UNCLASSIFIED How do we strengthen our national defense in this time of fiscal uncertainty? Jamie Morin OSD CAPE 19 February 2015 ASMC Washington Chapter.

UNCLASSIFIED

UNCLASSIFIED

How do we strengthen our national defense in this time of fiscal uncertainty?

Jamie MorinOSD CAPE

19 February 2015ASMC Washington Chapter Luncheon Meeting

UNCLASSIFIED

UNCLASSIFIED

O S D

• Strategy to budget– PB15 to PB16

– PB16 principles and choices

– Challenges at BCA

• Making every dollar count through smarter acquisition

• Final thoughts

2

Agenda

UNCLASSIFIED

UNCLASSIFIED

O S D

• PB15 made tough choices but maintained sufficient force structure to meet the strategy

• Congress rejected many PB15 reforms the Department proposed– Compensation– Healthcare– BRAC– Force structure reductions

• PB16 add resources and tightens our alignment to strategic guidance– Balancing joint force capacities, capabilities, and readiness– Increased focus on ISR and full spectrum combat readiness– Modified resubmit of the reforms Congress rejected– Key investments in nuclear deterrence, space, power projection and

counter-A2/AD

3

PB15 to PB16

UNCLASSIFIED

UNCLASSIFIED

O S D

• PB16 is shaped by the 2014 QDR strategy– Protect the homeland– Build security globally– Project power and win decisively

• Department’s Priorities– Rebalance to the Asia Pacific– Maintain a strong commitment to security and stability in Europe and the

Middle East– Sustain a global approach to countering violent extremists– Reinvigorate efforts to build innovative partnerships– Keeping faith with and taking care of our service members and their

families– Leverage the Defense Innovation Initiative– Prioritize and protect key investments in technology

4

PB16 Request

UNCLASSIFIED

UNCLASSIFIED

O S D

• ISR– Additional Gray Eagle and Reaper orbits– Slowing retirements of legacy forces to meet demand

• Nuclear Deterrence– $8B in additional funding to address shortfalls in the Nuclear Enterprise– Infrastructure and ICBM Security force improvements, additional nuclear

shipyard workers and force sustainment

• Space– Improving space resiliency and space control to meet the growing threat

• Power Projection and Counter-A2/AD– Additional missile capacity for Virginia class submarines– Maintain P-8A Poseidon aircraft for large area anti-submarine warfare– Increased funding for electronic warfare systems

Key Investment Areas

5

UNCLASSIFIED

UNCLASSIFIED

O S D

6

PB16 ToplineWe’re still living with uncertainty

($B)

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21$475

$495

$515

$535

$555

$575

$595

$615

$635

$655

$675

PB 2012 PB2013 PB 2014 PB2016 SCMR Sequester Caps

PB 2012

PB 2013PB 2014

BCAPB16SCMR

UNCLASSIFIED

UNCLASSIFIED

O S D

• At the PB16 funding level the strategy can bend without breaking

• Significant changes coming if forced to fund to BCA levels– Reductions in select force structure areas

• Reduce Army and Marine Corps end strength• Cut 11th Carrier and a carrier air wing• Reduce FYDP procurement by 8 ships • Divesting the Global Hawk Block 40 fleet

– Cutbacks in modernization and investment• PB16 increase in Space control investment is reduced by 70%• PB16 increase in Nuclear Enterprise investment is reduced by 40%• Break many multi-year/quantity buys of critical capabilities

– Reduced readiness• Reduce Service readiness funding by about $16B over the FYDP• Larger maintenance backlogs• Delay timeline to achieve joint readiness for full-spectrum operations

– A mechanical sequester would be even worse

7

Challenges at BCA

UNCLASSIFIED

UNCLASSIFIED

O S D

• Defense acquisition is about balancing valid, competing considerations– We cannot have a strong defense with a feeble acquisition process

• Military comptrollers play multiple roles in the acquisition process– Cost analysis advocates– Resource risk balancers in PPBE– Requirements generators (i.e., capability champions)

• Proper balancing of these roles is critical to maximizing funding stability and creating a resilient acquisition enterprise

Making Every Dollar Count Through Smarter Acquisition

8

UNCLASSIFIED

UNCLASSIFIED

O S D

• Strengthening the quality, relevance, and timeliness of cost estimation is key– Cost estimates are critical early in programs’ life cycles

• Congressional direction to improve cost estimating and acquisition program performance (e.g., WSARA) paid significant dividends– Space Fence

• Cost estimates are a tool to measure the risk of unmanageable cost growth– Air Force’s Non-advocate Cost Assessments (NACA) were used to

reduce cost risk by more than 90% in just 4 years

Cost Analysis Advocates

9

UNCLASSIFIED

UNCLASSIFIED

O S D

• PPBE has been significantly strained by the fiscal uncertainty we have been facing– Threat of BCA reductions have impaired program stability across DoD– Build fiscal resiliency into the process by remaining focused on

strategy• Financial managers need to assess alignment of resources and strategy

– Balancing short-term and long-term priorities is a challenge

• Sequestration / continuing resolutions can create vulnerable programs– In such environments, financial managers must be engaged to avoid

small blips becoming death spirals

Risk Balancers

10

UNCLASSIFIED

UNCLASSIFIED

O S D

• Capability champions are not program champions

• Requirements are not set in stone, it only seems that way– Sticking to a set of requirements after conditions have changed can be

a recipe for acquisition failure or operational failure– Focus on the end goal

• Change requirements and make trades when necessary• Seek to remain in the cost-schedule-capability “sweet spot”

– Preventing DEAMS from becoming a nightmare

• Keep asking questions / seeking options– Does this make sense?– Do we have to have ‘this program?’– Is there another way to get there?

Capability Champions

11

UNCLASSIFIED

UNCLASSIFIED

O S D

12

Balancing Challenges

Build Security Globally

Protect the Homeland

Project Power and Win Decisively

EndsBalance

Capacity

Capability Readiness

MeansBalance

UNCLASSIFIED

UNCLASSIFIED

BACKUP

UNCLASSIFIED

UNCLASSIFIED

O S D

14

CAPE Org Chart

DIRECTOR, CAPEJamie M. Morin

Principal Deputy DirectorLtGen Robert E. Schmidle Jr.

Land ForcesNaval ForcesTactical Air ForcesProjection ForcesIrregular WarfareC4 and Information ProgramsStrategic Defensive & Space PrgmsForce and Infrastructure AnalysisIntelligence, Surveillance, & Rec.

Program EvaluationDeputy Director

Scott Comes

FrontOfficeTeam

Economic and Manpower AnalysisWeapon Systems Cost AnalysisAdvanced Systems Cost AnalysisOperating and Support Cost Analysis

Analysis & IntegrationDeputy Director

Vacant

Program AnalysisSimulation Analysis CenterForce Structure & Risk Assessment

Program, Data, & Enterprise Services

Deputy DirectorJoseph Nogueira

Enterprise ServicesJoint Data SupportProgram Resources & Information Systems Management

Cost AssessmentDeputy Director

Rick Burke

UNCLASSIFIED

UNCLASSIFIED

O S D

15

Historical Topline

$0

$100

$200

$300

$400

$500

$600

$700

$800

1948

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Bill

ions

of 2

015

Do

llars

(To

tal O

blig

atio

nal A

utho

rity

)

Fiscal Year (FY)

Operations & Maintenance

MilPers + Retirement Pay + Family Housing

Procurement + RDT&E

Source: Department of Defense Green Book (FY15)Note: OCO is embedded in budget categories in all years prior to FY15; Placeholder OCO amounts are assumed to be in O&M for FY15–19

Korean War

Global Waron Terror

Cold War

Vietnam War

21%

33%30%39%

Afghanistan/ Iraq

UNCLASSIFIED

UNCLASSIFIED

O S D

$0

$50

$100

$150

$200

$250

$300

1948

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Bill

ion

s o

f 20

15 D

olla

rs (

Tota

l Ob

ligati

on

al A

uth

ori

ty)

Fiscal Year (FY)

Procurement

Source: Department of Defense Green Book (FY15)Note: OCO is embedded in budget categories in all years prior to FY15;

Korean War

Global Waron Terror

Cold War

Vietnam War

RDT&E

39%

71%51%

50%

16

Historical Investment Accounts

But are we done?Afghanistan/ Iraq

UNCLASSIFIED

UNCLASSIFIED

O S D

17

Balancing Challenges

Fiscal Uncertainty• Topline• Timing• OCO• Action on prior requests

Internal Cost Pressures• People• Acquisition• Operations and Support

Strategic & Operational Challenges• Shift to Asia – away game, geography, & A2AD• EM Spectrum Dominance• Commercial technological pacing vs DoD OODA Loop• Adversary cost imposition

UNCLASSIFIED

UNCLASSIFIED

O S D

FY 2016 President’s Budget(Dollars in Billions)

Base Budget Request: $534.3 Billion

By Appropriation Title FY 2015 FY 2016 Dollar Change

Military Personnel 135.0 136.7 +1.8

Operation and Maintenance 195.4 209.8 +14.5

Procurement 93.6 107.7 +14.1

RDT&E 63.5 69.8 +6.3

Military Construction/Family Housing 6.6 8.4 +1.9

Other 2.1 1.8 -0.3TOTAL 496.1 534.3 +38.2

By Military Department FY 2015 FY 2016 Dollar Change

Army 119.5 126.5 +7.0

Navy 149.2 161.0 +11.8

Air Force 136.9 152.9 +16.0

Defense Wide 90.6 94.0 +3.4TOTAL 496.1 534.3 +38.2

Numbers may not add due to rounding

Numbers may not add due to rounding

18

UNCLASSIFIED

UNCLASSIFIED

O S D

Military Personnel $136.7

Operation & Maintenance $209.8

Procurement $107.7

RDT&E $69.8

FY 2016 President’s Budget

Military Construction Family Housing $8.4 Others $1.8

(Dollars in Billions)

Navy$161.0

Army$126.5

Base Budget Budget By Military Department

Air Force$152.9

Defense Wide$94.0

Budget Request: $534.2 billion 19

UNCLASSIFIED

UNCLASSIFIED

O S D

PB 2016 Significant Modernization Programs

• 57 Joint Strike Fighters ($10.6B)

• 16 P-8 aircraft ($3.4B)

• 5 E-2D aircraft ($1.3B)

• KC-46 tanker ($3.0B) and Long Range Strike development ($1.2B)

• 9 ships ($11.6B)

• George Washington (CVN) overhaul ($678M)

• Ohio replacement strategic submarine development ($1.4B)

• Littoral Combat Ship capabilities improvements ($55M)

• Cyber capabilities enhancements ($5.5B)

• Ground Based Interceptor reliability ($1.6B)

• Army helicopter modernization (e.g., Light Utility Helicopter) ($4.5B)

• Reaper (MQ-9) procurement ($821M) 20

UNCLASSIFIED

UNCLASSIFIED

O S D

PB 2016 Continues to Pursue Compensation Reform

• FY 2016 Budget request savings (FY16, $1.7B; FYDP $18.2B)

– FY16 Basic Pay raise 1.3% (FY 2016, $0.7B; FYDP, $4.3B)

– Slow growth in Basic Allowance for Housing – an additional 4% out-of-pocket above 1% authorized by Congress in FY 2015 (FY 2016, $0.4B; FYDP, $3.9B)

– Reduce Commissary Operating costs and subsidy through efficiencies and revenue generating opportunities gained through legislative changes (FY2016, $0.3B; FYDP, $4.4B)

– Consolidate TRICARE healthcare plans with altered deductibles/co-pays to encourage beneficiaries to seek care in the most appropriate setting and improve the overall continuity of care. (FY 2016, -$0.1B; FYDP, $3.1B)

– Implement modest annual fees for TRICARE-For-Life coverage for retirees 65 and over (FY 2016, $0.1B; FYDP, $0.4B)

– Additional changes to pharmacy co-pay structure for retirees and active duty family members above the FY 2015 authorized level to further incentivize the use of mail order and generic drugs (FY 2016, $0.3B; FYDP, $2.0B)

21

UNCLASSIFIED

UNCLASSIFIED

O S D

Overseas Contingency Operations

• Included with this Budget Request– $50.9B– Continues decline since FY 2010– Reflects continued operational demands on U.S. forces

• Continues responsible transition in Afghanistan– Includes training and equipping of Afghan security forces ($3.8B)

• Funds Counter-ISIL Operations ($5.3B)– Includes training and equipping of Iraqi forces and vetted moderate Syrian opposition ($1.3B)

• Includes Counterterrorism Partnerships Fund ($2.1B)• Continues European Reassurance Initiative ($789B)• Funds International support ($1.7B)

– Coalition Support Fund

• Resets/retrogrades equipment ($7.8B)• If sequestration lifted, plan to transition enduring costs currently funded in the OCO

budget to the base budget beginning in 2017 and ending by 2020

22

23

The FY 2016 President’s Budget is a Strategy-Driven, Resource-Informed Budget

585 574

437468

479

534

601

666 666691

687645

33

583

6

23

3

8

3

71

17

597

* Reflects FY 2013 Enacted level excluding Sequestration

614*

560578 591

Numbers may not add due to rounding

$750

$250

$500

$0FY01 FY02 FY03 FY04 FY05 FY06 FY08FY07 FY09 FY10 FY12FY11 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

287 328 365 377 400 411 431 479 513 528 528 530 495 496 496 534 547 556 564 570

345316

581

166

7391 76

116

187 146162 159

115

82 85 6451 27 27 27 27

DoD Topline, FY 2001 – FY 2020(Current Dollars in Billions)

The $27 million shown in FY 2017 through FY 2020 for OCO are placeholder amounts

Base Budget OCO Other