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January 22, 2013

Pentagon Slows Burn Rate As Budget Conflict Looms

Posted in: Uncategorized

The budget battles in Congress have an interesting, if not wholly unexpected casualty, the Defense Department. Due to budget uncertainty DoD has been forced to slow down its notoriously extravagant contracting process:

Speaking to soldiers in Vicenza, Italy, last week, Defense Secretary Leon Panetta explained the Pentagon’s “burn rate” — the speed at which the department has been spending its cash — was based on the belief the Pentagon would eventually get a budget that resembled what it requested last February for the current fiscal year.

The longer Congress waits to resolve sequestration and pass a budget for 2013, the faultier that assumption seems, so the Pentagon is taking several steps to spend only the money it absolutely has to.

Might this finally force responsible budgeting at the Pentagon? Since 9/11 the Defense Industry has gone on an incredible binge with DoD happily shoveling money out in contracts. Now it seems that even the threat of cuts has lead to fiscal discipline in an institution that previously came up trillions short in an internal audit.

Ashton Carter, Deputy Defense Secretary, has set a cap of $500 million in spending on contracts before the contract must be reviewed by senior DoD staff. Not surprisingly, this new policy has lead to some gamesmanship.

On Dec. 29, the Air Force awarded Lockheed Martin a $1.9 billion contract for the Advanced Extremely High Frequency space vehicle, a new communications satellite.

Under Carter’s new guidance, this contract would have required review by Kendall, but according to Gen. William Shelton, head of Air Force Space Command, contracts of this size come along only a couple of times a year, at least for his command.

“We’ve got several that are just coincidentally $499 million,” Shelton joked with reporters at a breakfast in Washington on Thursday.

Nonetheless, the issue going forward is whether such phenomenal amounts of money should be spent for defense while austerity programs are launched against the poor and middle class. For the moment the Pentagon is keeping its budget in check.


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