U.S. official says Army’s industrial base in “death spiral”

The Association of the United States Army (AUSA) is a private, non-profit educational organization that represents America’s soldiers and supports the U.S. Army – Active, National Guard, Reserve, civilians, retirees, government civilians, wounded warriors, veterans, and family members.

Stew Magnuson reports for National Defense that on Oct. 15, 2014, the final day of the AUSA’s annual conference in Washington, DC, a panel of officials, industry leaders and academics spelled out all the problems with the U.S. armed service’s research, development and acquisition enterprise.

The panel’s moderator asked at what point will Army readiness be compromised by sharp reductions in research, development and acquisition spending.

Heidi Shyu

Assistant Secretary of the Army for Acquisition, Logistics and Technology Heidi Shyu replied, “We are already at that point” and that the Army-owned manufacturing facilities are in a “death spiral.”

Shyu said R&D and acquisition accounts have dropped twice as fast as the Army top line budget over the past three years, due to overall budget cuts, last year’s government shutdown, and furloughs of the civilian workforce. Parsing out the design and development accounts, the Army now has the smallest budget of all the armed services. All of which ” is very disconcerting for our future.”

Shyu said budget cuts do not equate to less work, but equate to more work as programs are strung out. That means more contracts have to be issued. Meanwhile, the vital contracting workforce is being “slashed and burned.” One-third the budget does not mean the Army needs one-third the number of personnel to carry out the acquisition duties, she added.

With the possible return of sequestration in 2016, the Army might be writing two budgets. “It creates an enormous amount of additional work and churn on all the folks that we have in the acquisition workforce,” she said.

The furloughs had an “incredible impact on the civilian workforce’s morale,” she said. The attrition rate is increasing. “We are starting to lose people we don’t want to lose.”

As acquisition programs are stretched out, it causes more inefficiencies. Purchasing items in smaller quantities equates to higher costs as opposed to buying in bulk. Referring to the Defense Department’s Better Buying Power 3.0 initiative, Shyu said, “It’s not better buying power. It’s much worse.”

The Army acquisition enterprise is being asked to deliver systems the Army needs but can’t currently do so in a timely manner. Because workloads are going down substantially in the organic industrial base — manufacturing carried out by government-owned plants — the rates the Army must pay are going up. That results in fewer items that can be purchased.

“This is a death spiral that we’re in,” she said. Congress won’t allow a Base Realignment and Closure process to reduce capacity, so there are few knobs the Army can turn.

Patricia McQuistion

Lt. Gen. Patricia McQuistion, deputy commanding general and chief of staff of the Army Materiel Command (AMC), said the impact of budget cuts on AMC’s personnel “cannot be overstated” and that “It is having a significant impact on our people and their ability to do their work.”

The budget slowdown means AMC is being given tasks to perform incrementally, which actually requires more work on the part of contracting specialists. That creates headaches for industry as well, which “really is the most inefficient way to do our operations,” according to McQuistion.

~StMA