Wednesday, November 18, 2009

U.S. Army Equipment Spending Surge Ending


The surge in spending on equipment for the U.S. Army over the past several years has likely run its course, the president of the Center for Strategic and Budgetary Assessments, an independent research organization, told analysts at an investor conference here Nov. 10.

But, said Andrew Krepinevich, who is also a former member of the Pentagon's Office of Net Assessments, that spending surge has resulted in a "hollow" buildup that doesn't really add to the Army's assets in a significant way, as equipment continues to be worn out by wars in Iraq and Afghanistan.

That situation is unlikely to be remedied as long as the burden of fighting two wars falls heavily on the Army. The "safety valve" used in the past - cutting force strength to lower personnel costs and free up procurement funds - currently isn't an option with a high-operational tempo for the service and planned troop increases.

Krepinevich spoke at an investor conference hosted by Defense News and Bank of America Merrill Lynch in New York. He echoed other speakers at the conference in saying there is a concern operations and maintenance and personnel costs will crowd out acquisition spending, and U.S. government spending to support the economy will add pressure to defense spending as well.

Expectations are that Defense Secretary Robert Gates will ask for base budget spending that is 2 percent higher in real dollars for fiscal year 2011 versus the base budget for fiscal year 2010, Krepinevich said, adding that plans to incorporate supplemental or war funding into that base budget will add pressure as well.

"Expectations [of military spending] are rather rosy," Krepinevich said. "The reality certainly is that those expectations are not going to be met."

Moreover, the Army's reliance on war funding, now called overseas contingency operations funding, to replace or "reset" worn-out equipment could come under pressure as war funding is rolled into the base budget starting next year. One-third of the Army's procurement funds come from overseas contingency funds, he said. Also, funds to modernize the Army's equipment could be moved to pay for planned troop increases, he said.

"The bill payer here in Pentagon terms is really procurement. In replacing old, worn-out equipment, you have to move money around. Essentially, that part of funding was not [accounted for] in the administration's reset bill."


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