I would like to say that the turmoil in Washington is over, that the Democrats and Republicans in Congress and the administration will resolve their differences over the federal budget and deficit reduction allowing the various departments and agencies of the federal government to establish a rational plan for the next fiscal year. But that would be foolish. It is more likely that the “super committee” will not be able to put together a viable plan to cut $1.5 trillion or that their plan will be rejected by one or both chambers — thereby triggering automatic spending reductions.
Regardless of whether or not the super committee is successful, Congress could demonstrate its opposition to the result by refusing to pass a budget and instead passing a continuing resolution (CR). A CR allows Congress to avoid taking ownership of what inevitably will be an unpopular budget. In 2010 the Democratic majority in both houses refused to pass any appropriations bills because it was an election year and they did not want to get tagged as profligate. Because of the changes in the balance of power in the Congress that occurred in the November elections, it was more than six months before Congress actually agreed to a budget. Thus, for half a year the government operated under a CR. As the political environment becomes even more turbid, the likelihood of another CR becomes a virtual certainty.
The fiscal year 2011 CR wreaked enormous damage to DoD programs and activities. Not knowing when, if ever, Congress might pass an appropriations bill, program managers husbanded their funds, delayed soliciting bids for programs or were prevented by law from initiating funding for new activities. Contract activities that should have occurred in May and June slipped to the end of the year. In addition, because a CR is based on the prior year funding, it acted as a tax on all DoD activities. Pentagon and military service planners had to shift money around to deal with must-pay bills, of which there were a lot as a result of two wars.
Even when a defense appropriation bill finally was passed, the costs of programs had changed or available funds could not be spent in the limited time remaining in FY2011. The normal flow of DoD acquisition activities business was perturbed, producing delays and a massive bow wave in spending and contracting activity in the second half of FY2011. This bow wave has overloaded the acquisition system’s ability to execute funding, resulting in further schedule slips. These delays compound over time and promise to cause problems in defense programs in FY2012 and beyond. Once a schedule slips, the costs of the program are guaranteed to rise. Once costs rise, the overall buy is almost always cut. The impact on defense companies is reduced revenues, inability to meet financial plans and, ultimately, layoffs. The CR created a real mess.
Given the political auguries, another long-term CR in FY2012 is highly likely. In the few weeks remaining before the new fiscal year starts, the Pentagon should take steps to minimize or mitigate the negative impacts of another CR on DOD programs. Such steps would include:
— Providing guidance to program managers not to delay soliciting bids for ongoing programs, those not determined to be new starts. While actual awards and subsequent contracting actions could be delayed until the program manager is comfortable with his/her funding levels, soliciting bids will save significant time.
— Determine as early as possible those awards that can be made under the CR and expedite actions to negotiate and sign contracts as early as possible, to some degree offsetting the impact of delayed contracts. Get as much of the contracting process out of the way early so that when an appropriations bill is passed the new starts can begin immediately.
— Identify now those programs that are candidates for reprogramming actions and initiate reprogramming requests to avoid costly programmatic delays and contract renegotiation. Clearly, close coordination and good communications with appropriate members of Congress and staffers is critical to the timeliness and success of such efforts.
— Where appropriate, encourage the use of short-term contracts within the limits of a specified “rate for operations.” This will allow some funds to flow, enable contractors to make some decisions, avoid certain delays and reduce the likelihood of layoffs.
Defense officials, program managers and contracting officers have options even under a CR and within the limits of the Federal Acquisition Regulations to mitigate the consequences of Congress’s failure to pass an appropriations bill. But if it waits to act until a bill is passed it could waste much of the next year with incalculable consequences for the warfighters, the military and the defense industrial base.
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