UPDATED with SecDef, HASC, & SASC comments WASHINGTON: Last night, the White House issued a veto threat against the draft defense bill that just went to the House floor, which takes an $18 billion bite out of the Overseas Contingency Operations fund. This afternoon, Defense Secretary Ash Carter blasted both the House draft of the National Defense Authorization Act and the Senate version, albeit for different reasons: The House over the budget, the Senate over sweeping reorganizations to the Pentagon.

As a former undersecretary of acquisition, technology, and logistics, Carter acknowledged the position has an overwhelming portfolio that keeps the incumbent from focusing on high-tech innovation — but, he argued, that’s not grounds to split it in two, as the Senate Armed Services Committee proposes.

“Separating research and engineering from manufacturing, which is implied in this proposal, could introduce problems in the transition” from one phase to another, which is already hard enough, Carter told the Navy League’s annual Sea-Air-Space conference in a lunchtime speech. “Procurement and sustainment are tightly coupled to technology, engineering, and development, and those two together represent about 92 percent of program cost, so separating those functions make no sense, as procurement and sustainment costs are determined by decisions made in development.”

[UPDATE] On Wednesday morning, the Senate Armed Services Committee emailed us saying that Secretary Carter had misread their bill.

“Unfortunately, Secretary Carter’s statement was wrong,” a SASC staffer said. “In reforming AT&L, the SASC does not split oversight of development and manufacturing. The new undersecretary for research and engineering would set defense-wide acquisition and industrial base policy and oversee the development and production of weapons and national security systems. Much of this work would be done by a new assistant secretary for acquisition policy and oversight, which would report to the undersecretary and enable that leader to prioritize technological innovation. What would shift to the new undersecretary for management and support is (1) oversight of purchases of goods and services that are not national security systems and (2) line management of defense agencies that perform these and other core business functions.” [UPDATE ENDS]

Carter stopped short of a veto threat over the Senate provision, and the White House hasn’t issued a statement on the Senate bill yet. By contrast, the message on the House bill was harsh.

Ashton Carter

House Faces Veto Threat Over OCO “Raid”

“I’m also compelled to address the budget gimmickry included in the proposed NDAA in the House,” Carter continued. “It’s another road to nowhere with uncertain chances of ever becoming a law and a high probability of leading to more gridlock and another continuing resolution.”

“Most disturbingly, it raids war funds in a time of war,” Carter said, referring to the $18 billon moved out of Overseas Contingency Operations (OCO) to meet other needs. “It also threatens the budget stability that undergirds all of the reforms and investments and developments I’ve outlined today… [and] it threatens the readiness of the force.”

The White House objects to provisions on everything from athletic shoes to the Lesser Prairie Chicken to how to replace the Russian-made RD-180 rocket, but the budget issue is literally item No. 1 in the statement.

That said, the official language is more waffle than steak. “If the President were presented with H.R. 4909 [i.e. the bill as it currently stands], his senior advisors would recommend he veto the bill.” One House Armed Services Committee staffer told me, dismissively, “the president’s never see a House NDAA he didn’t threaten to veto.”

And once upon a time, it would have been safe to write such a threat off as boilerplate, but not after Obama actually vetoed the NDAA last year. That bill did ultimately pass after a budget deal that, among many other things, moved the controversial OCO money into the base budget. But this year’s bill would break that budget deal, which few legislators want to revisit in an election year.

“The big problem with the House bill is what it does in terms of the Budget Control Act,” said Frank Kendall, the Pentagon’s procurement chief, this morning at Sea-Air-Space. “We reached an agreement with Congress on the budget for ’16 and ’17, and what the House is doing for defense doesn’t seem to be at all consistent with that agreement.”

“The budget stability that was supposed to last for two years is already under threat after only six months,” Carter exclaimed in his speech.

This draft bill also takes a much bigger bite out of OCO than proposed last year, and as result, OCO runs out of money to fund the war partway through 2017. The $18 billion goes instead to growing the force by 27,000 troops (mostly Army) and to a host of procurement and readiness measures.

House Armed Services Committee chairman Mac Thornberry argued that the new president would ask for supplemental funding to reflect his or her priorities, just as Obama did in 2009. In fact then-Senator Obama voted in 2008 for a “bridge fund” that only paid for the war partway into the year, just like Thornberry’s proposal.

But how much will the supplemental be, and when will it come? The White House argues that relying on a hypothetical supplemental to pick up the slack is far too uncertain. If it doesn’t show up on time and in adequate quantity, it will undermine the war against the Islamic State, the readiness of the force, or both.

“The bill would buy excess force structure without the money to sustain it, effectively creating hollow force,” the statement says. “By gambling with warfighting funds, the bill risks the safety of our men and women fighting to keep America safe, undercuts stable planning and efficient use of taxpayer dollars, dispirits troops and their families, baffles our allies, and emboldens our enemies.”

“Buying force structure in this fiscal year without the resources to sustain it in future years is not the path to increased readiness, it’s the path to a hollow force,” Carter warned.

Then there’s the politics. “Furthermore, the bill’s funding approach attempts to unravel the dollar-for-dollar balance of defense and non-defense funding increases provided by the Bipartisan Budget Act (BBA) of 2015, threatening future steps needed to reverse over $100 billion of future sequestration cuts to DOD,” the statement says.

In other words, many Republicans are willing to amend the Budget Control Act (aka sequestration) to provide more funds for defense, but most Democrats won’t accept plussing up the Pentagon without a comparable plus-up for education, the environment, and so on. Last year’s compromise was painful and precarious, and the HASC bill threatens to blow it up. The White House seems to be betting that most legislators won’t want to undo that hard-won bargain in an election year.

The HASC staffer, by contrast, argues that an election year makes change more likely, not less: The next president may well through out the dollar-for-dollar balance between defense and domestic spending. And at least so far, there are no amendments offered on the House floor that would change the fundamental fiscal structure of the bill and undo the $18 billion shift from OCO to the base budget. That means that the House-passed version of the NDAA, at least, will retain the objectionable “gimmick”; the Senate NDAA, by contract, uses the same numbers as the White House, the figures set by last fall’s budget deal.

While fiscal gimmickry is issue No. 1, the White House has a host of other objections to the House Armed Services Committee draft of the defense bill.

Russian-made RD-180 engines propel an Atlas V rocket heavenward.

Replacing Russian Rockets

The US military currently launches large national security space satellites using Russian-made rocket engines, a practice Senate Armed Services Chairman John McCain has blisteringly denounced as paying Putin’s “cronies.” His committee’s draft defense bill would ban further purchases of RD-180s. The Pentagon objects that they need more time to develop a US-made alternative and need to buy 18 RD-180 engines.

The House bill, by contrast, would let the Pentagon buy 18 more RD-180s, which the Air Force says it needs to do. The White House statement lauds that provision. So what’s the problem? It’s the House’s restrictions on the replacement rocket, which will be developed by private companies with government support.

First, the HASC NDAA says federal funds may only pay for developing the replacement rocket motor itself, not for any other components of the “launch system.” This ignores the new approach of the Air Force, which is to buy integrated packages of “launch services,” not individual pieces of hardware like rockets. The White House calls the HASC approach — supported by Strategic Forces Chairman Mike Rogers —  “arbitrary,” the equivalent of saying you’ll pay for a new car engine but not the chassis, dashboard, or wheels.

Second, the HASC says the government must acquire the rights and technical data for any engine it helps develop. The White House says that would not only require rewriting current contracts but defeat the whole purpose of a public-private partnership. What is industry’s incentive to invest their own money in developing a new engine if they won’t own the intellectual property they create? The fear is that would-be rocket makers will demand a lot more money to develop a rocket engine on these terms, making the replacement of the RD-180 slower and more expensive.

Sneakers and Prairie Chickens

Lesser Prairie Chicken

The White House statement also takes issue with a wide and sometimes wacky range of provisions in the House bill. Often these are more complex than they might seem. For example, the HASC voted to have the military buy athletic shoes for new recruits, rather than give them an allowance to buy their own. This may seem like sensible standardization — and a way to buy American instead of from sweatshops abroad — but in fact, the White House argues, it will lead to poor fits and more injuries for the troops, while benefiting just one company. (They didn’t name it, but it’s New Balance).

The administration also objects to several Navy provisions that would cost hundreds of millions. The HASC bill requires the fleet to buy a third Littoral Combat Ship, after Sec. Carter cut the program; to keep 11 Ticonderoga-class cruisers in service, whereas the military wants to put them in long-term modernization; and to retain the 10th, under-sized carrier air wing rather than disband it.

The statement also objects to HASC provisions on missile defense. The bill would task the Missile Defense Agency with developing countermeasures to hypersonic missiles; the Pentagon wants freedom to assign that role to another agency. The bill would also require MDA to start research on space-based missile defenses, which the statement calls impractical.

It also opposes the transfer of weather monitoring missions from the Air Force to the National Reconnaissance office.

Then there’s the perennial Sage Grouse provision. The bill restricts environmental protections for the Greater Sage Grouse, Lesser Prairie Chicken, and American Burying Beetle, arguing that conservation measures for these species end up restricting military training on the bases where they live. The administration argues this undermines the integrity of the Environmental Protection Act and isn’t the defense committee’s business anyway. But this, at least, is one issue that the president won’t actually veto the bill over.

Colin contributed to this story.