New president will face major challenges at Defense

Two new reports by the non-partisan Center for Strategic and Budgetary Assessments detail some of the deep challenges the next administration faces in managing the all-volunteer military and a shrinking base of defense contractors.

The reports, released on Wednesday, focus on military manpower and the U.S. industrial base. They are part of a 15-part series the center is producing to inform the 2010 quadrennial defense review required by Congress and to help shape the next administration's defense strategy.

Personnel challenges are felt most keenly in the Army, and they relate to both the number and quality of people the service is able to attract, analysts concluded. The share of Army recruits with high school degrees dropped to 79 percent in 2007, the lowest level in 25 years. The Army also faces a shortage of some 3,700 officers, mostly captains and majors.

The dearth of officers stems from the service's failure to recruit and train enough new officers in the 1990s, before the wars in Iraq and Afghanistan placed new demands on the military, the personnel report said. But it also has been exacerbated by the Army's shift to a brigade-centric structure and by plans to expand the service by 65,000 troops. The Army's need for more officers and its up-or-out personnel system means many officers rising through the ranks today would have been passed over for promotion in previous years, the report noted.

"The Army may be at a crossroads in terms of personnel quality," wrote Steven Kosiak, CSBA's vice president for budget studies, in the manpower report.

"Whatever happens in Iraq and Afghanistan, there are a range of other challenges that may lead to a more difficult recruitment and retention environment for all of the services in coming years," Kosiak said. Demographic changes in the U.S. population and a declining interest among youth to join the military only will aggravate the problem. At the same time, the increasing complexity of modern weaponry and the dispersed nature of battlefield operations will require more technically savvy troops capable of independent operations.

Kosiak concluded that the military should make better use of traditional recruitment and retention tools that are cost effective, and should develop more flexible personnel management and compensation systems. He also recommended that the Pentagon consider additional force cuts to the Navy and Air Force, and create specialized Army irregular forces.

If the personnel problems confronting the military are difficult, the challenge posed by a shrinking industrial base and the cost, schedule and performance problems plaguing major weapons procurements may be even greater.

"The vital question about the industrial base is whether it will be as much a source of long-term advantage in the decades ahead as it has been since the 1950s," wrote Barry Watts, a senior fellow at CSBA and author of the industrial base report.

The government has largely taken a hands-off approach to the industrial base, but a defense industry consolidation in the 1990s has resulted in supplier monopolies or duopolies in a number of key product lines, including ships and aircraft.

"The federal government will need to develop more consistent, thoughtful, long-term and effective policies toward the defense industrial base," Watts said.

One approach may be for the government to shift from cost-based to time-based metrics in defense acquisitions. The current cost-based system too often results in lengthy acquisition programs that deliver weapons over a much longer time period than desired, ultimately at higher cost and in smaller numbers, Watts wrote.

"The government's adoption of time-based acquisitions would incentivize more companies to remain in the defense industry, and possibly attract others to enter the defense market, by offering more new business opportunities more frequently than in the past," Watts said.