Archives for August 2013

Pentagon Weighs Firing Thousands Under 2014 Spending Cuts

The Defense Department may have to fire at least 6,272 civilian employees if automatic cuts known as sequestration slice $52 billion from its fiscal 2014 budget, according to a Pentagon planning document.

Additional budget analysis is “likely to produce further reductions” as the services focus on shrinking their contract labor forces, according to a Pentagon “execution plan” obtained by Bloomberg News. The job cuts, although less than 1 percent of the non-uniformed workforce, would mark an escalation from the unpaid leave mandated under sequestration in the current fiscal year.

The services should expect a $475 billion budget after sequestration cuts for the fiscal year that starts Oct. 1, almost 10 percent less than the pending $526.6 billion request, according to the document dated Aug. 1. Sequestration would result in 16 percent reductions in the Pentagon’s procurement and research spending and 12 percent cuts in operations, maintenance and military construction.

For the most part, major weapons programs aren’t being targeted for extensive reductions, according to the plan, which was a presentation by Pentagon budget and cost-assessment officials for generals and admirals who oversee force structure and resources for their respective services.

It offers more detail than previously disclosed about the potential impact of cuts on fiscal 2014 spending. Defense Secretary Chuck Hagel, in a July 10 letter to Congress, gave a broad picture of “abrupt, deep” cuts to the military.

The planning document is stamped “Draft/Pre-Decisional” and said no final decisions have been made.

‘Starting Immediately’

Jennifer Elzea, a spokeswoman for the Pentagon comptroller, said in an e-mailed statement that she “cannot provide comment on pre-decisional documents.”

To accommodate this year’s $37 billion in sequestration cuts, the Pentagon required 85 percent of its civilian workers to each take about six days of unpaid furloughs. “No service is planning fiscal 2014 furloughs,” the plan said. Instead, the department is preparing for dismissals, known euphemistically as “reductions in force,” or RIFs.

“Realistically, it is difficult to execute a RIF in fiscal 2014 without starting immediately,” with some of the necessary paperwork submitted no later than Sept. 15, it said.

The Army would lose more than 2,100 workers from a 263,900-person civilian workforce, and the Navy would cut as many as 2,672 of 214,000 people. Department-wide agencies would dismiss 1,500 people from a projected 137,000-person force, with most coming from the Defense Contract Management Agency.

Falling Morale

The Air Force “will require targeted” reductions to its planned 185,400-person civilian workforce, though the number hasn’t yet been determined, according to the document. The Army would also release 1,000 contractors.

Firings, if they occur, will result in a “significant skill-set mismatch and degradation in morale,” it said.

If sequestration continues into fiscal 2015, according to the plan, the Pentagon would need congressional help to increase “enhanced selective early retirement” and improve voluntary retirement incentives and selective early departure dates.

For fiscal 2014, the Pentagon also may need to ask Congress for “a massive reprogramming, possibly moving tens of billions among accounts,” according to the planning document, which said it would be “very difficult to secure congressional approval.”

Readiness “would, at best, stay at degraded fiscal 2013 level and in many cases would continue to decline,” with half of the Air Force’s active-duty fighters and bombers declared not-combat-ready and two Navy air wings shut for six months, it said.

Procurement Reductions

Cuts would “affect procurement and research/development most heavily, especially non-major procurement” such as accounts that bankroll Army vehicles and Air Force missile and ammunition accounts, it said.

The Army’s pending $16 billion procurement request would be cut to $12.6 billion with sequestration reductions; the Navy’s would drop to $37.9 billion from $44.1 billion and the Air Force’s would shrink to $15.5 billion from $18.8 billion.

The accounts with the largest percentage cuts under full sequestration are those that bankroll Army aircraft and a category for “other procurement” — such as vehicles, combat engineering, bridging, maintenance and material handling equipment, and Air Force ammunition and missiles, according to the document.

The Air Force’s “other procurement” request would be cut by 30 percent to $1.6 billion. That account pays for non-major programs such as mission planning systems, drug interdiction, combat training ranges, radios and satellite modifications.

Major Programs

The Air Force would keep current funding for its version of Lockheed Martin Corp. (LMT)’s F-35 fighter, Boeing Co. (BA)’s KC-46 tanker and its long-range bomber program.

The Navy would be able to sign all contracts planned for 2014 for vessels funded under earlier appropriations. It would be forced to cut one of the four Littoral Combat Ships from its 2014 funding request.

Pentagon officials also estimated that the purchase of 25 Navy aircraft would probably be cut, including unspecified numbers of Boeing F/A-18 and Lockheed Martin F-35 jets, Textron Inc.-Boeing V-22 Ospreys and United Technologies Corp. (UTX) MH-60 helicopters.

A planned overhaul to the CVN-73 USS George Washington aircraft carrier would be delayed, the document said.

The Air Force would also have to delay additional purchases of two Advanced EHF and two Space-Based Infrared System-High satellites made by Lockheed Martin and reduce purchases of air-to-air and air-to-ground cruise missiles made by Lockheed Martin and Raytheon Co. (RTN)

Army Aircraft

The Army would be forced to stop or reduce production of the General Atomics Grey Eagle drone aircraft and cuts would delay development spending on the Ground Combat Vehicle.

The Army’s aircraft procurement account, which pays for Boeing and United Technologies helicopters, would drop to $3.8 billion from $5 billion as production would be “forced down to minimum rates” necessary to sustain production lines, it said.

The Army’s total research and development request would drop to $6.3 billion from $8 billion, it said.

The Pentagon’s Defense Advanced Research Projects Agency would cancel its F6 satellite demonstration program, it said.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net