We get it. Whenever legislation regarding the Pentagon is in the news, there’s a lot of Sturm und Drang (rousing action and high emotionalism, according to Merriam-Webster) about how expensive it is to run the Department of Defense (DoD). After all, the DoD budget accounts for the largest tranche of discretionary spending in the federal budget.
But the particular piece of legislation that is all over the news right now is the National Defense Authorization Act (NDAA). As we said in our Five Fast Facts on the NDAA, this bill cannot cause a single dollar to be spent from the U.S. Treasury. Only appropriations bills can do that. And Congress hasn’t sufficiently pulled itself together to pass the DoD Appropriations bill for Fiscal Year 2022 – which began more than two months ago. So even though you’re reading that the Pentagon topline was raised by $25 billion, to $768 billion if you also include Department of Energy programs, this does not mean spending will automatically rise by that much.
Repeat after us: the NDAA is not spending legislation!
There was a time, ‘lo those many years ago, when every dollar appropriated for the Pentagon was required to be authorized at the exact same level. Ah, those were the days, my friends! Order and discipline to the legislative process meant the Appropriations Committees weren’t the only arbiters of spending levels. While the Appropriations bills were the only ones that could cause the spending of money (see paragraph 2, above) the authorizing committees (in the case of the Pentagon, the Armed Services Committees) had to agree and put the same spending level in their legislation.
In the years since that process broke down, the Armed Services Committees have lost their role in shaping spending decisions. So, back to the topic at hand, the NDAA setting Pentagon policy for FY22 is approaching the finish line.
Policy decisions abound in the final version of the bill, and most of those decisions need dollars to back them up. It usually costs money to enforce policies, particularly if you are setting a new policy that requires new organizations. A recent case in point being the formation of the Space Force. New policy? Yes. But it’s mighty expensive to set up an entirely new military service and so money must flow to affect the new policy.
Among the policies that may require significant new spending in future appropriations bills to be realized, or may lead to more wasteful decision making, as well as some that rightfully increase oversight:
- Proposed increases to so-called “Deterrence Initiatives”: Wearing our budget watchdog hats, we believe the normal Pentagon budget process wherein the Combatant Commanders set their military requirements, the military services respond by training and equipping their forces to meet those requirements, and the services make their budget requests to do that training and equipping, is a tried-and-true process going back decades. Short circuiting the process with these new “initiatives” breaks down that discipline. They are a recipe for wasteful spending and reduced oversight.
- The European Deterrence Initiative (EDI) is authorized to receive as much as $4 billion. This is significantly more than the Biden Administration requested ($3.4 billion). As budget watchdogs, we continue to cast a cold eye on the accounting for this initiative and doubt the efficacy of spending this much money outside the existing NATO budget process.
- The even newer Pacific Deterrence Initiative is given authority to increase spending to a whopping $7.1 billion. This is under the rubric of countering the influence of China, which is the mantra of those looking to give the Pentagon everything it wants.
- Repeal of the statutory preference for fixed-price type contracts: This is a super nerdy issue, mostly followed by government contract lawyers and the defense contractors they represent. Response to the issue swings like a pendulum across requiring fixed-price contracts, preferring fixed-price contracts, and having no preference on contract type. This bill removes the statutory preference for using fixed-price contracts, allowing cost-plus contracts to be used once again. On the one hand, requiring fixed-price contracts can penalize smaller, less established companies from bidding on government contracts. The risks could be ruinous. This ultimately pushes them from the market, making the government rely upon the “big boys” of government contracting who usually have a firmer grasp on how much it will cost to produce an item for the Pentagon. And, as our colleagues at Project On Government Oversight have written fixed price contracts have risks for the government as well, “With a price set before the design has matured, companies have an incentive to cut costs to maximize their profit and potentially deliver an inferior product. Decision-makers must carefully balance these considerations as they make contracting decisions”. We add that relying on contract type to supposedly reduce contract costs is never a substitute for adequate management and oversight of contractors. Not an easy issue to parse, so we’ll be keeping an eye on the effect of the repeal of the statute.
- Denial of Air Force request to retire equipment: Sorry Secretary of the Air Force, not only will you not be allowed to retire certain tactical airlift aircraft, but that denial is written as a statutory floor on the number of aircraft that must remain in the inventory. This is a serious and significant change to the way Congress previously flexed its parochial muscles. In years past, so-called “General Provisions” in the Defense Appropriations bill kept military services from reducing equipment inventory. But, given how appropriations bills work, that prohibition only lasted as long as the fiscal year. Moving the prohibition to statute makes it much harder to change in the future. We have said it for years: it’s rare for a military service to say they don’t want or need to maintain an expensive, older system. The Congress, if it is serious about listening to what the services say they need, should get out of the way of these requests.
- Increased oversight of the F-35 program: The F-35 aircraft is the most expensive procurement program in the history of the Pentagon, and sustainment of the program is on track to exceed $1 trillion. Given the substantial commitment of future Pentagon resources, we applaud the additional oversight and reporting on items like the sustainment system, previous recommendations of the Government Accountability Office, the oxygen delivery system, and the Adaptive Engine Transition Program. The F-35 budget request for FY22 was $9.3 billion for 85 aircraft and that’s what the NDAA authorizes. Programs of this size and expense need more oversight, not less.
There’s more to be found in this massive policy legislation, and we’ll keep digging. Meanwhile, we’re keeping an eye out for the actual Pentagon spending bill…whenever Congress gets around to passing the appropriations bills for the current fiscal year. Because that’s when the fiscal rubber meets the road.