The Insider

The Defense Business Board held its quarterly meeting last week, during which it discussed the status of a task group's study on "applying best practices for corporate performance management" to the Defense Department.

The impetus for the study, according to briefing slides shown during the meeting, was that "the department currently faces an extraordinary confluence of management challenges, mounting costs and budget reductions, while continuing to provide for the national defense." Consequently, the task group is to "evaluate how successful executives of large and complex corporations plan, implement and maintain strong performance, especially during periods of reduced resources and/or significant changes." The group is also tasked to "identify strategies, practices and performance metrics which could be used by DOD leadership," according to the presentation slides.

View those briefing slides.

The board also discussed the findings of a study on commercial satellite communications services. Our coverage:

The Pentagon should designate a single office to procure all satellite communications assets and services, according to a Defense Business Board task force.

During its quarterly meeting today, the board approved the task force's recommendations for how to better take advantage of commercial satellite communications services. Notably, the task force's new report says the Defense Department should "facilitate future governance by designating a single DOD point for procuring all [satellite communications] assets and services."

The report also calls for the Pentagon to "address which organization(s) has operational and tactical execution authority."

"Multiple DOD officials asserted ownership for key components of SATCOM (i.e. strategy, operational, tactical and acquisition support, etc.)," the report states. "From an outside view, appears current roles and responsibilities are ambiguous."

The Air Force Space and Missile Systems Center procures military satellite communications assets and selected frequencies to meet end-user requirements, the report states, while the Defense Information Systems Agency procures commercial satellite communications services as needed to augment military satellites. The Defense Space Council serves as an "advisory forum," the report states.

Following the task force's recommendation for a point person on SATCOM would enable the Pentagon to get better value and prevent redundancy, the report states.

The task force believes the Pentagon is on the right track. This month, DOD Chief Information Officer Teri Takai "defined" a satellite communications governance framework, the report notes. Accordingly, the task force calls for DOD to support the CIO in establishing a governance and usage plan for military and commercial satellite "ecosystem," which includes aerial and terrestrial elements.

View the rest of the article.

View the related presentation slides.

Incoming Senate Budget Committee Chairwoman Patty Murray (D-WA) is contending that if Republicans insist on further spending cuts, defense budgets should bear an equal burden.

In a memo sent yesterday to her congressional colleagues, Murray writes that nearly three-quarters of the $2.4 trillion in deficit reduction that Congress has already passed comes from spending cuts.

Specifically on defense, the memo -- first reported today by Inside Health Policy -- states:

Prior to Congress lowering the amount of the 2013 sequester (from $109 billion to $85 billion), OMB calculated the across-the-board cut for non-exempt programs in its report to Congress pursuant to the “Sequestration Transparency Act of 2012” in September 2012. However, with the replacement of $24 billion of the previously scheduled savings, those percentages will now be lower (see Table 4).

For instance, for nondefense discretionary, the percentage reduction should fall to approximately 5.1%. For nondefense mandatory (other than for Medicare), the percentage reduction should fall to 5.3%. Finally, for defense discretionary, the percentage reduction should fall to approximately 7.3%.

Consequently:

So while we have already cut so much from discretionary funding and should find savings in other ways before we cut more, should Republicans insist on additional cuts to this small slice of the overall budget, defense should contribute at least as much as nondefense. This equal sharing of the burden of discretionary spending reductions has been a key element of every bipartisan deficit reduction proposal, including Simpson-Bowles.

View the full memo.

Army Chief of Staff Gen. Raymond Odierno, speaking yesterday at an AUSA breakfast, touched on the "perfect storm" of looming budget challenges the Army faces -- a possible a yearlong continuing resolution, sequestration cuts, and more. As InsideDefense.com reported:

Odierno said a yearlong CR for FY-13 would create a shortfall of $6 billion in the Army's operations and maintenance accounts. "It's because we're not able to move money around in a continuing resolution," he said. "We're over-prescribed in one part of the budget and we're under-prescribed in another part."

The across-the-board cuts from sequestration would create an additional $6 billion shortfall in Army O&M for FY-13, he said. On top of that, the Army's wartime operations funding faces a potential $4 billion O&M shortfall in FY-13, he said.

"The Army's facing about $17 billion worth of shortfalls that we're going to have to figure how to deal with if we don't come to some conclusion by the first of March," he said.

The Army and the other services have issued guidance to commanders to begin planning for sequestration should the cuts be triggered, as InsideDefense.com reported last week.

"We've now given guidance to our major subordinate commands to come back with the details," he said. "We expect to have those details within the next week, which will define the actions we'll have to take. The situation is serious."

Odierno and Army Secretary John McHugh signed a memo on Jan. 16 on how to reduce spending to mitigate "significant budgetary uncertainty in the coming months.".

"While we are hopeful the current budgetary uncertainty will be resolved in a manner that avoids significant reductions to the Army's budget, we must begin to slow spending now and plan for the worst," the memo stated. Further:

"Our funding is in doubt as we support forward-deployed troops, those training to deploy and wounded warriors," the memo adds. "The uncertain Fiscal Year (FY) 2013 funding caused by the combined effects of a possible yearlong continuing resolution (CR) and sequestration, along with the need to protect wartime operations, may result in particularly severe reductions to operation and maintenance spending. . . .  Given the magnitude of our budgetary uncertainty, the Army must act now to reduce our expenditure rate and mitigate budget execution risks in order to avoid even more serious future fiscal shortfalls."

Defense Department officials have said the Pentagon will have to cut $45 billion from its FY-13 budget in the event of sequestration. The other services have recently issued similar guidance.

McHugh and Odierno note that the near-term steps listed in their guidance memo "will only achieve a small portion of the savings required should sequestration and a yearlong continuing resolution occur."

While funding for wartime operations and the care of wounded warriors will be "protected," a plan to institute much larger cuts is in the works and a directive will be issued by the Army comptroller's office "no later than 16 January," according to the memo. It was unclear at press time if the comptroller planned to issue that guidance later today.

To view the rest of that story, click here.

View the memo.

Even if sequestration hits the Pentagon, Raytheon officials believe the company's portfolio is diverse enough to weather the storm. According to Raytheon's fourth-quarter earnings statement released this morning:

The financial outlook for 2013 does not reflect any of the potential effects of sequestration under the Budget Control Act (BCA). Although it remains uncertain if sequestration will be implemented, it could have a significant impact on the U.S. Military, the Aerospace and Defense Industry and Federal spending. Several industry associations estimate that sequestration, if implemented, could have a severe impact on U.S. Aerospace and Defense Industry employment nationwide. We believe that Raytheon's large international market presence, portfolio of programs, technology and focus on high priority areas should help to mitigate some of the potential overall impact.

View Raytheon's full statement -- along with other defense contractors.

Defense Procurement and Acquisition Policy Director Richard Ginman has issued a charter for the Strategic Sourcing Directors Board. According to his Jan. 18 memo accompanying the charter:

The SSDB is the principal forum for establishing strategic direction, monitoring, and improving the DOD-Wide Strategic Sourcing Program. Strategic sourcing requires operating collaboratively, with increased efficiency and effectiveness, to deliver first-class support to our Warfighters and taxpayers. The SSDB is charged with facilitating this collaboration across the Department to share innovative initiatives and to achieve increased cost savings, process improvements, and encourage socio-economic participation.

View the charter.

The Government Accountability Office released a report in December that found that the Air Force was realizing only a fraction of the potential savings available through implementation of strategic sourcing efforts. As Inside the Air Force reported in October:

GAO's strategic sourcing report reviewed select government agencies -- the Defense, Homeland Security, Energy and Veterans Affairs departments -- and their efforts to expand aggregate buying power. The study found that those four agencies in fiscal year 2011 accounted for 80 percent of the $537 billion in federal procurement spending, but managed only 5 percent of that spending through strategic sourcing efforts.

Likewise, the Air Force in FY-11 reported spending $2.4 billion and achieving savings of $126 million through strategic sourcing -- a savings equal to about 5 percent of the spending through strategic sourcing.

"If the Air Force were to strategically source even 10 percent of its total procurement spending of $65 billion, and achieved savings equivalent to 5 percent of the spending through strategic sourcing vehicles, it would save $339 million," the report states.

According to Cristina Chaplain, director of acquisitions and sourcing management at GAO, the Air Force is considered an early adopter of strategic sourcing efforts and has been incorporating some aspects of strategic sourcing into its procurement for more than 10 years. The report notes that the service's efforts are "the most mature." Within DOD, the Air Force in FY-11 reported implementing strategic sourcing in 17 products and services areas, the Army in eight and the Navy in seven.

Read the rest of the story.

View the GAO report.

Countries with nuclear weapons have a "special responsibility" in promoting nonproliferation, according to U.N. Secretary General Ban Ki-moon.

Speaking on Friday at the Monterey Institute of International Studies in California, the secretary general encouraged nuclear weapon states "to come up with a bold set of measures to promote transparency of their nuclear arsenals." Further:

They can do this next April at the second session of the Preparatory Committee for the 2015 NPT Review Conference. Or they can start today by contributing data to the U.N.'s "Repository of Information Provided By Nuclear-Weapon States," as mandated at the Review Conference in 2010.

This should commence with in-depth consultations between the States with the largest nuclear arsenals -- the Russian Federation and the United States -- followed by deep and verified cuts in their arsenals and additional reductions by other States.

I urge all nuclear-armed States to reconsider their national nuclear posture.

Nuclear deterrence is not a solution to international peace and stability.  It is an obstacle.

Member States also need to reinvigorate the international disarmament machinery.

When I spoke to the Conference on Disarmament in Geneva I said plainly that the very credibility of the body is at risk. The Conference's record of achievement is overshadowed by inertia that has now lasted for more than a decade.  That must change. Another year of stalemate in the Conference on Disarmament is simply unacceptable.

The U.N. chief also called on the Conference on Disarmament to begin "long-overdue negotiations on a fissile material treaty as a priority."

The conference "should also start deliberations on a nuclear weapons convention, a legal security assurance for non-nuclear weapon States against nuclear threats, and the prevention of an arms race in outer space," he said, adding: "Global nuclear disarmament requires global arrangements."

View his prepared remarks.