us department of defense fears the budget axe
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8/8/2019 US Department of Defense Fears the Budget Axe
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Press ReleaseContact: Shaun McDougall, International Military Markets AnalystPhone: (203) 426-0800Fax: (203) 426-4262Web site: www.forecastinternational.comE-mail: [email protected] International, Inc.22 Commerce Rd. Newtown, CT 06470 USA
FOR IMMEDIATE RELEASE
Department of Defense Fears the Budget Axe
NEWTOWN, Conn. [December 16, 2010] According to Forecast International's latest analysis of theU.S. defense market, the DoD budget is facing mounting pressure from both sides of the aisle as lawmakers
struggle to rein in trillion-dollar deficits. The extent of the damage remains to be seen, however, as thereis a fundamental disagreement over whether the Pentagons coffers should be subject to the same scrutinyand cuts as non-security budgets, says Shaun McDougall, Forecast International's North America MilitaryMarkets Analyst and author of the report.
What is clear is that DoD spending will be constrained in the years ahead, especially when compared to theexpansive budget growth over the past decade. The White House projected about 1.8 percent real growthin FY11; growth is then expected to fall to 1.1 percent in FY12 and to below 1 percent after that.Furthermore, war funding will taper off as the U.S. completes its mission in Iraq, though volatile conditionsin Afghanistan leave some budgetary questions unanswered.
This top-line growth will be unable to support current DoD requirements, as Defense Secretary RobertGates has claimed the Pentagon will require around 2 to 3 percent budget growth above inflation to sustainthe military force structure. He has laid the groundwork for a budget savings initiative under which the
DoD would make significant cuts to operations & maintenance, contract services, and overhead in order totransfer over $100 billion to force structure and modernization efforts. The plan is not absentshortcomings, such as the fact that the majority of savings have been pushed to the outyears. In addition,there is a growing concern that the services could lose some or all of their savings as the governmentattempts to pay down the deficit.
What is clear for now is that the Pentagon has lowered its expectations and is adopting a planningconstruct that assumes minimal budget growth, says McDougall. The DoD also considers maintainingand modernizing its force structure a top priority. Although there is often little in terms of low hangingfruit when it comes to rising personnel costs, the DoD has shown that it at least intends to make sacrificesin order to prevent cuts to its acquisition budget, and indeed to provide substantial growth to support itswide-ranging weapons programs.
These fiscal uncertainties are especially troubling for a defense acquisition system that has been plaguedwith severe cost growth. Secretary Gates has said that affordability must be considered a key parameterthroughout the acquisition cycle, which will inherently limit the DoD's ability to modify programrequirements or take risks with technologies or schedules.
A number of major weapons programs are in the offing, including the SSBN(X) ballistic missile submarine,the Ground Combat Vehicle (GCV), long-range strike platforms, a presidential helicopter, and more.SSBN(X) will strain the Navy's shipbuilding accounts, the former presidential helicopter program wascanceled because of high costs, and lawmakers have already expressed concerns about the affordability ofthe GCV. With each of these efforts, "Designing to affordability, and not just desire or appetite, is critical,"says Secretary Gates. What remains to be seen is whether the Pentagon can live by this philosophy, andwhether it will be willing to walk away from programs that fail to meet these standards.
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Forecast International, Inc. (www.forecastinternational.com) is a leading provider of Market Intelligenceand Analysis in the areas of aerospace, defense, power systems and military electronics. Based inNewtown, Conn., USA, Forecast International specializes in long-range industry forecasts and marketassessments used by strategic planners, marketing professionals, military organizations, and governmentsworldwide. To arrange an interview with Forecast Internationals editors, please contact Ray Peterson,Vice President, Research & Editorial Services (203)-426-0800, [email protected]. ProprietarySpecial Research is also available. Contact Jonathan Watson, Managing Director, The Forecast ConsultingGroup ([email protected]).
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