July 20, 2012

DOD officials explain sequestration dangers

by Jim Garamone
American Forces Press Service

Pentagon officials continue to work to avoid the looming threat of sequestration, Frank Kendall, the new undersecretary of defense for acquisition, technology and logistics, said July 16.

Kendall spoke to Pentagon reporters in his office about sequestration, and the effect it would have on the department and the defense industrial base.

Sequestration comes out of the Budget Control Act. Now due to take effect in January 2013, sequestration calls for $500 billion in cuts from defense on top of $487 billion in defense cuts already agreed to.

Kendall believes that additional budget reductions called for through sequestration would damage DOD’s ability to defend the nation and create a hollow force.

“Cuts are one thing, but cuts in this irrational fashion is another thing entirely,” the undersecretary said.

Defense industry leaders are right to be worried about sequestration, he said. “They understand the impact of this probably better than anyone else. The main impact of this will probably be on them,” Kendall said.

Many defense firms are readying for sequestration with letters going to employees and general belt-tightening, the undersecretary said.

Within DOD, “the investment accounts are going to be hit hard and in a very irrational way,” Kendall said. “A lot of the work we’ve done over the past couple of years is going to be put at risk, if not more than that.”

Sequestration rules allow the president to exempt military personnel accounts from the process. If that happens, “then a greater burden falls on the other accounts — including operations and maintenance and [research and development] accounts,” Kendall said.

“Sequestration applies to funding that is not yet obligated, he said. “The reduction assigned to acquisition programs is based on the unobligated funding at the time sequestration goes into effect.”

In general, this means the reduction will be applied to funds not yet on contract, Kendall said. A small subset of acquisition programs – some research and development contracts, incrementally funded ships, multiyear contracts – are funded year by year, he said, so they are on contract, but not all the funding is obligated up front.

“This raises the pain for everybody else,” Kendall said. “We’re trying to send a strong message that sequestration is just an unacceptable outcome. It’s completely unnecessary, there’s no reason it should occur. The Congress simply has to act to avoid it, and we’re hopeful that it will.”

No one on Capitol Hill thinks this is a good process, he said.

“Everyone thinks this is a bad idea, and almost everybody thinks we should do something to avoid it,” Kendall said. “I haven’t talked to anyone yet who knows how to do that.”

The undersecretary said it is the general belief that nothing will happen on sequestration before the November presidential elections.

“There are a number of schemes that have been talked about up on the Hill,” he said. “So far all of the ones I’ve heard about are not politically workable. There’s a chance that there will be a delay in implementation, which just defers the problem.”

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