|Office of Management and Budget||Print this document|
June 19, 1997
The Administration supports prompt congressional consideration of its national
defense authorization legislative proposal for FY 1998. As reported by the
Committee on National Security, however, H.R. 1119 raises serious budget,
policy, and management concerns.
Of particular concern, H.R. 1119 would: (1) contrary to the Bipartisan Budget Agreement, reallocate funds from the Department of Energy's (DOE) 1998 defense discretionary budget request to Department of Defense (DOD) programs; and (2) impose severe restrictions on management of DOD's depot contracting process. The President's senior advisers would recommend that he veto a final conference bill that fails to address these concerns. In addition, if any amendment is adopted that would mandate a date certain for withdrawal of U.S. forces from Bosnia, the President's senior advisers would also recommend that he veto the bill.
Violation of Bipartisan Budget Agreement
H.R. 1119 is inconsistent with the Bipartisan Budget Agreement. While authorizing overall appropriation levels for National Defense consistent with the Agreement, the bill would cut $2.6 billion from DOE programs intended for vital environmental cleanup activities and ongoing construction projects. At the expense of these high priority activities, the appropriations are reallocated to unrequested procurement programs for the DOD. For example, the bill would cancel DOE's $1.0 billion privatization initiative for nuclear waste cleanup. Failure to invest in privatization contracts for cleanup activities promotes the continued use of more costly, traditional DOE contracting approaches. This would result in a substantial increase to DOE's cleanup costs in future years. In addition, DOE would not be able to support critical environmental projects required under legally enforceable compliance agreements. Cleanup costs would increase further as facilities deteriorate and contamination spreads. As a consequence, within the limits of the defense spending levels in the Budget Agreement, DOE would incur a substantial budget shortfall in critical departmental functions. Decreased federal oversight of Department of Energy programs would increase the likelihood of contractor waste and fraud.
Depot Maintenance Competition
Section 333 of H.R. 1119 effectively prohibits DOD from contracting for depot-level weapons maintenance and repair by the private sector at any military installation that was identified for closure in the 1995 Base Realignment and Closure (BRAC) round. This provision contravenes not only the best interests of the taxpayers, but also congressional intent to improve DOD's business practices and the BRAC Commission's recommendations. It would preclude DOD from conducting its competitions to determine where maintenance work can best be performed to save taxpayer dollars and protect military readiness. Without these competitions, the Department could lose hundreds of millions of dollars in savings that would otherwise be used to purchase modern weapons systems. Additionally the provision, in effect, limits the location at which maintenance work can be performed, a mandate that is opposite the notion of DOD using competition to improve its business practices. This is an issue the House leadership has championed to date. Furthermore, for the Air Force, this provision could require a transfer of all consolidated maintenance workloads from two Air Force bases to other DOD depots, requiring a massive effort with significant risk of disruption in mission performance and degradation in military readiness. Finally, this provision represents an unprecedented interference with the BRAC process.
Bosnia Withdrawal Amendment
The Administration understands that an amendment may be offered that would mandate a date certain for withdrawal of U.S. forces from Bosnia. Such an amendment could jeopardize the safety of our troops and damage our national security interests. It would seriously undercut the U.S. commitment to help implement the Dayton Peace Accords and successfully complete the NATO-led mission in Bosnia, resulting in a serious loss in U.S. credibility with the Bosnian parties, with our allies, and with other countries participating in the Stabilization Force (SFOR) operation.
The Administration continues to believe that the duration of SFOR's mission should provide sufficient time to establish conditions to maintain security and stability in Bosnia without an outside military presence. However, this effort can only succeed if the parties and the international community remain assured of U.S. leadership and commitment to peace in Bosnia.
Base Closure and Realignment. The Administration is disappointed that the Committee did not adopt the Department's proposal to authorize two additional rounds of base closure and realignment in 1999 and 2001. Defense's base infrastructure is far too large for its military forces and must be reduced if the Department is to obtain adequate appropriations for readiness and for modernization requirements for the next decade.
Arms Control Programs. The bill reduces appropriation authorizations for DOD's Cooperative Threat Reduction program and for DOE's nonproliferation programs by over 25 percent from the Administration's request. This would: (1) delay by one year the core-conversion program that will greatly reduce the amount of weapons-grade material produced by Russian nuclear reactors; (2) delay security upgrades at the storage sites for Russian nuclear warheads and potentially other sites that store nuclear materials; and (3) slow efforts to a ssist Russia with the destruction of its chemical weapons. The Administration urges the House to restore appropriation authorizations to the requested level for these important and highly effective means of enhancing U.S. security through eliminating foreign weapons of mass destruction and preventing weapons proliferation.
Increases for Procurement Programs Not In the Future Years Defense Program (FYDP). H.R. 1119 adds $3.7 billion to the Administration's request for procurement. Some of these increases, however, are for programs that are not in the FY 1998-2003 FYDP and are of questionable value to the Department's overall plans to modernize military forces. These additions include: $175 million for OH-58D Kiowa Warriors Helicopters; $111 million for upgraded Paladin Self-Propelled Artillery systems for the Army National Guard; and $81 million for upgraded Field Artillery Ammunition Support Vehicles for the Army National Guard.
Rather, the Administration urges reallocation of these appropriation authorizations to restore the DOE reductions and to support key DOD modernization programs, such as the F/A-18E/F aircraft procurement and development; the Navy's Arsenal Ship Demonstrator; and the next-generation aircraft carrier, CV(X)-78.
B-2 Bombers. The Administration opposes the authorization for $331 million more than requested to reestablish elements of the B-2 production line and to procure advance material to produce nine more bombers in the future. The DOD concluded, in both the Deep Attack Weapons Mix Study and the Quadrennial Defense Review (QDR), that the $20 billion cost to procure and operate more B-2s exceeds the benefits.
F/A-18E/F. The bill authorizes only $1.3 billion for an unspecified number of F/A-18E/F aircraft. The President's Budget requested $2.1 billion for 20 F/A-18E/Fs. A cut of this magnitude would be extremely disruptive to the program, as it "ramps up" from 12 aircraft in FY 1997 to 20 aircraft in FY 1998. The bill would slow production and reduce anticipated efficiencies.
Attack Submarine Procurement. H.R. 1119 would block the plan to construct New Attack Submarines using an innovative teaming arrangement between the two shipbuilders. Shipyard teaming will reduce procurement costs from current statutory requirements while meeting the Congress' intent to involve both shipyards in nuclear submarine construction, avoid a potentially destructive competition for future submarine construction and preserve the submarine industrial base. The Administration urges Congress to support its teaming plan.
DOE Program Direction. The bill would reduce appropriation authorizations for DOE Program Direction by $221 million. That would require large Reductions in Force (RIFs) of Federal employees beyond cuts already planned, and a 50 percent reduction in support services. The reductions would severely harm DOE's efforts to improve management of contracts on which the Department spends nearly $10 billion per year. The reductions would disrupt critical activities and restrict DOE's ability to assure the safety of its facilities.
DOE Community Assistance. Defense-related downsizing has reduced contractor employment at DOE sites by 40,000 (25 percent). By denying authorization of the Administration's request of $28.3 million for development assistance to communities impacted by this downsizing, the Committee would forego the creation of 1,900 jobs in six communities. Other Objectionable Provisions
Micromanagement of the Department of Defense. H.R. 1119 would undercut the Secretary's managerial authority and seek to micromanage Defense operational programs. Most significantly, the bill would: (1) impose unnecessary restrictions on the Seawolf attack submarine; (2) impose unreasonable restrictions on the reprogramming of Operations and Maintenance funds that would deny base and unit level commanders the latitude to realign funds as dictated by mission requirements; (3) unilaterally transfer oversight of morale, welfare, and recreation (MWR), commissary and exchanges to U.S. Defense (Comptroller); (4) constrain the ability of the Secretary of Defense to oversee the Ballistic Missile Defense Office; and (5) impose limits on funding levels for the Office of the Secretary of Defense.
Bosnia. The Administration is concerned that the bill would withhold funds from the Military Services pending the submission of a detailed report on the future of the U.S. Bosnian mission and the political and military environment in the region. Demanding such onerous reporting requirements in the midst of ongoing operations diverts manpower resources from focusing upon and accomplishing the important tasks at hand.
Counter-drug, Humanitarian Deminning. The Administration regrets that the Committee did not approve the Department's proposals to revise authorities for the counter-drug and humanitarian demining programs. The Administration's proposed revision of counter-drug authorities is a key component of the National Drug Control Strategy and would allow us to adapt counter-drug operations to changes in drug trafficking patterns in Columbia and Peru.
Active Duty End Strength. The Administration is concerned that H.R. 1119 imposes end strength floors. In light of additional manpower reductions recommended by the QDR, continuation of personnel floors would be disruptive to the Department's plans to implement the QDR.
White House Communication Agency (WHCA). The Administration objects to the reduction to the WHCA's operating budget. The Administration has worked with the Congress in a good faith effort to accurately portray WHCA expenditures. This reduction appears to have been based on incorrect information concerning WHCA's current year funding.
Exempting Navy and MARAD Ship Disposal from the Toxic Substances Control Act. The Administration objects to exempting the sale or sinking of Naval vessels from the Toxic Substances Control Act (TSCA) and Maritime Protection Research and Sanctuaries Act. While the Navy and MARAD face a serious problem due to their inability to dispose of ships, the Administration has not yet determined the best method for resolving these difficulties. Thus, the provision is premature. The Administration is working toward a solution that allows Navy and MARAD to dispose of ships in a timely manner while retaining adequate environmental controls on the process.
Military Pay Raise. The Administration is gratified that Congress provided a 2.8 percent raise as requested by the President for military members. It is concerned, however, that the delinking of civilian and military pay raises could create significant equity and budgetary issues, especially in an era of declining resources.
Termination of the Ready Reserve Mobilization Income Insurance Program. We are gratified to see that H.R. 1119 responds to the Administration's concerns about the Ready Reserve Mobilization insurance program and will pay all promised benefits while keeping the integrity of the insurance concept intact.
H.R.1778 - Defense Reform Amendment
The Administration shares many of the goals of the Defense Reform Bill, H.R. 1778, to achieve more efficient and cost effective DOD operations. Individually, many of the provisions have merit, such as reinforcing use procedures when buying commercial items, repealing the requirement for contractor guarantees, promoting the use of performance-based service contracts, and measures that expand competition. In other areas the Administration agrees with the goals, but disagrees with the course of action for achieving them. For example, the targets for workforce reductions ignore the success of reduction efforts to date and, of even more concern, would leave a workforce insufficient to ensure that DOD receives maximum value for its money at a time when procurement budgets are increasing. Also, while the Administration is vigorously promoting the use of purchase cards, their mandatory use is objectionable because it removes the discretion of line officials to use other more economical methods.
The Administration strongly disagrees with some provisions of the bill, including the proposal relating to DOD criminal investigations and audits and required process changes to study and notification requirements that contradict the worthy goals of other competition and outsourcing provisions. The Administration strongly objects to the termination of advisory committee provisions. The establishment of an advisory committee is a tool used by the Executive Branch to carry out its policies. We oppose any Congressional attempt to limit the Executive Branch's ability to carry out its policies. In addition, the Administration objects to the provision that would waive the current lease-purchase scoring rules and other OMB directives for certain Navy ship leases. Lease-purchase is always more expensive than outright purchase, because the government can borrow more cheaply than the private sector.
Also of concern is Title III, which includes amendments to Superfund and other environmental statutes. The Administration is engaged in bipartisan negotiations on comprehensive reform, and consequently strongly opposes these modifications to the programs outside of this process. Finally, H.R. 1778 would provide a reduced offset for early retirement and create separate buyout authority for Defense acquisition personnel. The reduced offset provision is objectionable on grounds of cost, precedent, and equity. The buy out provision lacks the controls and limitations applicable to existing buy out authority. In fact, it could result in buyout payments being given to someone who is involuntarily separated.
In summary, H.R. 1778 should be returned to Committee so that the Administration and other stakeholders are afforded an opportunity to comment on its wide-ranging provisions.
The Administration, as it continues its review of the bill, may identify other issues, and will work with the Congress to address these concerns and to develop a more acceptable bill.