on execution of the Joint Light
Tactical Vehicle program?
Secretary Shyu. The JLTV Joint Program Office has made substantial
progress in streamlining the program timeline, and both the Army and
Marine Corps remain fully committed to the program. The Engineering and
Manufacturing Development (EMD) Phase of the program is proceeding
well, and the Department is making every effort to keep it on schedule
in order to meet the proposed Milestone C and Low Rate Initial
Production contract award in Fiscal Year 2015 (FY15), despite
sequestration. A continuing resolution in FY14 would reduce the U.S.
Army's FY14 program by an additional $18 million, beyond the program
reductions already taken as a result of sequestration and Congressional
marks in FY13. Due to the cumulative program budget reduction effects,
the program office would no longer observe potential non-EMD vendor
tests, including Limited User Tests. Also the test schedule would have
to be extended, since a majority of FY14 Funds are for testing. This
will likely delay the Milestone C decision and Low Rate Initial
Production award until later in FY16.
Mr. Turner. Are any PPAs exempt from sequestration and on what
grounds?
Secretary Shyu and General Barclay. No Procurement, Research,
Development, Test & Evaluation, or Military Construction PPAs
(Programs, Projects or Activities) are exempt from sequestration.
Mr. Turner. How will the CR and sequestration impact your major
defense acquisition programs and will these reductions require a change
in national military strategy?
Secretary Shyu and General Barclay. With the President's signature
on the Fiscal Year 2013 (FY13) Consolidated and Further Continuing
Appropriations Act, 2013, on March 26, the continuing resolution is no
longer in place. As such statements related to a full year continuing
resolution no longer apply and will not be addressed in this response.
The primary impacts of the sequestration related to FY13 across our
Major Defense Acquisition Programs will be to cause inefficiencies in
program execution and resultant higher cost to the taxpayer for those
programs. Our programs still in development will experience delays to
planned schedules, which will extend the length of programs. Extending
programs leads to higher development costs than originally planned. For
our procurement programs, the primary impacts in FY13 will be: quantity
reductions resulting in increased unit price, delayed equipment
fielding; delays to cost savings initiatives that will increase the
cost to sustain our systems when fielded; and impacts to future
readiness due to deferring obsolescence and reliability upgrades.
Additionally, our ability to effectively plan programs into the future
is adversely impacted because of the continued uncertainty of future
budget top lines and because of an FY14 budget that does not fully
consider the impact of the late FY13 appropriation and sequestration
reductions.
From our perspective, the sequestration reductions in FY13 will not
require a change in the national military strategy.
Mr. Turner. Please describe how the effects of sequestration differ
for major defense acquisition programs in different stages of
development and fielding? For example, would it be less disruptive for
programs still in development, which are primarily based on a level of
effort, than those in production?
Secretary Shyu and General Barclay. In general, the earlier a
program is in the acquisition lifecycle, the less disruptive funding
reduction is likely to be in the near term. However, if system
engineering is reduced and the program is not re-planned, then this
will pose much greater risk to the program in follow-on phases. Unless
the program is responding to an Urgent Operational Need Statement, most
early contractual efforts are based on some type of cost type contract
vehicle, in which the Government and the contractor share in the risk.
Later in development, contract vehicles for operational testing or for
fielding efforts become more fixed price oriented in general, where the
contractor takes on more risk than the Government side.
For example, a program that is pre-Milestone B is more likely to
absorb changes in funding than a post-Milestone B program, once a
program baseline has been established. As we continue to assess the
impacts of sequestration, a significant concern is whether funding
reductions result in a Nunn-McCurdy statutory breach or its equivalent
for a Major Automated Information System program. These results would
significantly affect the Army's ability to field equipment for
Soldiers. Under sequestration, reductions to programs in procurement
would likely result in reductions to procurement quantities, which
increase unit costs. Such reductions may result in a production line
break or other industrial base impacts--particularly to second and
third tier vendors--and delayed deliveries of systems to the
Warfighter.
Mr. Turner. Will the potential effects of sequestration differ for
major defense acquisition programs using different contract types and
acquisition strategies (fixed-price v. cost-reimbursement; multiyear
procurement v. annual procurement)?
Secretary Shyu and General Barclay. The effects of sequestration on
major defense acquisition programs depend on a range of factors, to
include the program's acquisition strategy, life cycle phase, and
contract type. Contract types are selected to fit the profile of each
program and must comply with governing law and policy. Generally,
modifications to fixed-price and multiyear contracts may require
renegotiation and may result in cost penalties, which results in much
less flexibility as the Army implements funding reductions.
Long-term sequestration cuts are generally likely to increase the
schedule for delivery under fixed-price contracts. As a result, total
development cost or the cost of each individual production article may
increase. Delays may ultimately delay the fielding of equipment to the
Warfighter.
Fiscal Year 2013 sequester impacts to annually funded programs will
result in: 1) extension of planned multiple year schedules and 2)
increased estimated life cycle cost, which takes into account reduced
contract quantities and disruptions to planned events on each program's
schedule. The cost to field will increase as the timelines for delivery
are drawn out as a result of funding reductions.
Mr. Turner. Would large numbers of fixed price or multiyear
procurement contracts need to be renegotiated due to sequestration?
Secretary Shyu and General Barclay. Where possible, programs have
taken precautions to avoid significant renegotiation of procurement
contracts due to sequestration in Fiscal Year 2013. For example, the
multiyear production contract for the Tube Launched, Optically-Tracked,
Wire-Guided Missile was affected by sequestration reductions this year.
The Army was able to internally reprogram funds to avert impacts to the
multiyear contract and maintain projected cost savings. In other
instances, the Army uses quantity-range-option pricing on fixed-price
contracts. While this has not avoided the increased unit prices
associated with lower quantities, it has maintained flexibility to
address sequestration reductions without renegotiations.
With the estimated cuts for FY13 and anticipated reductions in
FY14, some multiyear contracts may have to be renegotiated absent
relief. For example, Program Executive Office Ground Combat Systems has
three Acquisition Category 1D programs that are either fixed-price or
cost-plus incentive fee type contracts that were awarded as
incrementally funded contracts spanning multiple years. Contract plans
for each are being revised to account for reduced work in the next year
as a result of a reduction in planned funding. Work is being adjusted
for the next several years within a revised schedule. Any change made
to incentive fee contracts must include a review of the incentives to
ensure that such measures are not inadvertently implicated due to a
revision in contract scope.
Mr. Turner. Please provide details on the major defense acquisition
programs that would experience any delays in fielding needed
capabilities to the warfighter as a result of the effects of
sequestration and yearlong CR?
Secretary Shyu and General Barclay. Sequestration reduces the
amount of Second Destination Transportation (SDT) funding, which
inhibits the ability of the Project Managers (PMs) to ship vehicles.
Resolution would require adjusting/realigning the distribution
schedules to ship the systems later to minimize PM risks, although
potentially delaying delivery of vehicles to the Warfighter. Delays
include:
Assault Breacher Vehicle currently being fielded to Korea
could be delayed beyond June or July 2013
Stops shipment of Abrams Tanks and Bradleys from Fort
Hood to the Fielding sites (impacts Initial Fielding of M1A2 SEP to the
155th Mississippi Army National Guard (ARNG) and includes the Korea and
Germany Rotational sets)
Stops shipment of National Guard Equipment from their
home station Maneuver Area Training and Equipment Site to Gowan Field/
Camp Shelby for New Equipment Training (NET) this Summer--Impacts 155th
and 116th ARNG
Stops shipment of Abrams/Bradley spares to keep the
unit's authorized stockage list at 100 percent during NET--Impacts both
the 155th Fielding/NET and 116th NET
The following examples of potential delays in fielding needed
capabilities to the Warfighter are driven by sequestration:
Delay six Lightweight Counter Mortar Radar (LCMR) systems
to two Brigade Combat Teams (BCTs).
Delay one Counter Fire Radar system to one BCT.
Delay fielding one Sensor Command and Control Shelter
required for counter-rockets, artillery, and mortars (C-RAM) for one
battalion.
Loss of 32 Modern Man-stations for the Patriot
Modifications program.
Loss of 3 AH-64 Apache Remanufactured aircraft.
Loss of 1 AH-64 Apache New Build aircraft.
Loss of 2 AH-64 Apache Radar Electronics Units and
subsequent overall unit cost increase for remaining quantity.
The fielding decision for Release 2 of the Distributed
Common Ground System-Army (DCGS-A) will be delayed six months and only
Army Force Generation (ARFORGEN) units would be equipped with the
latest version of DCGS-A.
Mr. Turner. What measures will you take to mitigate the impact of
sequestration on counter-IED efforts that could potentially diminish
the Department's flexibility and increase risks to rapidly respond to
unanticipated requirements?
Secretary Shyu and General Barclay. The Army is assessing funding
for counter-IED efforts in accordance with the priorities established
by the Combatant Commands and the Army Service Component Commands.
Additionally, the Warfighter Senior Integration Group, chaired by the
Deputy Secretary of Defense, provides Office of Secretary of Defense
level synchronization, prioritization and oversight not only for
counter-IED efforts, but all requirements that need rapid response by
Department of Defense. This is the means by which the Army will ensure
any impact of sequestration is balanced against operational
requirements and fiscal realities. This process allows senior Army
leaders visibility, flexibility and access to a variety of means to
address and minimize the impacts of budgetary challenges upon any
requirement.
Mr. Turner. How will you make cuts to major defense acquisition
programs without forcing them into a Nunn-McCurdy breach? Should
Congress modify the requirements that currently apply when a Nunn-
McCurdy breach occurs?
Secretary Shyu and General Barclay. We do not anticipate any Nunn-
McCurdy breaches to our Major Defense Acquisition Programs and Major
Automated Information System programs in Fiscal Year 2013 as a result
of the reduction attributable to sequestration this year. However, in
subsequent years whether or not a Program will incur a Nunn-McCurdy
breach will not be a significant factor in selecting Programs for
reductions. Cuts will be distributed on a requirements basis with cost
implications and collateral costs (e.g. cancellation costs or breakage
to other Programs) being factors.
Exempting the Department from Nunn-McCurdy reporting
responsibilities caused by CR or sequestration would be beneficial in
reducing Program workloads.
Mr. Turner. How would sequestration and a yearlong CR scenario
impact your ability to fund weight reduction initiatives for personnel
protection equipment? How would this impact the PPE industrial base,
e.g. body armor, night vision devices, and other critical warfighter
equipment?
Secretary Shyu and General Barclay. Sequestration may affect
ongoing development efforts regarding soft armor ballistic fibers and
hard armor ballistic plates. The Soldier Protection System program
entry into the Engineering Manufacturing and Development phase could be
delayed up to one year.
There is no immediate impact to the Industrial Base for ongoing
procurement and fielding of head, eye, pelvic, torso armor, and other
personal protective equipment. Funding is currently at the minimum
sustaining rate for maintaining two qualified armor vendors in hard and
soft armor solutions. Further funding reductions may place the Army's
ability to maintain competition (and expertise) at risk.
Projected Fiscal Year 2013 orders from the Army do not support
minimum sustainment rates for two vendors for night vision image
intensification tubes. Further funding decreases from sequestration may
stress image intensification tube manufacturing and ultimately drive up
system costs if competitive pressure is lost due to the loss of one
vendor. However, the Office of the Secretary of Defense ``Report to
Congress on the Assessment of Industrial Base for Night Vision Image
Intensifier Sensors'' completed in September 2012 concluded that
Warfighter readiness would not be negatively impacted if the industrial
base was further reduced.
Mr. Turner. How would sequestration and a yearlong CR scenario
impact the
V-22 program? Would there be impacts to the V-22 industrial base?
Secretary Stackley. Sequestration will reduce the program's
available funding (FY13 and prior year unobligated funds) by
approximately 10 percent although the exact percentage has not yet been
determined. As a result, the following efforts will be deferred: 1)
life cycle cost reduction and obsolescence initiatives (potentially
grounding aircraft due to unavailability of parts), 2) incorporation of
reliability and other improvements to production aircraft through FY
2014 (resulting in lost savings in operations and support costs), 3)
procurement of peculiar training equipment (adding significant costs
due to in-aircraft training), 4) engineering development of reliability
and other improvements until FY 2014 (further deferring savings in
operations and support costs), and 5) standing up depot repair
capability (which would improve readiness and reduce costs). If there
was a yearlong CR without anomaly language to permit the planned
multiyear contract to be awarded, the nearly $1 billion in savings
assumed in the FYDP would not be realized.
The impact to the V-22 industrial base has been minimized in FY
2013 with the plan to definitize the follow-on multiyear procurement
contract in May. The amount of future year budget reductions for the
program has not yet been determined so those impacts, including impacts
to the V-22 industrial base, cannot be addressed at this time.
Mr. Turner. How would sequestration and a yearlong CR scenario
impact your ground combat and tactical vehicle strategy? What programs
will be delayed or impacted by this budget uncertainty?
Secretary Stackley. Sequestration and the continued budget
uncertainty will have varying impacts on each of our Ground Combat and
Tactical Vehicle programs. While the specific impact on each program
will not be known until the Marine Corps receives the final FY 2013
appropriation and future year appropriations become more predictable,
we anticipate schedule delays, reduced acquisition objectives,
postponed modernization and upgrades, and subsequent cost increases due
to delayed programs and decreased procurement quantities. In the case
of the Joint Army/Marine Corps Joint Light Tactical Vehicle (JLTV)
program, the initial operational capability (IOC) may be delayed by one
year with the full operational capability (FOC) may be delayed by two
years. This also slows the procurement plan and leaves a shortfall in
the inventory which will need to be addressed at the end of the FYDP.
That delay, in turn, risks the procurement of the Marine Corp
Amphibious Combat Vehicle (ACV) as the Marine Corps strives to align
their procurement strategy and optimize the cost for each major
program. Other potential impacts include the delayed procurement of
safety and performance modifications for Medium Tactical Vehicle
Replacement (MTVR) and Logistics Vehicle Systems Replacement (LVSR),
delayed upgrades on the M1A1 tank, and the delay or cancellation of
engineering change proposals to Light Armored Vehicle (LAV) further
compromising the Marine Corp's amphibious capability while increasing
maintenance costs while awaiting the systems' replacement by the ACV.
Mr. Turner. What programs do the Marine Corps anticipate it will
have to cancel or extend due to the budget uncertainty?
Secretary Stackley. While the Marine Corps has not cancelled or
extended any programs as a result of the FY 2013 budget decisions, the
uncertainty associated with FY 2014 and outyear budgets will require
the Marine Corps to continually review and adjust their program plans
consistent with the changing budget environment. Decreasing budgets
within ongoing acquisition programs will necessarily lead to a review
of each program's ability to execute approved cost, schedule and
performance parameters. Programs such as JLTV, P-19 Firetruck
replacement,
G/ATOR and CAC2S could all see schedules extended depending on future
year budget decisions.
Mr. Turner. If the continuing resolution is in place for a full
year, what impact does this have on the execution of the Marine
Personnel Carrier and Joint Light Tactical Vehicle program?
Secretary Stackley. With the enactment of HR933, the risk of a full
year continuing resolution has been eliminated. The Marine Corps is
committed to executing these programs as planned, but both the Marine
Corps Personnel Carrier (MPC) and the Joint Light Tactical Vehicle
(JLTV) programs will continue to be under budgetary pressure resulting
from future year budget uncertainty.
Mr. Turner. Are any PPAs exempt from sequestration and on what
grounds?
Secretary Stackley and Admiral Myers. Original OMB guidance
directed O&M program, project, and activity (PPA) detail to be at the
Appropriation level and Investment to be at the Line Item level of
detail. MILPERs accounts were excluded from sequestration.
To date, no exclusions have been made for sequestration with the
exception that the Navy expects to receive guidance from the Director
of National Intelligence (DNI) that classified efforts will not be
subject to furlough. The Navy may have classified efforts in its
Operation and Maintenance accounts that are predominantly civilian
personnel efforts that may not be able to take an assigned
sequestration cut without causing a furlough. In these cases, the DON
will have to exempt portions of these sequestration cuts to classified
programs and take the cuts elsewhere. Once the Navy has processed all
of the impacts to H.R 933 and then applied sequestration impacts, we
will know more definitively if any classified efforts required relief.
Mr. Turner. How will the CR and sequestration impact your major
defense acquisition programs and will these reductions require a change
in national military strategy?
Secretary Stackley and Admiral Myers. Sequestration and the
continued budget uncertainty will have varying impacts on each of the
Department of the Navy's programs. While the specific impact on each
program will not be known until the Department receives their final
FY2013 appropriation including sequestration allocations and future
year appropriations become more predictable, we anticipate schedule
delays, reduced acquisition objectives, postponed modernization and
upgrades, and the subsequent cost increases due to delayed programs and
decreased procurement quantities. In addition, certain programs will
require restoration of funds in future years in order to deliver end
items. The strategic impact of any program adjustments and future
program affordability will need to be considered as part of the SECDEF
initiated review of the Department's Strategic Planning Guidance.
Mr. Turner. Please describe how the effects of sequestration differ
for major defense acquisition programs in different stages of
development and fielding? For example, would it be less disruptive for
programs still in development, which are primarily based on a level of
effort, than those in production?
Secretary Stackley and Admiral Myers. The effects of sequestration
vary depending on a program's stage of development and fielding, but
also vary from program to program. Sequestration impacts to some naval
programs in the development stage will result in loss of capability,
while other naval programs will experience a delay in delivery. Most of
Navy's development work is tied directly to acquisition programs of
record, consequently, reductions in the development stage will
potentially have an impact on their production schedules and costs.
Mr. Turner. Will the potential effects of sequestration differ for
major defense acquisition programs using different contract types and
acquisition strategies (fixed-price v. cost-reimbursement; multiyear
procurement v. annual procurement)?
Secretary Stackley and Admiral Myers. Yes, if sequestration remains
in place, limited funds could cause the Department to reduce the
products and/or services being purchased on existing contracts. Limited
funds forces the Department to prioritize all its requirements,
including mission critical programs, then determine how much money it
has available for those programs.
From a strict contractual obligation perspective, some types of
contract vehicles provide the Department with more flexibility than
others. Given current regulatory requirements, the Department has more
flexibility with existing Cost Reimbursement, Indefinite Delivery,
Indefinite Quantity (IDIQ) and ``Requirements'' contracts, because they
provide the Department with maximum flexibility in avoiding hard budget
limits. Typically cost reimbursement contracts provide greater
flexibility than firm fixed price contracts. Through a higher level
review, the Department, through ASN(RDA), may choose to limit
obligations on the cost reimbursement contracts thereby effectively
``stretching out'' performance and/or contract schedules to match
limited funds. The amount of the Department's obligation under a
``Requirements'' contract is the dollar value of each order actually
placed under that contract. IDIQ contracts have obligation values at
the guaranteed minimum amounts and increase only as individual task
orders or delivery orders are placed by the Government. While these
types of contracts have flexibility, the end result is still less
supplies or services for the Government. The amount of obligations
under a ``firm fixed price'' contract is the face value of the contract
that is fully funded at contract award. The Department has less
flexibility with existing fixed price contracts, but can choose, if it
is deemed necessary, to re-negotiate established pricing based on its
decision to de-scope quantity, capability and breadth of contract
performance. The Department may also choose to not exercise and or re-
negotiate any contract options for future supplies and or services. The
multiyear contract provides the least amount of flexibility for the
Department in this sequestration environment. Unlike annual contracts,
obligations under a multiyear contract must follow the established
contract terms and conditions to avoid any cancellation payment
arrangements established in the contract.
The actual or potential effects on each program are specific to
each program, lifecycle phase, funding profile, and contract type, to
name a few issues. Each program would be required to assess the impact
individually to provide the potential effects.
Mr. Turner. Would large numbers of fixed price or multiyear
procurement contracts need to be renegotiated due to sequestration?
Secretary Stackley and Admiral Myers. The Navy does not anticipate
renegotiating large numbers of fixed price or multiyear procurement
(MYP) shipbuilding or aviation contracts due to sequestration in FY
2013. No major previously awarded fixed price shipbuilding or aviation
contracts will require deobligation of funds. Additionally, no current
shipbuilding or aviation MYP's will need to be renegotiated. The Marine
Corps has not cancelled or extended any programs as a result of the FY
2013 budget decisions and does not have any MYP contracts.
The Navy's shipbuilding and aviation MYP's requested in the
President's Budget for FY 2013 (the Block IV VIRGINIA Class FY14--FY18
MYP, the DDG 51 ARLEIGH BURKE Class destroyer FY13-FY17 MYP, and V-22
FY13-17 MYP) were authorized in the FY 2013 National Defense
Authorization Act (NDAA) and approved in the Appropriations Act.
While the Department of the Navy has not renegotiated any major
defense acquisition contracts to date as a result of the FY 2013 budget
decisions, the uncertainty associated with FY 2014 and outyear budgets
will require the Department to continually review and adjust program
plans consistent with the changing budget environment. Adjustments to
these program plans may require renegotiation of procurement contracts.
However, the Department of the Navy will strive to minimize the number
of these renegotiations to maintain the best value for the limited
resources.
Mr. Turner. Please provide details on the major defense acquisition
programs that would experience any delays in fielding needed
capabilities to the warfighter as a result of the effects of
sequestration and yearlong CR?
Secretary Stackley and Admiral Myers. Sequestration and the
continued budget uncertainty will have varying impacts on each of the
Department of the Navy's programs. We anticipate schedule delays,
reduced acquisition objectives, postponed or cancelled modernization
and upgrades, together with subsequent cost increases due to delayed
programs and decreased procurement quantities. The impact on specific
programs will not be known until the Department completes a strategic
management review of DOD strategy, posture and investments and as
future year appropriations become more predictable.
Mr. Turner. What measures will you take to mitigate the impact of
sequestration on counter-IED efforts that could potentially diminish
the Department's flexibility and increase risks to rapidly respond to
unanticipated requirements?
Secretary Stackley and Admiral Myers. The Navy, as the Single
Manager for Joint Service Explosive Ordnance Disposal (EOD) Technology
and Training, and as Single Manager for Joint Service Counter-RCIED
Electronic Warfare (CREW) has responsibilities to all four military
Services for executing counter-IED efforts. The Navy continues to
support two significant programs that support JS C-IED capabilities:
JCREW and Advanced EOD Robotic System (AEODRS).
The JCREW program of record is supported in the current budget and
future technical insertions will allow us to respond to unanticipated
requirements across the FYDP. The modular design of the JCREW counter-
IED system will allow rapid technology insertion of upgrades to meet
emerging RCIED threats.
The Advanced EOD Robotic System is the future JS EOD robot that
will meet EOD requirements for safe standoff from IEDs and other
unexploded ordnance. This system is also being designed in a modular,
open architecture to easily allow technology insertion to address
emerging counter-IED requirements for the EOD
community.
Counter-IED efforts continue to hold high priority, and where
budget lines are shared, reductions under sequestration will focus on
lower priority areas where possible. As is the case with all urgent
needs that arise within the execution year, the Department of the Navy
will seek to reprogram funds from lower priority projects or seek
assistance from OSD to meet funding requirements for urgent needs.
For those ongoing counter-IED efforts, we are reviewing our
critical path activities and schedules in anticipation of furlough of
Government employees. Where necessary, we are modifying scheduled
events to account for non-availability of key Government personnel due
to Government furlough, while still achieving program milestones.
Additionally, we have already reduced all travel and non-essential
training and slowed all obligations to maximum extent in order to
conserve funding in anticipation of the budget reductions due to the
sequestration.
Mr. Turner. How will you make cuts to major defense acquisition
programs without forcing them into a Nunn-McCurdy breach? Should
Congress modify the requirements that currently apply when a Nunn-
McCurdy breach occurs?
Secretary Stackley and Admiral Myers. Whether or not a Program will
incur a Nunn-McCurdy breach will not be a significant factor in
selecting Programs for reductions. Cuts will be distributed on a
requirements basis with cost implications and collateral costs (e.g.
cancellation costs or breakage to other Programs) being factors.
Exempting the Department from Nunn-McCurdy reporting responsibilities
caused by CR or sequestration would be beneficial in reducing Program
workloads.
Mr. Turner. How would sequestration and a yearlong CR scenario
impact the procurement of F-35Cs and F-35Bs? Would lower procurement
numbers affect the strike fighter shortfall?
Secretary Stackley and Admiral Myers. The Department of the Navy is
working closely with the F-35 Program Office and the Under Secretary of
Defense for Acquisition, Technology and Logistics to assess the impacts
of sequestration on the F-35 program. Currently, the Department is
investigating the balance between preserving the development program
and maintaining capabilities of Block 2B, Initial Warfighting
Capability; support and sustainment for all delivered aircraft;
preserving production efficiencies and production capacity; and
aircraft procurement. However, it is probable that sequestration
reductions will reduce the number of
F-35B and F-35C within FY 2013 Low Rate Initial Production (LRIP) 7
quantities, thereby increasing unit recurring flyaway costs for all
services and partner procurements. We will see a decrease in investment
in tooling, redesign for diminishing manufacturing sources and out of
production parts, and cost reduction initiatives. Furthermore, if a
furlough of Government workers were to occur and the shutdown of
military airfields on weekends were to occur, it would significantly
slow the execution of the F-35 flight testing and subsequent fielding
of capability.
The Navy actively manages the strike fighter shortfall to minimize
impacts in each execution year. The projected strike fighter shortfall
is a compilation of a number of factors including legacy usage,
meticulous management of fatigue life, and
F-35 procurement. Delays in the F-35 procurement will aggravate
challenges in meeting inventory requirements.
Mr. Turner. Would sequestration and a yearlong CR affect life
extension programs for F/A-18s and AV-8Bs resulting in a higher strike
fighter shortfall this year or in the years ahead?
Secretary Stackley and Admiral Myers. Yes. Sequestration will have
an effect in the short term and is expected to exacerbate the long term
strike fighter shortfall. Sequestration will cause delays in depot
inductions and High Flight Hour inspections which will negatively
impact the ability to source Navy and Marine Corps squadrons.
Mr. Turner. Are any PPAs exempt from sequestration and on what
grounds?
General Wissler. No Programs, Projects Activities contained within
any investment appropriation are exempt from sequestration. Only
military personnel accounts have been exempted.
Mr. Turner. How will the CR and sequestration impact your major
defense acquisition programs and will these reductions require a change
in national military strategy?
General Wissler. In the near-term, sequestration should not have a
negative impact to our ground combat and tactical vehicle strategy.
These reductions were mitigated by current and prior year assets.
In the long-term, sequestration will have a negative impact on our
warfighting investment portfolio, including several critical vehicle
modernization and sustainment programs. We have mitigated some of the
impact by prioritizing and sequencing our investments. For example, we
are investing in the Joint Light Tactical Vehicle now because it is the
most mature capability, followed by investment in the Amphibious Combat
Vehicle program. These measures, however, cannot fully mitigate the
negative effects of sequestration. Our High Mobility Multipurpose
Wheeled Vehicle (HMMWV), Assault Amphibious Vehicle (AAV), Light
Armored Vehicle (LAV), and tank modification programs, which are
critical to maintaining the operational availability of these vehicles,
will likely be slowed significantly. Critical survivability and
mobility upgrades to the AAV and LAV fleets will be delayed. These
delays will ultimately impact our ability to provide Marines with
ready, relevant and capable combat systems.
Mr. Turner. Please describe how the effects of sequestration differ
for major defense acquisition programs in different stages of
development and fielding? For example, would it be less disruptive for
programs still in development, which are primarily based on a level of
effort, than those in production?
General Wissler. Sequestration will be disruptive during every
phase of the acquisition process. Examples of these disruptions
include:
Slowing the development and procurement of acquisition
programs, increasing the total life cycle program cost.
Slowing the sundown process on legacy systems, which will
ultimately drive up current operation and support costs. Sequestration
would require investment to replace obsolescent parts for legacy
systems which are no longer available in the market place, further
driving up sustainment costs.
Investments in new technologies designed to improve
efficiencies, such as fuel efficiency, lightweight armor, and
information technology consolidation, would be delayed, negating their
corresponding savings and capabilities.
Initiatives to increase buying power in all phases of the
acquisition process will likely be negated by schedule slips.
Contraction of the small business industrial base is
likely to occur as larger firms keep more work in house.
Mr. Turner. Will the potential effects of sequestration differ for
major defense acquisition programs using different contract types and
acquisition strategies (fixed-price v. cost-reimbursement; multiyear
procurement v. annual procurement)?
General Wissler. Major Defense Acquisition Programs (MDAPs), like
any other program, would be affected by sequestration. Firm-Fixed Price
(FFP) contracts would already be fully funded, but options may need to
be re-negotiated to buy a lesser quantity. Under Indefinite Delivery
Indefinite Quantity (IDIQ) contracts, the Marine Corps would buy fewer
items. This may require a program extension in order to buy the total
Approved Acquisition Objective (AAO) if additional funding is received.
Cost type contracts are incrementally funded. If the funding falls
short, the contract would have to be modified to either extend the
schedule or de-scope the statement of work.
Mr. Turner. Would large numbers of fixed price or multiyear
procurement contracts need to be renegotiated due to sequestration?
General Wissler. The Marine Corps is not executing any ground
multiyear contracts, and any current Firm-Fixed-Priced (FFP) contracts
are already fully funded. However, any FFP options will have to be
reviewed on a case-by-case basis.
Mr. Turner. Please provide details on the major defense acquisition
programs that would experience any delays in fielding needed
capabilities to the warfighter as a result of the effects of
sequestration and yearlong CR?
General Wissler. There is no impact of a continuing resolution
given the President's signing of the FY13 DOD appropriations bill.
Potential long-term sequestration impacts specific to Marine Corps
programs
include:
Ground Air Task Oriented Radar (G/ATOR) (ACAT 1C)
Delays Initial Operational Capability (IOC) of Block 2
software (SW) counter battery development and delays start of Block 4
SW Air Traffic Control development
Transition to gallium nitride (GaN) at risk which would
negatively impact cost, i.e. ``should-cost''
Reduced system procurements increases production cost,
scheduled to end in FY20, into FY21
Industrial Base: Potential impacts to the GaN supplier
base when G/ATOR funding is taken in context with other DOD investment
reductions in advanced radar technologies
Common Aviation Command and Control System (CAC2S) (ACAT
1AM)
Negative impact on Limited Deployment Unit (LDU)
production, and testing
Delays Full Deployment and stretches completion of
procurement into FY19
Joint Light Tactical Vehicle (JLTV) (ACAT 1D)
Delays USMC IOC, Milestone (MS) C, and Full Operational
Capability (FOC)
Extends USMC procurement past currently scheduled
attainment of Approved Acquisition Objective (AAO)
Army sequestration impacts may contribute to Marine Corps
delays
Mr. Turner. What measures will you take to mitigate the impact of
sequestration on counter-IED efforts that could potentially diminish
the Department's flexibility and increase risks to rapidly respond to
unanticipated requirements?
General Wissler. Countering IEDs will remain a priority for the
Marine Corps. Inherent flexibilities provided under the Budget Control
Act will allow the Marine Corps to mitigate impacts to CIED programs in
FY13 by using available prior and current year funding. However, we
will not have these same flexibilities in FY14. Prioritization and risk
reduction decisions on counter-IED efforts in the long term will be
made in the context of the discretionary cap reductions in the Budget
Control Act and their impact on the Marine Corps' entire procurement
portfolio and associated priorities.
Mr. Turner. How will you make cuts to major defense acquisition
programs without forcing them into a Nunn-McCurdy breach? Should
Congress modify the requirements that currently apply when a Nunn-
McCurdy breach occurs?
General Wissler. Efforts to major defense acquisition programs
without forcing them into a Nunn-McCurdy breach would include:
Reductions to other programs in order to preserve
capability provided by Major Defense Acquisition Programs (MDAPs) would
have to be made based on the Service's priorities and flexibility
provided to the Department for the application of sequestration.
For current MDAPs the Service may de-scope capability to
maintain costs within the current Acquisition Program Baseline.
The Marine Corps recommends language that would recognize the
unusual circumstances of MDAP breaches due to sequestration and
authorize the Marine Corps to restructure and re-baseline in order to
establish a new Acquisition Program
Baseline.
Mr. Turner. Would sequestration and a yearlong CR affect life
extension programs for F/A-18s and AV-8Bs resulting in a higher strike
fighter shortfall this year or in the years ahead?
General Wissler. Sequestration will cause a fiscal and operational
environment of ``haves and have-nots''--the F-35 is no exception.
Reducing the funding of the
F-35 program will impact the development of the combat capabilities the
Marine Corps needs from the aircraft and/or limit the number of
aircraft and related equipment needed to meet operational requirements.
For the Marine Corps Air Ground Task Force, the Nation's force in
readiness, overall integrated aviation capabilities will be degraded in
terms of overall survivability, tactical agility, and strategic
flexibility due to a diluting of capabilities from a decrease in
procurement, sustainment, and operational funding.
Mr. Turner. How would sequestration and a yearlong CR scenario
impact your ground combat and tactical vehicle strategy? What programs
will be delayed or impacted by this budget uncertainty?
General Wissler. In FY13, sequestration should not have a negative
impact to our ground combat and tactical vehicle strategy. These
reductions were mitigated by current and prior year assets.
In the long-term, sequestration will have a negative impact on our
warfighting investment portfolio, including several critical vehicle
modernization and sustainment programs. We have mitigated some of the
impact by prioritizing and sequencing our investments. For example, we
are investing in the Joint Light Tactical Vehicle now because it is the
most mature capability, followed by investment in the Amphibious Combat
Vehicle program. These measures, however, cannot fully mitigate the
negative effects of sequestration. Our High Mobility Multipurpose
Wheeled Vehicle (HMMWV), Assault Amphibious Vehicle (AAV), Light
Armored Vehicle (LAV), and tank modification programs, which are
critical to maintaining the operational availability of these vehicles,
will likely be slowed significantly. Critical survivability and
mobility upgrades to the AAV and LAV fleets will be delayed. These
delays will ultimately impact our ability to provide Marines with
ready, relevant and capable combat systems.
Mr. Turner. What programs do the Marine Corps anticipate it will
have to cancel or extend due to the budget uncertainty?
General Wissler. If sequestration were fully implemented, the
Marine Corps would have to assess every program. Sequestration will
cause interruptions during program acquisition that increases the total
program cost, as schedules slip and delays result in longer contracts,
loss of efficiencies, negative impacts on development and production
schedules, program restructures and potentially cause Nunn-McCurdy
breaches. In procurement, existing contracts will have to be
renegotiated which will prevent the Marine Corps from receiving
Economic Order Quantity
pricing.
The Marine Corps will also have to sustain legacy systems longer
than planned, which will ultimately drive up current operation and
support costs. We will have to shift our attention to developing and
replacing obsolescent parts for legacy systems that are no longer
available in the market place, which will shift the workforce to a
focus of reengineering old and inefficient technology (e.g. sustaining
5 legacy radar systems will cost more than employing one new Ground/Air
Task Oriented Radar (G/ATOR)). Finally, technologies designed to
improve efficiencies (fuel, lightweight armor, etc.) will have to be
postponed, preventing the Marine Corps from reaping planned savings
while simultaneously driving up costs due to the use of older, more
expensive technologies.
Mr. Turner. If the continuing resolution is in place for a full
year, what impact does this have on the execution of the Marine
Personnel Carrier and Joint Light Tactical Vehicle program?
General Wissler. With the enactment of the FY13 DOD Appropriations
Bill, the risk of a full year continuing resolution has been
eliminated. Both the Marine Corps Personnel Carrier (MPC) and the Joint
Light Tactical Vehicle (JLTV) programs will continue to be under
budgetary pressure resulting from future year budgetary
uncertainty.
Mr. Turner. According to the Commandant's planning guidance, the
Marine Corps seeks to develop an expeditionary force capable of
forcible entry to support the National Military Strategy during
emerging conflicts and instabilities. The guidance also indicates that
the Marine Corps desires to be a ``middle-weight force . . . light
enough to get there quickly, but heavy enough to carry the day upon
arrival, and capable of operating independent of local
infrastructure.''
How would sequestration and a yearlong CR scenario affect this
planning guidance? What additional risks would the Marine Corps have to
assume given this budget uncertainty?
General Wissler. Despite the effects of sequestration, the Marine
Corps will do everything in our power to protect enduring U.S. global
interests that underpin our prosperity. We will meet our
responsibilities for rapid response to crises wherever they may occur.
Still, the Marine Corps' ability to execute our expeditionary crisis
response role is based upon one word--READINESS. This requires trained
Marines, ships at sea, and aircraft in the air. These assets are the
foundation of our forward deployed and rotational forces. Without them,
not only will our forces become hollow and unable to respond as we are
accustomed to, but we will make enduring national interests hollow as
well. Insufficient maintenance and operating resources may limit the
presence of Marines forward, and therefore the ability to intervene
when our citizens, diplomats, allies or interests are threatened. We
will be able to respond to crisis as a nation, but our response options
will be limited, and our response times dramatically slowed. The risk
of small-scale crises escalating is increased without forces that can
rapidly contain them at their lowest levels. Without ready amphibious
ships and well-trained Marine units, there will be less engagement with
allies and partners, leading to decreased deterrence for small scale
conflict. Without ready Marines, our Nation will forfeit a primary
political-military tool that helps to protect U.S. interests, prevent
conflict, and enable our joint forces in war.
Mr. Turner. What impacts would be associated with the Procurement,
Marine Corps account?
General Wissler. Potential sequestration reductions distributed
across the Procurement, Marine Corps (PMC) appropriation by line item
will have long-term impacts including:
Operational Impacts
Delayed Initial Operational Capability/Full Operational
Capability (IOCs/FOCs)
Unaffordable Approved Acquisition Objectives (AAOs)
Reduced procurements (resulting in less equipment)
Delayed reconstitution and reset
Cost
Increased total cost due to decreased competition (i.e.
anticipate a reduction in industrial base and small businesses)
Increase unit costs (due to decrease in number of units
procured)
Contract termination costs (when applicable)
Performance/Capabilities
Postpone modernization/upgrade (resulting in reduced
system performance)
Reduced trade space . . . compromised requirements
(resulting from the program being no longer affordable)
Reduced collective Marine Air Ground Task Force (MAGTF)
capabilities
Retention of legacy solutions
Schedule
Longer production timelines due to phasing of dollars
Delayed reconstitution and reset
Delayed fielding
Delayed technology refresh
Mr. Turner. Are any PPAs exempt from sequestration and on what
grounds?
General Davis and General Moeller. Apart from the President's
exemption of military personnel accounts, there are no PPAs exempt from
sequestration.
Mr. Turner. How will the CR and sequestration impact your major
defense acquisition programs and will these reductions require a change
in national military strategy?
General Davis and General Moeller. The Air Force has only addressed
the impacts for FY13. Sequestration cuts to Air Force modernization
investments, if applied at the program, project, and activity level as
planned, impact every one of the Air Force's acquisition programs. For
example, the F-35A low rate initial production would see reductions of
at least two aircraft from the requested 19 in FY13. Such potential
reductions not only drive up unit costs--resulting in FY14 production
funding shortfalls--they also delay follow-on software and flight
testing. While the disruptions to the detailed planning and execution
of the Air Force's complex investment and modernization programs, such
as the F-35 and KC-46, would be significant, the impacts to the
industrial base grow in magnitude as the reductions cascade down
through the network of companies that support each program.
The current SECDEF-directed Strategic Choices and Management Review
will determine if the impacts of sequestration will require any change
to the current Defense Strategic Guidance, and in turn, the National
Military Strategy. At a minimum, reductions associated with
sequestration will drive the need to prioritize within and among the
National Military Objectives (Counter Violent Extremism, Deter and
Defeat Aggression, Strengthen International and Regional Security, and
Shape the Future Force). As a result, the Air Force has already
implemented a series of prudent measures to help mitigate current
fiscal year budget risks; however, sequestration and other fiscal
constraints have already disrupted strategic planning efforts and this
will cause short-term and long-term effects that will adversely affect
the Air Force today and for years into the future. These significant
fiscal constraints require creative and innovative approaches to ensure
the Air Force continues to play an integral role with Joint and
interagency partners as we work together to meet national security
responsibilities.
Mr. Turner. Please describe how the effects of sequestration differ
for major defense acquisition programs in different stages of
development and fielding? For example, would it be less disruptive for
programs still in development, which are primarily based on a level of
effort, than those in production?
General Davis and General Moeller. In general, regardless of
program size, programs in earlier stages of their lifecycle have more
flexibility to adjust to changes in funding by adjusting requirements.
Programs nearly complete with development or with less-flexible (i.e.
fixed-price type) contracts have fewer options to mitigate
sequestration, which may lead to impacts such as schedule delays or
increased costs. Mature programs in production with better defined unit
costs and production rates also have less flexibility to respond to
cuts, potentially forcing quantity reductions and unit cost increases.
Mr. Turner. Will the potential effects of sequestration differ for
major defense acquisition programs using different contract types and
acquisition strategies (fixed-price v. cost-reimbursement; multiyear
procurement v. annual procurement)?
General Davis and General Moeller. Regardless of contract type, the
effects of sequestration could drive a descope in program requirements,
delays to performance, or termination. While cost-reimbursement type
contracts may provide more flexibility and quickness to react to
changes than fixed-price type contracts; both require modification. For
both annual and multiyear procurements, reductions in the required
number of items or level of service could result in increased unit
prices. In the case of multiyear procurement, reductions could result
in a Government breach of contract if the requirements fall below a
minimum commitment in the
contract.
Mr. Turner. Would large numbers of fixed price or multiyear
procurement contracts need to be renegotiated due to sequestration?
General Davis and General Moeller. The Air Force is carefully
managing our multiyear and large fixed price development, production
and sustainment contracts to avoid breaks in production or service.
Smaller fixed price agreements at the installation-level are the most
vulnerable.
Mr. Turner. Please provide details on the major defense acquisition
programs that would experience any delays in fielding needed
capabilities to the warfighter as a result of the effects of
sequestration and yearlong CR?
General Davis and General Moeller. Sequestration cuts to Air Force
modernization investments, if applied at the program, project, and
activity level as planned, impact every one of the Air Force's
acquisition programs. For example, the F-35A low rate initial
production would see reductions of at least two aircraft from the
requested 19 in FY13. Such potential reductions not only drive up unit
costs--resulting in FY14 production funding shortfalls--they also delay
follow-on software and flight testing.
Mr. Turner. What measures will you take to mitigate the impact of
sequestration on counter-IED efforts that could potentially diminish
the Department's flexibility and increase risks to rapidly respond to
unanticipated requirements?
General Davis and General Moeller. The Air Force has largely
absorbed sequestration of FY13 funding in ways which avoid impacts to
operational capabilities supporting Counter-IED efforts in Afghanistan.
Key ISR support such as U-2 Dragon Lady, MQ-1 Predator, MQ-9 Reaper,
MC-12 Liberty, and Blue Devil Block 1 will not have their support to
Counter-IED efforts impacted by sequestration. Likewise, sustainment of
crucial EOD equipment will not be impacted by sequestration. However,
sequestration funding reductions will impact the Dismount Detection
Radar (DDR) development effort; which is being mitigated by delaying
delivery of two systems and foregoing some risk reduction testing in
lieu of cancelling this important capability solution. Although the Air
Force is developing and has fielded considerable flexibility in its
capabilities, sequestration reductions leave no unallocated funding
available to rapidly respond to unanticipated Counter-IED requirements
that cannot be addressed with current systems.
Mr. Turner. How will you make cuts to major defense acquisition
programs without forcing them into a Nunn-McCurdy breach? Should
Congress modify the requirements that currently apply when a Nunn-
McCurdy breach occurs?
General Davis and General Moeller. In all likelihood, the
Department will need to make cuts to defense acquisition programs that
may cause Nunn-McCurdy breaches. The Department may be declaring
critical breaches on dozens of programs, some from terminations, but
many others to the original and current baselines established in the
pre-sequestration era. As a result, the required certifications and
milestone re-approvals may overwhelm OSD and Service personnel. At this
time we do not recommend modifying Nunn-McCurdy requirements.
Mr. Turner. How would sequestration and a yearlong CR scenario
impact the procurement of F-35Cs and F-35Bs? Would lower procurement
numbers results in a future strike fighter shortfall?
General Davis and General Moeller. The Air Force is procuring F-35A
aircraft and is not procuring F-35B or F-35C aircraft. The Department
of the Navy is procuring these versions of the Joint Strike Fighter.
Mr. Turner. Would sequestration and a yearlong CR affect life
extension programs for F-15s, F-16s, and A-10s resulting in a higher
fighter shortfall this year or in the years ahead?
General Davis and General Moeller. F-15: The F-15 does not have a
formal service life extension program. Scheduled, periodic Programmed
Depot Maintenance (PDM), which is performed on each F-15 approximately
every 6 years, is used to repair known service life issues.
Sequestration will remove 2 (of 75) aircraft from the PDM schedule
in FY13. These 2 aircraft will be rescheduled for FY14. While this
reduction will not cause a drastic reduction in aircraft availability
or any immediate groundings, it will cause a cascade of PDM deferrals.
Without additional funding, there will be a ripple effect causing at
least 1 aircraft from FY14 to be pushed to FY15. The Air Force has not
yet determined any additional impact of sequestration in the outyears.
F-16: The F-16 is currently in the Research, Development, Test &
Evaluation phase of the Legacy Structural Life Extension Program
(SLEP). This program will extend the certified service life of 300 F-16
aircraft from 8,000 Equivalent Flight Hours (EFH) to 10,000 EFH. This
translates to an extension of the F-16 service life by approximately 8
years in order to provide a viable F-16 fleet until replaced by the F-
35.
Sequestration will not have a significant impact on the F-16 SLEP
in FY13. The program is currently in full scale durability testing as
part of the RDT&E phase, and fielding of SLEP aircraft will not occur
until 2018. The Air Force has not yet determined the impact of
sequestration in the outyears.
A-10: The A-10 does not have a formal service life extension
program. The
A-10 Wing Replacement Program (WRP) exists to replace the legacy wings
with a structurally enhanced form, fit, and function replacement wing
that will not need inspection for 10,000 flying hours, and will keep
the A-10 flying through 2035.
Sequestration will not have a significant impact on the A-10 WRP in
FY13. Congress provided additional funds to maintain the A-10 force
structure, and there is sufficient funding to procure the maximum
number of wings specified in the WRP contract. The Air Force has not
yet determined the impact of sequestration in the outyears.
Note: As a result of the Consolidated and Further Continuing
Appropriations Act for 2013, there is no impact to the F-15, F-16, or
A-10 programs resulting from a yearlong CR.
Mr. Turner. What effects could sequestration and a yearlong CR have
on the military aviation industrial base?
General Davis and General Moeller. Sequestration is driving
significant reductions in Air Force expenditures within an extremely
short period of time. These reductions in Air Force spending will
negatively impact the industrial base network of suppliers on which the
Air Force depends for the parts, supplies, and services needed to
sustain our operational capabilities and infrastructure. The Air Force
is concerned not only with the impacts but also by the fact that the
reductions that cause these impacts reduce the ability to mitigate
them.
As part of Air Force actions to immediately reduce spending, the
Air Force will be flying fewer hours, conducting fewer training
exercises, reducing the flow of aircraft into depot maintenance, and
deferring maintenance on facilities and equipment. These operational
reductions translate immediately into less demand for parts, supplies,
and services. This rapid and dramatic change in Air Force expenditures
challenges our suppliers. For large suppliers with a diverse customer
base, the consequences may be barely noticeable, no more than a ripple
in their financial flows. For smaller suppliers whose primary customer
is the Air Force, the consequences may be extremely significant, even
resulting in a calamitous drop in their financial flow that threatens
the viability of their company. In a March 13, 2013 article, Bloomberg
reported that an index of 18 small- to mid-size defense contractors has
fallen 7.3 percent this year while a corresponding index of the top 10
defense contractors has risen 6.6 percent.
______
QUESTION SUBMITTED BY MR. MAFFEI
Mr. Maffei. I represent Hancock Air National Guard Base in
Syracuse, NY. Hancock has approximately 400 full-time employees of
which 280 are DOD civilians and 120 Active Guard reservists. This means
approximately 70 percent of the base's full-time staff will be
furloughed in the coming months. Is that percentage on par with other
similar Air National Guard units or is Hancock more severely impacted
than other units? Can you also address any other impacts on
acquisition, programming that sequestration may have on the MQ-9 Reaper
training mission at Hancock Air Base?
General Davis and General Moeller. Furloughs if implemented will be
in accordance with the SECAF Fiscal Year 2013 Sequestration Guidance
Memorandum dated 11 Mar 2013 and NGB guidance for Administrative
Furlough dated 1 March 2013, provided by NG-J1-TN. Based on this
guidance it is likely that all Air Technicians will be furloughed for
some yet-to-be-determined number of days between now and the end of
this fiscal year, with very few exceptions. Air National Guard full-
time workforce consists of 62% Title 32 civilian employees overall. The
174 ATKW full-time force structure is consistent with the ANG full-time
force structure.
There will be no foreseeable acquisition impact at Hancock Air
National Guard Base as the acquisition process is complete for the MQ-9
RPA mission performed by the 174th FW.
The Air Force is still working to determine and minimize the
impacts of sequestration upon operations.
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