Pentagon No. 2 issues guidance to 'mitigate' budget uncertainty

After months of near-silence on planning for sequestration, Deputy Defense Secretary Ashton B. Carter on Thursday instructed Pentagon managers to prepare specific actions in case Congress and the White House fail to enact a new budget deal.

Carter’s guidance memo to all top service and civilian directors authorized such steps as a hiring freeze, a review of contracts, cessation of travel and supply purchases, as well as release of temporary employees. Near-term actions should be accompanied by “intensified” long-term planning, it said.

Reviewing the harm to defense readiness and planning from the looming March 1 date for automatic across-the-board agency cuts and the March 27 expiration of the current continuing resolution, Carter wrote, “For now, and to the extent possible, any actions taken must be reversible at a later date in the event that Congress acts to remove the risks I have described. The actions should be structured to minimize harmful effects on our people and on operations and unit readiness.”

None of the steps, Carter noted, should affect operating portions of the defense budget, including military personnel and their pay, wartime operations, wounded warrior programs and those for military families. To the extent possible, the steps also should protect readiness and investments in wartime operations, as well as programs related to the new defense strategy issued a year ago. Managers applying cuts should also minimize disruption to construction projects and major contracts by using prior-year funds and avoiding penalties, the guidance said.

Where the belt-tightening should focus, the memo said, is on a hiring freeze, consideration of 30-day furloughs and the termination of temporary employees who are not involved in “mission-critical activities.” Also taking hits will be base operations funding; travel, training and conferences (except for mission-critical licensure); facilities maintenance in non-critical areas; and spending on supplies, information technology and ceremonies. Maintenance activities for ships, aviation and ground depots for the third and fourth quarter are to be canceled by mid-February.

All contracts are to be reviewed for savings, and those larger-dollar contracts affecting research and development, production, and science and technology are to be re-reviewed by a higher authority before being awarded.

The new guidance “is a good sign, a step in the right direction,” Todd Harrison, a senior fellow at the Center for Strategic and Budgetary Assessments, told Government Executive. “The department is starting to do the things it needs to mitigate against the worst consequences of sequestration, and it’s better late than never. But ideally they would have started doing this months ago.” Harrison expressed optimism that the actions “will help Congress understand the real immediate impacts, not the hyperbole or the wild exaggerations, of sequestration.”

Lawrence Korb, a former Pentagon top official now a senior fellow at the liberal-leaning Center for American Progress, said the memo “will show people what will happen because people are cavalier about sequestration. It puts a human face on it, and will impact a lot of other agencies.” Everyone agrees that cutting everything equally with the fiscal year half over is “dumb,” Korb added, but “that doesn’t mean we can’t cut the defense budget in a very sensible way.”

The memo drew ire from David Cox Sr., national president of the American Federation of Government Employees. It “reveals the unapologetic bias of the department in favor of contractors, regardless of cost,” he said in a statement Friday. “Despite the fact that contractors make up 70 percent of the Pentagon’s costs for delivering services, while federal employees make up just 30 percent, DoD is requiring components to reduce the cost of the civilian workforce without any remotely equivalent requirement to reduce contractor costs.”

Instead of a routine review of contracts, the union called on Defense planners to freeze new service contracts, contract modifications and exercise of contract options; prohibit the conversion of work performed by temporary federal employees or term employees to contractors; match any reduction in federal employee costs achieved by furloughs with cuts in service contract expenditures; and authorize penalties associated with contract cancelations to the extent of the costs of voluntary separation incentives and voluntary early retirements of federal employees.

The memo’s approach, Cox said, “will force more extensive cuts in services for each dollar eliminated than if the costs of contractors were subject to the same level of cuts as civilian employees.”