One month has passed since US Secretary of Defense Robert Gates proclaimed the arrival of a new era of cost-saving in national security. With budget top-lines projected to grow by only 1% a year, and fiscal needs rising by 2-3% a year, Gates proposed to make up the difference by economising internally.
Speaking last week, Frank Kendall, principal deputy undersecretary of defense for acquisition, recalls receiving an advance copy of Gates' 9 August announcement from his boss, Ashton Carter: "I said, 'if [Gates] is serious about this, it's a revolution. Ash said, 'he is serious, and it is a revolution'."
And so the revolution has begun. Gates's two biggest weapons suppliers - Boeing and Lockheed Martin - each announced major cost-saving plans exactly one month after their biggest customers' fateful speech. The corporate initiatives mirror Gates's proposed actions for the Department of Defense almost to the letter.
As Gates seeks to eliminate 50 flag officer positions and 150 top civilian jobs, Boeing and Lockheed are now shedding a combined total of 1,000 executives as a prelude to further cutbacks.
While Gates is proposing to shut down big agencies such as Joint Forces Command, Lockheed is divesting two businesses and Boeing is consolidating six divisions into four.
This is only the beginning. Defence budgets are still growing, but manpower and operating costs are starting to outpace the topline growth, which puts a squeeze on discretionary recapitalisation budgets.
The Government Accountability Office estimates the US military owns $4 trillion in capital equipment, much of which must be replaced every four years. The DoD requires enormous sums merely to avoid losing capability. If defence spending starts to actually decline, the current squeeze will be trivial compared with the defence industry budget slashing that will follow.
The nightmare scenario still seems unlikely. At the same ComDef 2010 conference where Kendall spoke, Centre for Strategic and Budgetary Assessments senior fellow Todd Harrison noted the DoD's budget consumes only 4% of US gross domestic product, which is well below the 6% average post-Second World War.
Even if pre-2008 defence spending growth rates recover, Gates's month-old speech is doing the right thing in forcing aircraft suppliers to eliminate waste accumulated over a decade of rapid growth. It may not be a revolution, but it's certainly progress.
Source: Flight International
