As Pentagon budgets tighten, military depots remain a tempting but tough target
They still need to break a sweat, but the wrench turners, mechanics and other “artisans” at U.S. military depots do not appear to be an immediate target for cost savings even as the Pentagon, White House and Congress eye so-called sequestration cuts for the long term.
The question is, though, for how long are they relatively safe?
“You know, it's a very sensitive political subject. Right now, with the situation we're in at the department, we are looking at creative ways to try to save money and to have more competition,” says Pentagon acquisition chief Frank Kendall. “We're not allowed to have competition, I think, under the law, between the depots and the commercial world at that moment. I don't know that we're going to go so far as to try to take that one on politically.”
Ironically, Kendall's comments this summer come as theis busy proposing a slew of unpopular ideas, from closing more bases to reining in personnel benefits, let alone allowing some combat units to slip in readiness. But they also come as the Defense Department pushes its Better Buying Power strategy, which relies heavily on the benefits of competition, to help it get more “ bang for the buck.”
That will become increasingly important as federal dollars become scarcer under the long-term effects of the 2011 Budget Control Act and its spending caps or automatic sequestrations, i.e., widespread budget rescissions, if Congress does not appropriate on its own to the predetermined caps. With fiscal 2014 starting Oct. 1, and with it, the near certainty of another round of sequestration—and, at $52 billion above plan, also larger than the $37 billion that took effect in March—the whole idea of introducing competition in military depot work could become harder to fend off.
“It's something we should think about,” Kendall adds, knowing he is touching on a sensitive subject. “There's a very strong [congressional] caucus, as you're well aware, that supports the depots. And we do need some capacity there. So the question is, what's the right balance? I think we need to be sure that our depots are giving us value, and we need to have competition where we can. But I'm not sure that we can move very far away from the situation we have right now in terms of the balance.”
Yet, while it was always tenuous, the balance appears to be teetering even further lately. Today's military depot regime stems from Washington's fears following World War II that industry would abandon the maintenance, repair and overhaul (MRO) business in light of a major drawdown in the armed forces. U.S. law was passed to require the Pentagon to maintain a “core maintenance capability”—or a combination of people, facilities, equipment, processes and technology, as expressed in direct labor hours—that is government-owned and operated to meet regular and emergency force-generation requirements. In even-numbered years, the Pentagon must provide lawmakers a so-called Biennial Core Report outlining its status.
According to the latest report from 2012, which was examined this year by congressional auditors, the Defense Department's overall planned workloads exceed its core capability requirements. But the military also faces work shortfalls approaching 1.4 million hr. in certain categories for the Army, mostly with ground combat vehicles, as well as for the Air Force. There, the armed service sees total workload shortfalls of about 404,000 hr. in communication and electronic equipment, namely unmanned air system (UAS) ground stations, and ordnance, weapons and missiles, according to the(GAO) examination. Moreover, the Air Force acknowledged to auditors additional workload shortfalls of about 64,000 hr. with some aircraft components.
Those work shortfalls—or excess depot capacity, depending on how one looks at it—has the MRO industry afraid and all but certain that as federal budgets tighten and lawmakers and others look to protect their bases and related jobs, work that has been outsourced to contractors will be brought back in-house (AW&ST April 29, p. 38). Indeed, from whatofficials told the GAO, they are right to think so.
Air Force officials told the GAO that almost all the USAF workload shortfall stems from a lack of “organic” depot capability to repair ground stations for the anticipated increase in manufacturing of thePredator and UAVs, as well as their missile launchers and defensive systems. Contractors currently repair the aircraft—but to mitigate the shortfall, as congressionally required, the service will incrementally assign maintenance work to depots for the UAV ground stations through fiscal 2016 and for the other systems by 2017. New in-house work on other aircraft weapon systems, such as for the Joint Strike Fighter (JSF), also will be used to mitigate depot shortfalls, the Air Force told the GAO (see page 47).
Nevertheless, despite lower federal spending and increased cost pressures elsewhere, the Air Force will have to ramp up capital investments to do this MRO itself because it does not have the people or facilities necessary now, according to the GAO. Considering recent spending and authorization markups for 2014, as well as vociferous congressional lobbying of the Pentagon to exclude depot workers from defense furloughs, albeit unsuccessful, lawmakers apparently are not thinking twice in providing those funds.
“The quality of work that is performed in these facilities is unparalleled,” a bipartisan group of eight lawmakers from the House Depot Caucus wrote leading appropriators in both chambers of Congress last month. “We applaud you for including significant funding in support of the organic industrial base, including for depot maintenance, facilities modernization and mobilization capacity. We urge you to fund these accounts at the highest possible level in the final fiscal 2014 legislation.”
Furthermore, underscoring the point that depot workers should be retained over others, the caucus authored an amendment in July to the House's defense appropriations bill for the next fiscal year that would exclude roughly 180,000 workers, those paid through the Pentagon's self-funded five working capital accounts, from sequestration-related furloughs in 2014. Despite its political polarization, the House adopted the amendment by voice vote, indicating widespread agreement.