USAF FY16 Budget Plus $10B More, Please!

The long-anticipated 2016 President’s Budget (PB) was submitted to Congress in early February. The PB is the spark that ignites the lengthy and often contentious congressional budget process, including: adopting a budget resolution framework, developing numerous discretionary spending bills, reconciling legislation between the House and Senate, approving continuing resolution stop-gap measures and finally, hopefully, appropriating funds for various programs — including the Global Positioning System (GPS) as part of the Department of Defense’s (DoD’s) U.S. Air Force (USAF) budget request.

For FY (Fiscal Year 1 Oct – 30 Sep) 2016, the U.S. Air Force requested a topline budget of $122.2 billion in Air Force controlled funding that exceeds funding levels recommended by the OMB (Office of Management and Budget) and laid out in the Budget Control Act by almost $10 billion. Several well-meaning friends still in high places in the government immediately sent me copies of the USAF budget while it was still warm, so to speak, and thought that I would be “properly incensed” — proffered one old friend — over the so-called $10B overdraft. I hate to disappoint my friends, but in the spirit of the USAF policy of putting the Bottom Line Up Front, I applaud the Air Force action and personally think it may be too little, too late. The supplemental request or overdraft should probably have been more on the order of $20B, not $10B.

Hollow Force

This is not an emotional reaction, but a reasoned statement by a seasoned veteran airman of 30 years in the USAF, yours truly, who served through at least two periods of a “hollow force” that were devastating not only to the USAF as an institution, but to the DoD as a whole and to all the personnel who served during these austere and dangerous times. And, yes, I am equating a hollow force with a dangerous force. Indeed, the term “hollow force” officially refers to military and government forces that certainly, on the surface, appear to be “mission ready,” but upon close examination suffer from moderate to severe shortages of personnel and equipment as well as deficiencies, to varying degrees, in training.

Gen Mark A Welsh III, Chief of Staff, USAF, testifying before the Senate Armed Services Committee 201 (Photo courtesy of USAF – SSG Sean K. Harp).

In recent testimony before the Senate Armed Services Committee, along with his fellow service chiefs, General Mark A. Welsh III, chief of staff of the United States Air Force, laid out the dangers inherent in the hollow force when he stated:

“Last year, our readiness levels reached an all-time low. As we struggle to recover, we don’t have enough units ready to respond immediately to a major contingency, and we’re not always able to provide fully mission-ready units to meet our combatant commanders’ routine rotational requirements.

“The Air Force’s modernization forecasts also are bleak. About 20 percent of [our] aircraft flying today were built in the 1950s and 1960s, and more than half of the rest are 25 years old or older.

“And now, due to sequestration, we’ve cut about 50 percent of our currently planned modernization programs.”

To someone who lived through the hollow force in the past, this is a scary description and prospect for our airmen. In describing the results of budget cuts and difficult decisions regarding program terminations that result in a hollow force, General Welsh put it this way:

“Without these tough calls, the Air Force ‘will be neither ready to fight today, nor viable against the threats of tomorrow’.” 

Indeed, a hollow force puts every ones lives in danger. During the post-Vietnam hollow force created by the peanut farmer, there were times when there were B52 aircraft sitting alert just for the spy satellite photo ops that did not have engines in the nacelles nor certified crews to fly them. Aircrews were lucky if they were able to fly four hours per month, and believe me, that made us all less than proficient. I remember one incident specifically. My oxygen (O2) mask had failed on a previous flight and I needed a new one. In the high-performance aircraft in which we flew, regulations required an O2 mask be attached to our helmet and actually in place with crewmembers in the cockpit breathing pure (100%) O2 above a certain altitude. Because of budget cuts, I was issued a waiver, a piece of paper that said I was legal to fly without a fully functioning O2 mask. Fortunately I never was forced to fly without a fully functioning O2 mask, but what if I had been? What if I had passed out from O2 deprivation? What about the other members of the crew? What purpose did the piece of paper serve, other than mollifying a paper pusher’s conscience? Would the Air Force crash investigators have found it in the wreckage and said, “Oh, it’s OK, he had a waiver!” These are the types of things that can happen with a “hollow force.” We don’t need to go there again, and if nothing else, the extra $10B may be just the ticket to keep the aircrews proficient and equipment maintained.

The Color of Money

I know that budgeting and spending other people’s money seems like a simple issue, but with the government, nothing is ever simple. Consequently, the DoD has established an entire university system, known as the Defense Acquisition University (DAU), to train acquisition, program and financial officials in handling government acquisition funds, along with other procurement activities. Under the Budget Control Act guidelines and the Congressional cost-cutting exercise known as Seques-castration, 2016 is another cost-cutting year. That is significant when you understand that the USAF and all of DoD are still reeling from more than ten years of war, on more than one front, along with previously mandated significant budget and manpower cuts that seriously impacted the ability of the USAF to accomplish its multitude of missions.

Consider that budget cuts have a lingering, insidious and costly effect in equipment not maintained or replaced, training not accomplished, R&D not conducted, new technologies not developed, and inevitably the inability to accomplish the mission. A lot of the complexity in these budget-cutting moves relates to what the government refers to as the color of money. For example budgetary funds are appropriated and obligated for the USAF, and most other services, according to the following formula:

• O&M – Operations and Maintenance – Obligated for 1 year
• MILPERS – Military Personnel – Obligated for 1 year
• RDT&E – Res Dev Test & Eval – Obligated for 2 years
• PROC – Procurement – Obligated for 3 years
• MILCON – Military Construction – Obligated for 5 years

As you can see, all funds are not obligated for just one year and then the money expires. Indeed, there are several colors of money, and failing to fund an RDT&E effort can have catastrophic results on the future of that program and associated programs that might benefit from the technology not developed. At any one time, the USAF is juggling budgets stretching across years and programs and moving money or robbing Peter to pay Paul.

FM (Financial Management) or financial and program management gurus at any one time are managing funds that originated as many as five years previously, plus the current year’s budget, while planning on how to use funds that might carry over to next year. They have just submitted the FY16 budget, which also means they are now hard at work on the FY17 budget without knowing what will be obligated for FY16. Across all those budget years, they have to deal with the arcane rules concerning the color of money. Yes, they are professionals (I’ve been married to one of the best for 35+ years), and they do a great job, but face it — sometimes they are just taking a well-educated guess and hoping for supplemental funding just to meet basic requirements.

Seriously, FM’ers live for the fairytale that one day a combatant commander will say, “Hey, your mission is more important than mine, so I will ‘MIPR’ (a one-time financial move) my funding to your budget line for your project.” Let’s see — a pig is not aerodynamically designed to fly…

Space    

Funding for all space programs is especially critical, as the entire space arena is known as a force multiplier, in that satellites and space platforms provide and enable capabilities that increase the effectiveness and reach of all military and government personnel. Therefore, when space programs are not funded, delayed or are cut, the impact ripples across the entire DOD. This is especially true of GPS and PNT (Position, Navigation and Timing) systems which have become so ubiquitous, they are considered a must-have utility for billions of users around the globe, not just the U.S. government. In fact, military and government users may be the smallest segment of users for GPS and PNT services today, which is ironic when you consider that, as General John Hyten (USAF), commander of Air Force Space Command, loves to remind us, “GPS is provided to the world, and over three billion plus users, free of charge 24/7, by the United States Air Force.”

OCX – Next-Generation Space Control Segment

Unfortunately, a couple of major GPS-related programs are in trouble. For OCX, the Next-Generation Control Segment for GPS, my sources tell me, and 2016 budget documents clearly show, that current costs attributable to the prime contractor greatly exceed the contract award specification of ~$886M by a factor of 100% ,with a delivery date still far out on the horizon — somewhere around 2020 with a total program costs of $3.6B. That’s the bad news; the good news is there are definitely sound alternatives, and my sources tell me they are being belatedly explored.

Sometimes the behemoth primes are just that: too big and too expensive. Oftentimes the real subject matter experts (SMEs) reside in the smaller, boutique, more agile companies that can do the job in 24 months for $200M, which is a price that was quoted to me recently by a company with skin in the game, since their software products are responsible for launching and controlling all of the GPS satellites launched in the last eight years without a single failure. Plus, sources inside the company tell me that they have already developed a complete launch and initial checkout system for GPS III, which the OCX prime contractor is still struggling to construct.

This is where the USAF and OSD must step back and assess the OCX program for all its merits versus costs. GPS is not that complicated a satellite system, and yet we are on course to spend $3.6B for a ground C2 (Command and Control) system that will still have significant shortcomings. If it were the perfect C2 system in the end, that would be one consideration, but in fact, as the prime has admitted, it will be far from what was initially envisioned, and the total program costs will have grown by almost 400%.

This scenario begs the question: As the GPS acquisition authority, which product would you trust, a known product derived from a proven government and commercial satellite launch and C2 capability in operation today from a reliable company that has a flawless track record of GPS launches for the last eight years? Or a brand-new unproven product costing billions of dollars from a company that is clearly struggling technically and financially and has, at the end of the day, never launched or controlled a single GPS satellite? The answer seems clear to me. Obviously, there are valid alternatives, and in this budget environment the USAF needs to take a look at replacements, alternatives, supplements and backups, however you choose to phrase it, to OCX.

As we were going to press, we learned that Mr. Kendall has given the OCX Program a green light, but with several caveats indicating the program will be closely watched in the future. Mr. Kendall confirmed that while the OCX costs had indeed doubled, he was going to stay the course for now.

Major General Roger Teague, director of space programs for the Air Force acquisition chief, said a review by chief arms buyer Frank Kendall went well, but program officials and the contractor got “tough marching orders” to stick to schedule and cost targets. That is well and good, but history shows us that it has never happened in the past with the OCX program, and so some tough changes are going to have to be made if they are going to stay on track. We wish them well.

GPS III – Next Generation Space Segment

On the satellite or hardware side of the house, the GPS III — or next-generation GPS satellite — is also having problems, but in this case it centers on development and delivery issues with a subcontractor having serious technical issues and who has failed to deliver on cost or schedule. That subcontractor was just last week bought by a bigger prime, so we will have to wait and see what happens. In this case, however, the whole satellite program is not failing just a component, albeit an important one, the Mission Data Unit or MDU. Although again the answer seems simple, there are bigger forces at play, and one of them is wrapped up in a new government initiative known as Better Buying Power 3.0.

Better Buying Power 3.0 

The current GPS III+ budget input states: “In an effort to implement Better Buying Power 3.0 (BBP 3.0) to control production costs, the [U.S.] Air Force intends to create a competitive environment. Options for the GPS III competition continue to be explored by USD (AT&L) [Under Secretary of Defense for Acquisition, Technology and Logistics], Mr. Frank Kendall.

Frank Kendall, under secretary of Defense for Acquisition, Technology and Logistics; the Under Secretary flag.

The Under Secretary of Defense for Acquisition, Technology and Logistics, or USD (AT&L), is a senior civilian official in the Office of the Secretary of Defense within the Department of Defense. USD (AT&L) is the principal staff assistant and advisor to the Secretary of Defense and the Deputy Secretary of Defense for all matters concerning departmental acquisitions and the general management of the department as a whole, which means he is a significant decision-maker where DoD acquisitions are concerned, and he has something to say about the plans for those acquisitions. Obviously, those plans need to make sense, financially, operationally and hopefully logically. Mr. Kendall, who has been in his current position for almost four years, has brought a much needed common-sense approach to government acquisition, and we can only hope he continues to make judicious, practical and logical decisions.

For GPS III+, the U.S. Air Force’s published notional plan is for a two-phased competition process. Phase one is a Production Readiness competition for up to three firm-fixed price contracts to mature competitors’ production designs for a competition in Phase two. Phase two will be a full and open competition for up to 22 GPS III Production SVs [satellite vehicles] with an expected award in FY17/18. The [U.S.] Air Force GPS Directorate received USD (AT&L) approval to purchase GPS III SV09-10 from the incumbent Lockheed Martin (LMCO) at the December 2014 Defense Acquisition Board (DAB), in order to sustain the GPS constellation while competitive options are pursued.” [Bold added for emphasis.] See the budget document here.

The “government speak” sounds great if you need an entirely new GPS III system, which consists of, at a minimum, a new payload, satellite, launcher and ground C2 system (remember OCX is only designed to work with current and planned GPS SVs, and it doesn’t even do that today). But, in fact, the U.S. government only needs an MDU, which is a critical part of the payload. Indeed, failure to produce the MDU on time has delayed the entire GPS III program by about 18 months to date.

Even more troubling to me is the seemingly innocuous phrases from the government plan that states “create a competitive environment…firm-fixed price contracts to mature [up to three] competitors’ production designs,” which is nothing more than government speak for “We are going to pay competitors to mature their technology so they can compete against the current prime (LMCO), who is currently building the first 10 GPS III satellites.” In effect, the government is saying the competitors on their own cannot compete against LMCO so we, the government, are going to give them contracts and lots of money to help them get to a point where they can compete, and then we are going to have a recompetition. Of course, this is going to take at least three years and cost hundreds of millions of dollars, and LMCO may well win again in the end, but at least we will have conducted a competition. Does this approach make sense? Does it pass the financial, operational, and logic tests? Does it pass the Washington Post test? I guess we will have to wait and see if Frank Kendall agrees.

BBP 3.0

So, what exactly is the initiative known as Better Buying Power 3.0? It’s DoD’s mandate to “do more with less”:

“DoD’s Mandate To Do More Without More

“Better Buying Power (BBP) is the implementation of best practices to hopefully strengthen the Defense Department’s buying power, improve industry productivity, and provide an affordable, value-added military capability for the warfighter and government user. Launched in 2010, BBP encompasses a set of fundamental acquisition principles to achieve greater efficiencies through affordability, cost control, elimination of unproductive processes and bureaucracy, and promotion of competition. BBP initiatives also incentivize productivity and innovation in industry and Government, and improve tradecraft in the acquisition of services.”

Sounds great, doesn’t it? Now for the rest of the story.

We can all agree that defense budgets are tight, so it will be interesting to see how BBP 3.0 plays out in the arena for GPS SVs. Will the U.S. Air Force initiate a competition to acquire an entirely new GPS III SV, or fix the problem with the current GPS III program, the MDU? Recall my previous column concerning the GPS III Sources Sought, in which the GPS III MDU was compared to an aircraft engine and the GPS III satellite was compared to an aircraft. In this analogy, the Air Force didn’t ask for companies/competitors to produce a new aircraft just because it needed an alternate engine. It simply contracted for another engine supplier — the most cost-effective competition that adheres to the principles of BBP 3.0. However, from the GPS Directorate budget language quoted earlier, it appears as if the Air Force is looking to pursue an entirely new GPS III system to include SVs, rather than just procure an alternate MDU.

In my humble opinion, stringently applying BBP 3.0 to GPS III issues means simply to employ competition at the correct level (i.e., for the engine rather than the entire aircraft). An interesting feature and significant added cost to the GPS budget, which I briefly mentioned earlier, concerns the need for a new ground C2 system if the total new systems approach is taken. For, indeed, if preliminary elements of the GPS space segment are developed without cross-checking the impact to the GPS control segment, the technical, operational, budgetary and schedule impacts will be significant. For example, the already troubled next-generation GPS ground control system, OCX, budget likely has not considered the integration costs of a newly developed, yet-to-be-procured “production ready” GPS III+ SV. Indeed, OCX today is geared for the GPS III already contracted for and it is failing to meet that challenge in a spectacular and expensive way. So it is possible, even probable, that OCX integration costs for yet another new model of GPS III family of satellites would increase the OCX budget significantly…unless of course one assumes that the U.S. Air Force acquires a perfectly matched, new GPS III satellite that integrates seamlessly with OCX. In other words, an entirely new GPS III SV would need to be perfectly matched to the current GPS III SV — and what are the chances of that, and why would you spend hundreds of millions of scarce acquisition dollars to procure an exact and more expensive replica?

Budget constraints are tight and getting tighter. BBP 3.0 mandates the Air Force “do more with less” in every context. For GPS III SVs, this means developing an alternate MDU rather than buying a new block of GPS SVs.

Until next time, Happy Navigating, and remember: GPS is brought to you free of charge by the United States Air Force.