Navy FY15 Budget: Stewardship

By Rear Adm. Barry Bruner
Director of Programming

As media interest in the Department of the Navy’s FY15 budget submission continues, I wanted to take the opportunity to discuss something not as heavily highlighted: good stewardship of taxpayer dollars.

This year’s budget is a $15B decrease from the levels requested in the FY14 president’s request. We had to make some tough choices across force structure and modernization – as reflected in our reduced aviation and weapons accounts, as well as the potential inactivation of an aircraft carrier.

But this budget also makes prudent, significant, and enduring good stewardship reforms, allowing us to offset some of these tough decisions wherever possible. In this context, stewardship entails maximizing efficiency in a range of support functions, such as business processes, contractual services, better buying power in procurement, research & development, headquarters staffing, flag officers management, excess infrastructure, and auditability.

It is absolutely critical that we save every penny possible and maximize the resources we devote to build and maintain the ships, submarines and airplanes of our fleet. Ultimately, we must be able to execute the Department of Defense’s (DoD) updated strategy, as stated in the 2014 Quadrennial Defense Review (QDR), which emphasizes three pillars: Protect the Homeland, Build Security Globally, and Project Power and Win Decisively. 

The first initiative I’ll discuss is business process transformation, which combined are expected to save approximately $20 billion from Fiscal Year (FY) 2015 – 2019. These efforts look for ways to reduce costs in contractual services, procurement, research & development (R&D) and financial management.

Contractual Services. The Department of the Navy (DoN) year-to-year spending for Contractual Services, adjusted for inflation, has grown by about ~$10 billion since 2000. Contractual services spending was reviewed first for savings with conscious decisions made to challenge stated requirements and to accept higher levels of risk in services spending before additional reductions were made in force structure, modernization, or readiness. Our FY 2015 budget reduces contractual spending in four principal areas: Knowledge Based Services, Research & Development, Equipment Related Services, and Communications Related Services. The use of Services Requirements Review Boards  to assess, review, and validate contractual service requirements has been a key tool to help us in this area and will continue to be used as we assess the impacts. Our efforts in this area  reduced our budget by approximately $14.8 billion from FY 2015 – 2019.

Better Buying Power (BBP) in Procurement. An approximately 2 percent funding reduction was applied across DoN Procurement activities for savings at the line item level through competition, multi-year procurements, engineering change control and should cost management. Savings from previous/existing multi-year contracts have already been harvested to support DoD and DoN priorities totaling over $8.5 billion. DoN will continue to emphasize all Better Buying Power initiatives to identify new savings and cost avoidance opportunities. Our efforts in this area  reduced our budget by approximately $2.7 billion from FY 2015 – 2019.

More Efficient Research & Development. An approximately 5 percent (in FY 2015) and 2.5 percent in (FY 2016 – 2019) funding reduction was applied across DoN R&D activities for savings within programs through realigning the portfolio to focus on mission priorities, emphasizing high pay-off technology transitions, or reviewing R&D for better alignment and product outcomes tagged to ACAT programs. We are seeking efficiencies in R&D activities for Advanced Component Development & Prototypes, Systems Development & Demonstration, and Post-Production Development. Our efforts in this area reduced our budget by approximately $200 million from FY 2015 – 2019.

More Effective Use of Operating Resources. A detailed review of R&D and procurement execution performance was conducted with under execution corrections made in several accounts. Better business practices were also implemented to address historical execution issues and manage programs in a more informed manner to prevent future inefficiencies. Our efforts in this area are expected to save approximately $2.5 billion from FY 2015 – 2019.

Shifting to efficiencies in headquarters staffing, we are complying with the Secretary of Defense’s guidance to implement a 20 percent headquarters reduction by FY 2019. To protect the Navy’s ability to rebalance to the Pacific and continue to execute on-going overseas contingency operations, Navy leaders made a conscious decision to apply less pressure on fleet operational headquarters staffs and more on other staffs when executing the reduction. Specifically, U.S. Fleet Forces Command, U.S. Pacific Fleet, Navy Component Commands, and Type Commander headquarters were allocated only a 5 percent reduction.

This decision required additional pressure to be placed on other staffs to compensate for the protection of the fleets. Navy savings from this initiative is expected to achieve $33 million in FY 2015 and a total of $873 million across FY 2015- 2019. This reduction in staff size includes reductions to military, civilian, and contractor personnel. We understand this initiative will have a significant and varied impact on each headquarters affected. Accordingly, we provided some flexibility in how each headquarters applies the reduction, so long as the targets are met.

We are also continuing to reduce the overall number of Flag officers by 21 (11 Navy and 10 Joint) by March 2016.  These reductions are being achieved through increased retirements and then not backfilling those positions as they become vacant.

The Base Realignment and Closure (BRAC) process offers the opportunity to objectively assess and make good decisions about potentially excess infrastructure which results in long term annual recurring savings. The Navy BRAC program is funded in FY 2015 to continue environmental cleanup, caretaker operations, and meet property disposal plans of previous BRAC rounds. As of September 30, 2013, the Navy BRAC program has disposed of 176,129 acres of property (93%) from five BRAC rounds through assorted conveyance mechanisms with 13,345 (7%) acres remaining.

Effective internal controls over Navy’s business operations are another aspect of good stewardship. As demonstrated by successful financial audits in coming years, Navy will send a reassuring message to Congress and American taxpayers that we are minimizing the risk of misusing taxpayer dollars and maximizing accountability. Our goal remains to achieve full financial auditability by the end of FY 2017 with the near-term objective of complying with the mandate to achieve audit readiness on the DoN’s Schedule of Budgetary Activity (SBA) in FY 2014. Currently, eight of the ten components of Navy’s SBA have been asserted as audit ready.

Lastly, we must and will continue to look for other efficiencies. As we head into our next budget build, we’ll consider ways to improve how we conduct ship and aircraft maintenance as well as how we replace legacy platforms.

These initiatives build on recent Navy and DoD initiatives that date back to 2009 and represent our continuing commitment to be good stewards of taxpayer dollars. As General Dempsey, Chairman of the Joint Chiefs of Staff, testified to Congress last week, “We will never end our campaign to find every way to become more effective.” The Navy is working hard to do everything we can to be more efficient, while at the same time ensuring our country’s defense is assured.

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