FROM: U.S. DEPARTMENT OF DEFENSE
Budget Cuts Threaten Defense Industrial Base, Official Says
By Cheryl Pellerin
American Forces Press Service
WASHINGTON, March 4, 2013 - Large and sudden U.S. spending cuts and an unstable budget environment promise long-term damage to a critical segment of the defense industrial base, the Defense Department's top maintenance official recently told a congressional panel.
John Johns, deputy assistant secretary of defense for maintenance policy and programs, testified last week before the House Armed Services readiness subcommittee, along with officials from industry professional associations.
The defense industrial base, or DIB, is the worldwide industrial complex whose companies perform research and development, design, production, delivery and maintenance of military weapons systems to meet U.S. defense requirements.
A critical component of the DIB is the defense sustainment industrial base, whose companies support fielded military systems from procurement to supply-chain management, along with depot and field-level maintenance and equipment reuse and disposal.
Normally, a mix of public and private sustainment capacity and capabilities are available to the services and play a crucial role in the department's ability to respond to the nation's security requirements.
During the hearing, the panel sought to assess the viability of the defense sustainment industrial base and implications for military readiness given two major fiscal constraints: the nation's budget crisis and many months of Defense Department funding through a continuing resolution that freezes fiscal year 2013 spending to fiscal 2012 levels.
"The combined potential shortfalls and cuts are so large, we anticipate reductions, delays and cancellations in work orders within our public depots and shipyards, and on contracts with the private sector," Johns told the lawmakers.
Such actions will begin as early as this month, he added, and continue throughout the fiscal year.
In response, Johns said, the military services will manage the existing funded workload, resource the highest-priority maintenance, and do what they can to mitigate harmful effects on readiness, sustainment industrial base capability and the workforce.
Actions that can be reversed will receive priority, he explained, but "given the magnitude of the combined, concentrated reductions, even the most effective mitigation strategies will not be sufficient to protect the sustainment industrial base."
As a result, the department's top maintainer said, third- and fourth-quarter inductions of equipment into depot repair lines will be canceled in many areas.
For example, in the Navy, "70 percent of ship maintenance in private yards in the third and fourth quarter will be canceled," he said. "That's 25 ship availabilities and potentially two carrier refuelings, and complex overhauls on the aviation side -- 320 airplanes, approximately 10 percent of the fleet and over 1,200 engines and modules."
This will result in readiness problems in four air wings, Johns added. There will be impacts in the industrial base in all three fleet-readiness centers and across the entire shipyard complex.
"Very clearly," the deputy assistant secretary said, "this level of impact is going to have an associated effect on assets available for the Navy to deploy worldwide. There's no doubt about that."
The continuing resolution is affecting the department's ability to move money from one account to another, Johns said, adding that for the Army, the associated shortfalls in operations and maintenance accounts affect the entire depot and arsenal system, with impacts in multiple weapon system maintenance activities across the board.
Army Chief of Staff Gen. Ray Odierno estimated recently that 50 percent of the impact to the Army is associated with the continuing resolution and 50 percent with the severe cuts required by sequestration, Johns added.
If sequestration and funding by continuing resolution are allowed to continue, he observed, "gross financial and production inefficiencies will be generated, thousands of government temporary and term employees and contractor personnel will be impacted immediately, hundreds of small businesses and businesses with strong military-market dependency will be placed at risk, and the readiness of numerous major weapon systems and equipment and, in turn, each service's ability to satisfy future mission requirements, will be seriously degraded."
The damage may be so severe in some areas, he said, "that full recovery within our national industrial base, both public and private sectors, from just fiscal 2013 reductions could take up to a decade."
The end of the Iraq conflict in December 2011 and the drawdown of combat troops in Afghanistan by the end of 2014 may produce in some the expectation of a peace dividend, Johns said, but "given the full-spectrum [national security] threat we're facing, I'm not sure that we should actually be seeking one."
The department's current fiscal situation is so drastic and is taking place over such a short period of time, he said, "the drawdown in the post-Cold War era was nowhere near the slope we're looking at in fiscal 2013."
The bottom line is that each service's ability to support surge and sustained operations will be seriously damaged, Johns told the panel.
Protecting the DOD workforce will be a priority in each service and among companies in the DIB and defense sustainment industrial base, the deputy assistant secretary explained.
This is critical "to ascertaining capabilities for us in the future in the industrial base ... and protecting the critical skills that we would identify in [such an] analysis would be a centerpiece of our department-level strategy," Johns said.
"From a strategic perspective," he added, "we would be looking at protection of highly complex work associated with highly complex equipment, work associated with software maintenance, critical safety items and materiel requiring true artisans."
Johns continued: "The workforce that we're talking about in both the public and private sectors are probably some of the most patriotic citizens that we have in the country."
Such workers have experienced the war "through the equipment they have had to refurbish that have bullet holes in them, that have [improvised explosive device] damage, battle damage, sand and dust damage. They know and have contributed significantly to the success of the war," he said.
A furlough is likely to "send a very strong signal to them of indiscriminate actions and lack of value associated with their contribution to national defense," the deputy assistant secretary said.
"It is not going to be viewed very well," he added, "... and the uncertainty of future workload is not going to be a good signal to them."
