October 02, 2013

Former CAPE Director: Focus on Preserving Key Industrial Base Capabilities

Former Cost Assessment and Program Evaluation director Christine Fox believes the Defense Department has made a lot of good progress in finding ways to reduce costs and protect vital industrial base skills, but she said there are several key areas in which the department cannot lose focus as budgets shrink.

Speaking at a Center for a New American Security event Sept. 30, Fox said that even if Congress granted the Pentagon flexibility in how it carries out its $50 billion in annual sequestration cuts--an idea that many in Congress and in DoD have advocated--the department could only generate about half of the needed cuts by trimming overhead, changing the pay and benefits structure and drawing down force structure.

“Flexibility alone is not the solution to the sequestration impact on our industry and workforce,” she said. Rather, “the biggest thing that would help us is to backload the reductions. Let us do it strategically and put in place the things it would take to get the levels down so the budget is reduced in the out-years, but give us the time to get there. That would not force us to do these nonstrategic things.”

Even cutting the number of troops or closing bases, if Congress allowed it, would incur upfront costs to achieve out-year savings, said Fox, who led CAPE from 2009 until the conclusion of the Strategic Choices and Management Review process earlier this year. So without allowing the sequestration cuts to be backloaded, Fox said it is clear there is no way to get around cutting readiness and modernization accounts to pay the sequestration bill.

Fox said that DoD and industry need to identify particular skills that need to be maintained in the industrial base no matter what happens with the budget, and then funding cuts could be tailored to preserve those skills. She said people tend to look at total number of jobs, or people, affected by any cuts, but she implored the Pentagon and industry to take “a very cold and clear view of exactly what we must protect in this country if we’re going to maintain a strong technological edge in the future post-sequestration craziness.”

During her time with CAPE, the Pentagon began to look at this very issue, Fox said. She noted that they got as far as realizing that research and development needed to continue even if DoD couldn’t afford to start an acquisition program, for example, to maintain certain industry capabilities and programmatic knowledge. But what DoD still needs to figure out is how to maintain critical design and construction capabilities if major systems are only being funded in R&D accounts but not being