Reform, Ohio Replacement Fund; Top Changes In NDAA

With the 2016 National Defense Authorization Act completed and headed to the president’s desk likely sometime next week, it’s useful to summarize the biggest policy changes therein. While most Republicans do not take the veto threat seriously, Mr. Obama will surely do just that. Still, when this bill eventually receives his signature later this year or early next year, it will be—for all practical purposes—a near-exact version as to what is now public. The only difference will (hopefully) be a small budget deal to fund the government after December 11th negotiated between the White House and Congressional Republicans. Highlights of this year’s defense policy bill crafted by Senators John McCain (R-AZ) and Jack Reed (D-RI) and Representatives Mac Thornberry (R-TX) and Adam Smith (D-WA) include significant bipartisan changes in acquisition reform, military retirement, US policy in the South China Sea, and a strategy for the eventual closure of Guantanamo Bay. Additionally, the Congressional leadership shown by McCain and Thornberry was ever more impressive for having silenced arguments on the far right for lower defense spending. Fiscal hawks can no longer deny that Congress and the Pentagon are making real improvements in efficiency. Broadly, this year’s defense authorization bill may be the beginning of the end of the liberal-Tea Party coalition against reasonable levels of defense spending based on the needs of and increasing risk to the military. Defense Acquisition Reform The 2016 defense policy bill starts anew on real acquisition reform—the first real effort since the last round of streamlining in the 1990s. Since then, the system has once again accumulated regulatory barnacles and suffered from half-hearted attempts to fix specific problems with one-size-fits-all defense-wide rules. Senator McCain prevailed in his effort to force the department to study just how much all these regulatory layers and compliance cost taxpayers each year. The reform effort comes not a moment too late, as the rapid acquisition authorities jury-rigged during the wars in Iraq and Afghanistan near expiration, even as the military loses its technological edge against its adversaries. The latest Congressional acquisition push puts meat on the bones of Secretary Carter’s ongoing outreach to Silicon Valley. Significant lines of effort include: making it easier for commercial firms like SpaceX, Google, and small tech companies to do business with the Pentagon; removing duplicative or unnecessary reporting requirements; moving to a time-based system that focuses on rapid prototyping and accelerated fielding; and, adding accountability to larger programs by mandating longer tenures for program managers and devolving authority to the service chiefs. Taken as whole, the purchasing changes constitute a significant step in the right direction toward a system that gives the contracting workforce the ability to take the initiative, which will lead to more technological breakthroughs and faster, cheaper delivery of major equipment programs. New Military Retirement Benefits Congress followed some of the advice of the Military Compensation and Retirement Reform Commission to update the military retirement system to match a 21st-century labor force and better manage talent across the military. Instead of the current system in which over 80 percent of military personnel receive no retirement benefits because they do not serve a full career in uniform, the Pentagon will now institute a blended 401(k)-style retirement system. While the new system is fairer and will likely improve retention, what it will not do is save money in the near future. This is particularly true because the final bill includes a Senate proposal to allow for “lump-sum” pension payouts to current servicemembers. On merit, the new retirement subsidies are good policy. But it was unwise for Congress to enact them without making health care benefits similarly portable for those who will not make the military a long-term career. This makes changes to military health care unlikely to pass without the generous new retirement benefits alongside to keep members onboard and a major missed opportunity. Further, the man best-equipped to lead the TriCare reform effort, Rep. Joe Heck (R-NV)—brigadier general, medical doctor, and personnel subcommittee chairman—will run for Senate next year. That loss, combined with presidential politics and the inherently difficult politics of TriCare reform, mean that the only significant cost savings option available—and one with soft support from those seeking more value from the program—will not be implemented any time soon. Headquarters and Overhead Reductions During the “peace dividend” drawdown of the nineties, both the active-duty and civilian workforces were trimmed proportionally by about 35 percent each. Though the active-duty military grew in the post-9/11 buildup, defense civilians swelled at an even faster rate. Now, as the military continues its postwar drawdown, the federal defense civilian workforce has not been downsized proportionately or adequately. Since 2010, the military has shrunk 7 percent to 1.32 million, even as its civilian support force grew 6 percent to 744,000. Pentagon leaders have made several halfhearted attempts to trim the civilian workforce, but they clearly lack the ability to analyze and adjust employees quickly or at will. The 2016 defense bill better outfits the department with the tools to do so, allowing for performance-based reductions of civilian personnel in support of a 20 percent reduction of headquarters staff and $10 billion in administrative savings by 2019. By mandating a two-year probationary period for new Pentagon civilian hires and disallowing automatic pay increases, the legislation incentivizes defense officials to improve their personnel management system. Expanded National Sea-Based Deterrence Fund: Ohio Replacement The Navy’s effort to find non-Navy offsets to pay for its new ballistic missile submarines was thought a hopeless cause when it began last year. But with the help of HASC seapower subcommittee chairman Randy Forbes (R-VA), the Navy has so effectively lobbied Congress that the plan received a strong vote of support earlier this year on the House floor and made it through conference unscathed. Yet the method of taking funds from the other services and defense accounts remains, rightly, controversial. Not only is it a naked budget grab at the expense of sister services, but Congress has generously expanded its application in this year’s bill to also include attack submarines and aircraft carriers. The sea-based deterrent fund’s prospects for success have also grown with two critical appointments: former Naval Nuclear Reactors chief Admiral John Richardson as Chief of Naval Operations and former Project Executive Officer for Submarines Vice Admiral David Johnson as the new uniformed acquisition executive for the Navy. Even if House appropriators succeed in cutting off the funding this year, this fight will continue. Its likely outcome will eventually be a nuclear modernization fund that includes all three legs of the nuclear triad for a similar funding dilemma in the Air Force, which must procure new ICBMs and bombers over the next decade. South China Sea Initiative Congress has taken the first real steps to provide legislative direction for the administration’s pivot to the Pacific following a tumultuous year of increasingly aggressive Chinese maneuvering, island-building, and expansion of its Coast Guard. The South China Sea Initiative began as an amendment from Chairman McCain to provide a $425 million investment in the Global Train and Equip Program over five years, mostly targeted toward supporting enabling capabilities like command and control or intelligence and surveillance equipment for our Southeast Asian partners: the Philippines, Vietnam, Indonesia, Thailand, and Malaysia. While Senator McCain’s amendment was accepted in the Senate, the House removed nearly all the funding during conference. The original plan authorized $50 million for 2016, $75 million for 2017, and $100 million for each year until 2020. The final bill only authorizes the first $50 million this year and essentially directs the Pentagon to submit another request next year. The removal of a clearly defined roadmap for this regional training and equipping program will make it very difficult for the Pentagon to start any credible initiatives. Mackenzie Eaglen, a member of the Breaking Defense Board of Contributors, is a defense analyst at the American Enterprise Institute.

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Reform, Ohio Replacement Fund; Top Changes In NDAA

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