Lt. Gen. Charles Davis, right, told Air Force program managers to anticipate that top line budgets will remain flat. (Air Force)
With no long-term budget in place yet to fund defense programs through Oct. 1, the Air Force has directed all program managers to assume their top line budgets will remain flat.
For contractors, that will mean more intense competition for future programs, more scrutiny of whether costs are fair and reasonable and more dialogue up front about what the Air Force is willing to pay for certain capabilities.
Congress has yet to give final approval of a bipartisan budget deal announced last week by House Budget Committee Chairman Rep. Paul Ryan, R-Wis., and Senate Budget Committee Chairman Sen. Patty Murray, D-Wash. The deal, which passed the House Dec. 12, would provide agencies some relief from sequester budget cuts and cap the government’s discretionary spending at $1.012 trillion this fiscal year.
The deal would restore about $22.5 billion to the Defense Department’s 2014 budget and $9 billion in 2015. But “tough decisions will still be necessary going forward in order to achieve the right balance in military capacity, capabilities and readiness,” Defense Secretary Chuck Hagel said last week about the deal.
If budgets were to increase, “we’re going to restore some readiness into the services, that means the investments will probably stay flat,” said Lt. Gen. Charles Davis, the military deputy in the office of the secretary of the Air Force for acquisition. “If there is a budget deal reached, we’re probably not going to see as much as you think,” Davis said at an AFCEA Air Force IT Day in Virginia last week.
“We’ve asked all our program managers to tell us what that flat line means and tell us how you execute to that,” he said, adding that, “there are no longer budgets we have anywhere within our programs that do not have some level of sequestration applied to them.”
That means the Air Force will have to curb its requirements and appetite for capabilities that cannot be met with mature technologies and be very judicious about the technological capabilities it can afford, Davis said.
The Air Force has also been asked to take risks, the Pentagon euphemism for cutting, in systems that have limited, single-use missions or are more suited for an area where forces are not involved in contested operations, Davis said. Major programs, including the F-35 Joint Strike Fighter and Space Based Infrared System, will more or less be protected in future budgets. The Air Force is also working to protect investments in cybersecurity, IT networks and areas that provide healthy returns.
Davis said the Air Force traditionally loses about $600 million a year because programs may have been canceled or delayed and, subsequently, funding expired. Last year, the Air Force lost about $200 million because of poor execution.
One area in particular the service is clamping down on is what it spends on knowledge-based services. “What do we do with all these people, not only on the government side but on the industry side?” Davis said. “You need them around through the next program. You need some of the expertise that’s there.”
Marcus Weisgerber contributed to this report.