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Gates Battles Nominal ‘Requirements’ March 15, 2010

Posted by Matthew Leatherman in Analysis.
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Each year Congress requests lists from the military services of their ‘unfunded requirements.’ These lists itemize purchases that the services want but which the Secretary chose to exclude from the defense budget request.  This peculiar ritual and its results highlight the recent victories and struggles in defense spending.

Priority-setting already is an area of weakness for DOD.  Yet to the extent that DOD is able to set priorities and limit spending, the unfunded requirements conversation undercuts those decisions, loosens the remaining spending restraints, and challenges the Secretary’s authority within the organization.

Secretary Gates, however, is pushing back.  Instead of permitting his service chiefs to submit their unfunded requirements lists directly to Congress as had been the tradition, last year (FY10) Gates informed them that he would review the lists beforehand.  Going behind his back would no longer be tolerated.

“Should you determine there are FY 2010 unfunded requirements that are responsive to the request from Congress,” Gates commented, “I expect you to first inform me of such a determination so we can schedule the opportunity for you to brief me on the details.”

The result was a new dose of restraint.  ‘Unfunded requirements’ fell from $33.3 billion in FY08, Gates’ first budget submission, to $2.6 billion this year.  Most dramatically, the Air Force fell into proportion with the other services in FY11 after representing 51% of unfunded requirements in FY08 and 61% in FY09.

Even at reduced spending levels, though, items in these lists are ‘requirements’ in name only.  Each one has received the Secretary’s veto, a testament to their actual character: wish lists for the Services and a political football for Congress.  Indeed, this character is rather transparent.  Any item unfunded by the Secretary but required immediately (e.g., in an already-submitted budget) ought to have an urgent impact on real-time operations – yet much of the FY11 lists do not.  A few examples include:

  • The Air Force, Navy, and Marine Corps listed $928.2 million in unfunded procurement and sustainment costs for aircraft ($337.2M, $423M, and $168M respectively).  Procurements are focused on Marine Corps lift: one KC-130J, three UC-12Ws, and two UC-35ERs.  Yet even on the most aggressive procurement schedule, these aircraft cannot have a real-time impact.  Sustainment costs are distributed between the Navy and Air Force and include maintenance for B-1 and B-2 strategic bombers and the V-22 Osprey.  Strategic strike, however, plays a minimal role in Afghanistan, while the more tactically-oriented V-22 has only been deployed in Afghanistan for six months.

The unfunded requirements exercise is a misnomer, and one that supports nothing more than the Services’ spending habit and Congress’ tallying of political points.  It additionally undermines the Secretary’s command over the military and credibility when imposing fiscal discipline.  This is all cost and no benefit.  Secretary Gates rightly has pressed hard on this practice, and must press even harder so as to bring this it to an end.

Unfunded Requirements Lists



1. Marty Graham - July 27, 2010

Matt–As an Army program analyst, I have worked on the MRAP and PATRIOT programs as a System Synchronization Officer at the Pentagon, and I can attest to the incredible scrutiny each of the Army’s program undergoes prior to budget submission, both in Department of the Army and Department of Defense. However, to truly understand the figures, you have to dive deeper into the process. Let’s hypothetically use an FY12-17 Army only budget submission. This would be the budget that the President signs on the 1st Monday of February 2011:

-The process would start with a weapons system review in October of 2009. This is the forum for the Program Managers, Capability Managers, and System Synchronization Officers to present life cycle weapon system and equipment funding requirements for cross-Program Evaluation Group (PEG) review and integration, and also serves as the forum to review new and emerging funding requirements (for our hypothetical let’s assume the Equipping PEG or “EE PEG”).

-The PEG process would begin in November 2009 and run until about June of 2010. During this process, EE PEG requirements are competed against one another, validated (or not) and prioritized. Once the EE PEG has determined which requirements are valid, they are banded into three categories: Funded, Validated Unfunded Requirements (VUFR), and Critical Unfunded Requirements (CUFR). The CUFR is the amount of the UFR that, if not funded, will cause either significant delay in delivery or termination of a program of record. The VUFR is the entire difference between what the PEG validates as required and the funded amount. Without getting too much further into the weeds, it is at this stage the Army EE PEG determines what it wants and what it will do without, based on whether it believes a program has become unaffordable or unexecutable. Additionally, this is the stage where PEGs integrate requirements to ensure no duplicate effort.

-July-August of 2010, Army Budget Office completes its Budget Estimate Submission and sends it to the Office of the Secretary of Defense for review.

-OSD conducts it’s review from September-October 2010.

-From October 2010-January 2011, OSD conducts what are called Program Budget Decisions (PBD’s), where it will adjust the Army’s Budget Estimate Submission.

-No later than 31 January, OSD consolidates and sends forwards the services requests and the first Monday of February 2011, the Presidents sends his bill to congress.

With the process laid out, I would like to address several points you make:
First, to the discrepancy in unfunded requirements by service component; I would venture that the anomalies exhibited in the chart might be explained by a submission of VUFR’s in 2008 and 2009 and CUFR’s in 2010 and 2011, based on specific congressional or OSD guidance to the service chiefs. If my hunch is correct, we would be comparing apples to oranges.

Second, the fact that a requirement is unfunded does not necessarily equate to an OSD “veto” of the requested dollars. In fact, the service itself is much more likely to validate and subsequently not fund a requirement due to competing priorities. I have been a part of the whittling process, and Army Budget Office searches for spikes in fundin requirements to target billpayer or “donor” programs. Remember, within the Army the EE PEG competes its requirements against 5 other PEGs for the money that OSD allocates to the service.

Third, congressional inquiries to services are received at the Pentagon all the time. While I can concede that individuals in congress may have vested interests in seeing some service specific programs continue (and thus want to know Army’s CUFRs), it certainly would not serve the DoD’s interests to present a disjointed front to the members of the House and Senate. Inquiries aside, members of congress see the Army’s (and other services) P&R Forms which provide gory details about what is funded and unfunded in each program as well as cost to completion. I don’t understand what purpose an additional inquiry from congress would serve.

MAJ Marty Graham, ILE Student, Ft Belvoir

“The views expressed in this article are those of the author and do not reflect the official policy or position of the Department of the Army, Department of Defense, or the U.S. Government.”

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