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15 Mar 19. Congress wars with defense secretary over $98bn ‘slush fund.’ Senators from both parties took aim at a Trump administration plan to dramatically increase the overseas contingency operations budget as a workaround to the caps in the Budget Control Act.
Sen. Jack Reed (D-R.I.), ranking member of the Senate Armed Services Committee, said at a March 14 hearing that the OCO budget request was “a gimmick” and that “overloading the OCO request at $97.9bn worth of activity that truly belong in the base budget … far exceeds any precedent, and it cannot be justified.”
The administration’s budget request of $750 bn in overall defense spending includes $174bn in OCO funds — about $100bn more than was appropriated in 2019. OCO spending is carved out of the mandatory spending caps in the Budget Control Act and allows the military to ramp up spending in wartime.
The administration wants to use about $9.2 bn of the OCO funding for the border wall and disaster funding and about $98bn — the figure Reed referenced in his statement — for base budgetary requirements. About $66bn will go to “direct war and enduring requirements,” acting Defense Secretary Patrick Shanahan said.
The fact that the funding for the border wall project is included in the request also presents political hurdles, which Reed alluded to in a question to DOD Comptroller David Norquist.
“You’re asking us literally to authorize funding for the wall?” Reed asked.
“Yes,” Norquist answered.
Sen. Elizabeth Warren (D-Mass.) called the OCO increase a “slush fund.”
Warren said, “You’re asking [for at least] $98bn for things that have nothing to do with contingency operations, and I’m not quite sure why you can’t say that,” she said.
Shanahan confirmed that war activities had not increased, but he said that the request for the top-line $750bn budget were justified. DOD, he said, “want[s] to work with this committee to get the appropriation and authorizations proper.”
Sen. Tom Cotton (R-Ark.) said the request was “obviously is a big patch to try to get around the Budget Control Act” and was concerned it foretold a return to continuous resolutions.
Cotton asked Shanahan whether if Congress could come to a deal on budget caps, having the OCO increase in the base budget would be better for DOD.
“It would be much better off,” Shanahan said. (Source: Defense Systems)
19 Mar 19. These US States Receive the Most in National Defense Spending. California, Virginia and Texas get the most defense dollars while Wyoming receives the least among the 50 states and the District of Columbia, according to a Pentagon report released Tuesday.
Virginia’s 8.9 percent share also tops the list of states for defense spending as a share of state gross domestic product, followed by Hawaii at 7.3 percent and Connecticut at 5.6 percent. Oregon is at the bottom, at 0.5 percent, according to the report by the Defense Department Office of Economic Adjustment.
Overall in fiscal 2017, DoD spent $407bn in contracts and payrolls across the states and in D.C., or about $1,466 for every American, the report said. Total spending amounted to 2.3 percent of the nation’s GDP.
Of the $406bn total, $271.7bn, or 67 percent, was spent on contracts for products and services, and $135.3bn, or 33 percent, went for the salaries of DoD personnel, the report stated. Total defense spending by state ranged from $49bn in California, followed by Virginia, at $46.2bn, and Texas, at $37.7bn. Wyoming was at the bottom at $393.6m.
The top three counties nationwide for defense contract spending were Fairfax County, Virginia, with $13.7bn spent; Tarrant County, Texas, $13bn; and San Diego County, California, $9.2bn.
Lockheed Martin Corp. was listed as the top defense contractor for the year, receiving $30.5bn in defense spending, followed by Boeing ($22bn), General Dynamics ($13.5bn), Raytheon ($11.8bn) and Northrop Grumman ($11.5bn).
In his remarks at The Brookings Institution and during a question-and-answer session afterward, O’Brien said data for defense spending by state for fiscal 2018 is being gathered this month, but he did not anticipate major changes in the rankings of the states.
The top five or six states are expected to remain in the same positions in terms of defense spending and percentage of defense spending as a share of state GDP, he said.
O’Brien did not address in depth the current controversy over the Trump administration’s intent to divert money from military construction projects to pay for a border wall and how the transfer might affect the overall defense budget.
“The wall is a challenge for the department,” O’Brien said, adding that the issue is not in his lane as OEA director. (Source: Military.com)
19 Mar 19. DoD 2020 Budget Looks to Fix Shipbuilding, Ammo Industrial Base. The Defense Department plans to pump $286m into parts of the defense industrial base identified as at risk by a major White House report released late last year. The investments aim to boost everything from large shipyards to tiny suppliers of ammunition components. Budget documents released last week for fiscal 2020 fail to spell out exactly where that money will go. But Pentagon spokesperson Lt. Col. Mike Andrews told me that the money will support “a number of areas in the industrial base – such as shipbuilding and munitions – to increase readiness and ensure robust capabilities as we address the near-peer threats outlined in the National Defense Strategy.”
There are plenty of concerns about the health of the manufacturing sectors both in shipbuilding and ammo production, albeit for very different reasons.
On the Navy side, the service currently faces a massive backlog in shipyard availabilities and that means slow repair times. A whopping 70 percent of the service’s destroyers can’t make it out of the shipyard on time when they come in for repairs. That has more than operational impacts. If the Navy ever hopes to reach its goal of a 355-ship fleet, it will have to extend the lives of dozens of ships already nearing the end of their lifespans — and do so at a time when shipyard space is already stretched.
The Navy is looking to make more and better use of both public and private shipyards to do maintenance work, Vice Adm. Tom Moore, head of Naval Sea Systems Command, told the West 2019conference last month. “Industry has got to hire more,” Moore said. “We got to build a system that incentivizes industry to have the right people there, so I think you’re going to see a real sea change in the way we’re working to acquire repair work.”
Over the past two decades, the workforce and capacity of the entire defense industrial base in the United States has shrunk, the report stated, shedding more than 20,500 U.S.-based manufacturing firms. As these mostly small companies shuttered their doors, some of that domestic work was sent overseas, leading to a situation where “a surprising level of foreign dependence on competitor nations exists.”
An example of the at-times brittle nature of the industrial base was highlighted by the fact that the Navy currently contracts with just one company to make and repair propeller shafts used by both surface ships and submarines.
Because of the fact that only one shop exists, technical schools have stopped training prospective skilled workers to operate the older machinery used by that company. “If the forge is not modernized, the facility may exit the market, causing disruptions to multiple Navy programs,” the report states.
The Navy had a startling wakeup call last year, when it discovered flaws in the welding of missile tubes aboard the first of its $128bn Columbia-class submarines.
The Navy’s primary submarine builder, Electric Boat, had contracted out the welding work to BWX Technologies, which subcontracted it to another, smaller company. Due to the lack of submarine work in recent years, some of the welding and inspection skills needed had withered, creating a situation that George Drakeley, the civilian in charge of the Navy’s submarine programs called a “debacle,” late last year. He said fixing the issue is “ramping up is going to be harder than we thought.”
The problem also affects the Royal Navy’s new Dreadnought-class submarines, which use the same Common Missile Compartment as the American Columbia class.
When it comes to ammunition, most of the risk the Pentagon sees is with sub-tier suppliers of things like switches and discrete electronic systems. Many of the parts for rockets and projectiles are only made by a single supplier, or use critical source materials from foreign suppliers that could be compromised in some way, officials worry.
Many of those concerns were spelled out in the annual Industrial Capabilities Report, put out by the Pentagon’s Office of Manufacturing and Industrial Base Policy, last spring. The report found that the industrial base of the munitions sector has been battered by the hot-and-cold nature of munitions procurement over the years, and thinned out by the dearth of new designs being developed.
Some smaller parts makers have just dropped out of the segment due to the lack of work, leaving gaps in replacing parts in the supply chain. Other important suppliers are foreign-owned, and many raw materials and computer components are being sourced from China (yes, China).
Overall, the industrial base report, compiled by the White House and Pentagon with plenty of defense industry input, identified 300 areas at risk of atrophy, or where the demise of a single supplier could put weapons programs at risk.
The $286m ask is a blip in the $718bn budget request for fiscal 2020, but Pentagon officials last year pledged to start filling in the gaps of those 300 vulnerabilities in this year’s budget request.
Eric Chewning, deputy assistant Defense Secretary for industrial policy, told reporters when the report dropped, “I wouldn’t think of this just as an additional ask for money. We also need to be spending more wisely, This isn’t just an investment fix. There’s also legislative fixes; there’s policy fixes; there’s regulatory fixes.”
Chewning has predicted “about a third” of the 300 issues would be dealt with in this budget, with another third addressed over the next few years. The final third “are things that long term we’re going to have to manage, recognizing that new stuff is going to come in and things are going to pop out as we dynamically manage the industrial base.” (Source: Defense News Early Bird/Breaking Defense)
15 Mar 19. DoD Inspector General Slams F-35 Program Office for Allowing Lockheed to Manage Government Property. The F-35 Joint Program Office has not adequately tracked government property leant or leased to Lockheed Martin and its subcontractors, an oversight that a new investigation by the Defense Department’s inspector general said could impact readiness. Building the F-35 Joint Strike Fighter requires the use of government property such as materiel, special tooling like molds used to form the jet’s structure and unique test equipment. Over the lifespan of the program, the F-35 JPO has not followed the mandated procedures used to manage government-furnished property, or GFP, and instead depended on Lockheed and its subcontractors to keep track of such equipment, stated a DoD IG report released Friday.
“As a result, the DoD does not know the actual value of the F‑35 property and does not have an independent record to verify the contractor‑valued government property of $2.1bn for the F‑35 program,” the report said. “Without accurate records, the F‑35 Program officials have no visibility over the property and have no metrics to hold the prime contractor accountable for how it manages government property.
“The lack of asset visibility restricts the DoD’s ability to conduct the necessary checks and balances that ensure the prime contractor is managing and spending F‑35 Program funds in the government’s best interest and could impact the DoD’s ability to meet its operational readiness goals for the F‑35 aircraft.” (Source: defense-aerospace.com/Defense News)
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