posted Washington Business Journal, 21 Jan 2014
By Ray Bjorklund, President, BirchGrove Consulting
Finally, we have some fiscal 2014 appropriations without worrying too much about whether the edge of the cliff will crumble beneath our feet. But don't think it's smooth sailing from here on out.
The bipartisan budget deal struck between the House and the Senate last December—and recently made manifest in the 2014 appropriations—gave the Department of Defense some breathing room. Agencies can enjoy higher budget control caps, some limited flexibility in reprogramming within the budget caps, and two-year operations and maintenance appropriations instead of the typical one-year funding.
That said, the anxiety and uncertainty that led to the sequester decision and the waves of equivocation in the acquisition system that followed the early March 2013 decision aren't going away with the arrival of this breathing room.
Why? The long-term budget reduction targets are pushed to the right, but still there. Trying to fulfill today's requirements has been tenuous enough. Tomorrow's requirements—driven by the smaller budget—are unclear.
Secretary Hagel's Strategic Choices and Management Review came up with a list of options. He is already taking steps to introduce efficiencies into the Pentagon organization. As much as those efficiencies will disrupt organizational structures and reduce contract spending, they pale in the face of the tough decisions to be made about which warfighting missions to pursue and the assets and support tail needed to implement and sustain those missions over the next decade.
Will cyber warfare and information operations become more important than weapons platforms? What is the value of an aircraft carrier in enforcing national security? Will pay and benefits for boots-on-the-ground forestall the requirement for the next-generation fighter?
DOD knows this will be a steep mountain to climb. In August testimony before the House Armed Services Committee, defense officials put it this way: "In making this strategic transition, we only deserve the amount of money we need and not the amount of money we have gotten used to…."
Instead of wringing our hands about limited budgets and an imperfect acquisition system, we need to capitalize on this breathing room to help DOD (and Congress) rationalize the operational requirements that drive appropriations and acquisition.
With a well-defined and well-balanced portfolio of warfighting capability that fits within future budget constraints, we and our defense customers can focus on the procurement and execution of those portfolio programs.
So what should contractors do? There are three steps you can take.
First, next time your service or trade association advocates the legacy of the military interests it represents, think hard about the long-term sustainability of that position. A capability that must be mothballed yields a paltry revenue stream.
Second, identify solutions that depend on less tail and less physical presence. Conflicts can be won without amassed forces. Turn doctrine upside down if you have to. New technologies, applied in asymmetric ways, will lead to strategic and tactical advantage. Get it right, and you have long-term business.
And finally, don't suggest a roadmap that disrupts the industrial base to the point it can't be systematically re-tooled to support the future defense establishment. Due to the complex linkages in the defense world, that disruption may interfere with your legacy program revenue.
As members of industry, we must take DOD's admission to heart. There's a certain amount of money that we have gotten used to as well.
©2014 Washington Business Journal. Used by permission.