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DoD, Industry Leaders Discuss How To Manage A Downturn

Defense News - October 15, 2012, By Marcus Weisgerber

The Pentagon continued its ongoing dialogue with industry last week. But unlike previous discussions about the impact of deep defense budget cuts scheduled to go into effect in January, this meeting emphasized how to manage those spending reductions.

Many senior defense officials, uniformed and civilian, were junior officers during the last spending downturn in the early 1990s — with the exception of Defense Secretary Leon Panetta, who was President Bill Clinton’s director of the Office of Management and Budget and White House chief of staff — so they do not have much experience managing smaller budgets.

Deputy Defense Secretary Ashton Carter, in conjunction with the Business Executives for Na-tional Security (BENS), arranged the Oct. 11 meeting at the Pentagon.

Carter, Army Gen. Martin Dempsey, the chairman of the Joint Chiefs of Staff, and other top officials heard from retired CEOs. They included Norm Augustine, who helped guide Lockheed Martin during the last downturn, as well as retired chief executives from IBM, JP Morgan and Sears on how they navigated budget and market downturns.

DoD spokesmen and BENS representatives declined to discuss specifics of the meeting.

The Pentagon, as mandated by the Budget Control Act of 2011, is cutting $487 billion from planned spending over the coming decade. That figure, however, could double through automatic defense cuts if Congress fails to reach a broader deficit reduction deal by the end of the year.

Panetta, Carter, Pentagon acquisition executive Frank Kendall and industrial policy chief Brett Lambert have held numerous meetings with senior industry representatives over the past year, primarily to discuss the impact of sequestration.

DoD officials are already doing some of the things necessary when funding is cut, according to Gordon Adams, who oversaw defense budgets in the Clinton administration. This includes buying fewer weapons, which in turn need fewer spare parts, as well as prioritizing research-and-development funding to focus on technologies that are critical to the future, and shrinking the size of the force.

“Nothing focuses the attention of the department faster than watching their budget come down,” Adams said. The Pentagon has historically gone though what Adams calls a “builddown” every 20 years. The last time DoD went though these cuts was in the 1990s.

“A lot of the people who managed the last one are gone,” Adams said.

The defense budget grew dramatically over the past decade. Including war funding, defense outlays totaled about $294 billion in 2000 in current dollars, rising to $694 billion in 2010.


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