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Tough Choices – The Transformation of the US Defence Budget

Commentary, 16 April 2009
Americas, Defence Policy
The US Defense Secretary Robert Gates has outlined plans to ‘profoundly reform’ US military spending. They include curbs on significant weapons programmes and a boost to more strategically focused projects. The underlining themes behind this new policy will certainly have implications well beyond the US defence acquisition community.

The US Defense Secretary Robert Gates has outlined plans to ‘profoundly reform’ US military spending. They include curbs on significant weapons programmes and a boost to more strategically focused projects. The underlining themes behind this new policy will certainly have implications well beyond the US defence acquisition community.

By John Dowdy for RUSI.org

On 7 April 2009, Defense Secretary Robert Gates outlined plans to ‘profoundly reform’ US military spending, urging a scaling back of some major weapons programmes while boosting funds for those deemed most relevant for current operations in Iraq and Afghanistan. For example, Gates proposed to end production of the F-22 fighter, to terminate the VH-71 presidential helicopter and to cut spending on missile defence by $1.4 billion, while bolstering funding for Predator UAVs, helicopters, Littoral Combat Ships (LCS) and special operations forces. This is, of course, just the opening salvo in the battle over the fiscal year 2010 defence budget on Capitol Hill – the recommendations still need to be formally endorsed by the White House, and then approved by Congress. Secretary Gates has chosen to follow this unorthodox approach – announcing his recommendations before the White House has submitted a budget to Congress – because of the scope and significance of the proposed changes.

His specific programme level recommendations have already generated a great deal of speculation and debate, but the underlying themes are equally important, with potential ramifications well beyond the US market.

Proven Technology, Today

One of Secretary Gates’ three principal objectives is to rebalance expenditure from countering potential enemies of the future to fighting the wars we are in today (and the foreseeable tomorrow).

‘The perennial procurement and contracting cycle – going back many decades – of adding layer upon layer of cost and complexity onto fewer and fewer platforms that take longer and longer to build must come to an end. I will pursue greater quantities of systems that represent the “75 percent” solution instead of smaller quantities of “99 percent,” exquisite systems.’

With that proclamation, Secretary Gates is attempting to bring to a close the phenomenon so well summarised by Norm Augustine in his book Augustine’s Laws, in which he observes that the cost of a fighter aircraft has grown by a factor of four every ten years from the days of the Wright Brothers to modern times. Or perhaps it is just recognition of Joseph Stalin’s maxim that quantity has a quality all it own.

Secretary Gates intends to do this by changing not just what we buy, but also how we buy it. One of the more interesting manifestations of the ‘what we buy’ part of the equation is the reversion to lower cost solutions – new and existing – at the expense of the more expensive, and presumably more capable, alternatives. More F-35 Joint Strike Fighters, fewer F-22s. Restarting the DDG-51 Aegis Destroyer programme, while ending production of the newer DDG-1000. More Advanced Extremely High Frequency (AEHF) Satellites over the newer Transformational Satellite (TSAT) programme.

And Tomorrow as Well

The ‘how’ can be even trickier in many ways than the ‘what’. Secretary Gate’s acquisition and contracting reform agenda consists of three steps. First, stopping programmes that ‘significantly exceed their budget [1] or which spend limited tax dollars to buy more capability than the nation needs.’ This is easier said than done, but he goes on to recommend cancellation of a range of troubled programmes, starting with the VH-71 presidential helicopter.

His second step is to ensure that requirements are reasonable and technology is adequately mature, and to separate appetites from real requirements, recommending vigilance against ‘requirements creep’. Again, easier said than done. But he goes on to concretely suggest against the pursuit of a development programme for a follow-on Air Force bomber ‘until we have a better understanding of the need, the requirement, and the technology.’

Finally, he calls for realistic estimates, budget stability, and adequate acquisition staffing.

Rebuilding the Acquisition Workforce

To execute all of these changes, Secretary Gates plans to increase the size of the acquisition workforce, converting 11,000 contractors and hiring an additional 9,000 government acquisition professionals by 2015 to bulk up the process. He also plans to add as many as 30,000 new civil servants to replace contractors, reducing them from 39 percent of the workforce to the pre-2001 level of 26 percent. This appears to reflect the recognition that equipment acquisition is part of the core business of defence.

An Opening for ‘Profound Reform’ elsewhere as well?

Are these the types of bold changes that can only be attempted with a new government? Or might they just create the context and momentum for similar changes elsewhere? This type of reform is sorely needed not just in America, but in many other acquisition systems around the world. The real question is whether Secretary Gates’ ambitious endeavours create a window for action well beyond the US, or if the rest of us have to wait patiently for a new government for the mandate to act.

John Dowdy is a partner in the London office of McKinsey and Company

NOTE
1. As recommended by the existing 1982 Nunn-McCurdy law, which calls for the termination of programmes whose costs grow by more than 25 per cent

The views expressed above are the author's own, and do not necessarily reflect those of RUSI.

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