Ensuring Air Force Readiness in a Challenging Budget Environment
Undersecretary of the Air Force Erin C. Conaton
Remarks at the Air Force Association's Air Force Breakfast Program, Arlington, Va., May 11, 2011
Good morning to all of you, and thank you, Mike [Dunn], for that gracious introduction. It is a pleasure to be here today.
Let me start by expressing my deep appreciation to the Air Force Association for everything you have done to support the Air Force for the last 65 years. You have stood by our Airmen and worked tirelessly to strengthen our Nation's air, space and cyber power. Thank you for your efforts.
This morning, I want to talk briefly about the state of the Air Force, and provide some insight into how leadership is approaching the challenging budget environment we face today - and what that means for the Air Force's role in our national defense in the future. I'm mostly speaking from the perspective I have as Chief Management Officer -- particularly the fun of building our annual budget and managing our efficiencies initiative with the Vice Chief! I'll also try to hit on my roles as Senior Energy Official and Air Force Focal Point for Space, but I'll be happy to take the discussion wherever you would like to go after the formal remarks.
AF Budgetary Environment
The fragile state of our nation's economy and the burgeoning federal budget deficit have dominated the news for the last few months, with good reason. We can all see and feel the effects of the struggling economy; and no less than Chairman of the Joint Chiefs of Staff Admiral Mullen has said the country's looming fiscal crisis is the number one threat to our long-term national security.
The narrowly-averted government shutdown and the President's deficit reduction speech last month were powerful demonstrations that federal spending must come down, and that the Department of Defense will be expected to do its part to reduce the deficit. Specifically, the President set a target of 400 billion dollars in additional defense spending cuts over the next 12 years.
The President also called for "a fundamental review of America's missions, capabilities, and our role in a changing world" to precede any decisions on cuts. Secretary Gates has begun organizing this review and the Air Force and the other services are already actively engaged in supporting that work. The key principles underlying this review are that strategic choices should drive resources, and that the Department of Defense owes the President, the Congress and the American people an honest assessment of what the strategic implications would be of defense reductions. Your Air Force senior leaders share Secretary Gates' determination that the strategic review should be rigorous and plainly describe the trade-offs associated with options for achieving savings.
As the Air Force considers our strategic options moving forward, there are a number of things we will keep in mind based on our past and current experience.
1. Broad array of missions
First, we are conscious that we are currently balancing a range of missions while we prepare for the possible fights of the future. As the Chief often says, your Air Force is proud to be "all in" in our current fights. In fact, at this moment we're engaged in a wide array of global operations. From humanitarian support for our Japanese friends in need; to the ongoing stability and counterinsurgency operations in Afghanistan and Iraq; to support for the NATO no-fly zone enforcement and protection of civilians in Libya; to the continuous air sovereignty, space, cyber and nuclear deterrence missions we execute every day - the speed, precision, and versatility of the Air Force is being tested and proven every day, all around the world.
We carry out these missions even as we prepare for the future, just as we always have. Indeed, over the past 10 years, the Air Force has substantially reshaped itself to meet the immediate needs of today's irregular conflicts and to position itself for the future. We've boosted our Intelligence, Surveillance, and Reconnaissance (ISR) capacity, increased special operations capacity, added hundreds of new aircraft, funded development of over 30 satellites, and added thousands of Airmen for critical nuclear and cyber operations and acquisition support. To do all this, however, we've retired over 1,500 legacy aircraft, canceled major acquisition programs, shed manpower in less critical career fields, and deferred much needed military construction. As the strategic review shapes our future mission set, we'll stay mindful of the where we've come in the last decade and the lessons we have learned.
2. Trends in End Strength
Second, as we look across our force, we know we've reduced our active duty end strength by about 26,000 in the last seven years.
At one point, we considered going lower, but decided that wouldn't be wise, given all we were being asked to do. Looking forward, we will look at the strategy and responsibilities assigned to the Air Force to consider whether further adjustments are needed here... but that will not be an early or easy choice.
But we are not looking at military end-strength in isolation. Part of what we need to consider in this review is the balance in missions among the Active and Reserve components. Indeed, Secretary Donley has already had our team put in a lot of work reviewing how we use our Total Force across weapons systems and missions.
We are also working our way through the recent direction on the DoD civilian workforce which has capped our planned civilian growth at Fiscal Year 2010 levels, with some narrow exceptions for areas like acquisition excellence. As a result, we will be hiring far fewer new civilians than we planned just a year ago, and converting fewer contractors to civilian positions. We are determined to manage these changes in a strategic way, aligning our total workforce to Air Force priorities and the Department's broader strategy. This is complex work; we are trying to undertake it as smartly as possible.
3. Recapitalization Efforts
Third, while we win the fight with our Airmen, we help them win by putting world-class platforms and tools in their capable hands. As you know, we are working to modernize or replace many of these platforms and tools, and many programs are now getting underway. The Air Force faces a multi-year effort to recapitalize our aging tanker, fighter, bomber, and missile forces; modernize our satellite constellations; meet dynamic requirements in the cyber domain; and replace aging airframes for pilot training and presidential support.
I know many of you are interested in what a reduced top-line will mean for our investment accounts; we're curious about that too! But in all seriousness, we must do the strategic review first in order to fairly show what the trade-offs in this area and others might be.
4. Maintaining Readiness
Fourth, we undertake all this analysis mindful of the need to maintain and enhance readiness.
Our senior leadership is very careful to ensure we consider the readiness impacts of any planned reductions. Our personnel and fleet size are smaller than virtually any other time in our Air Force's history, while our operations tempo is its highest. We will be vigilant on this front even as we consider tough trade-offs.
Finally, in considering a strategic approach to reduced resources, we have to both acknowledge and combat the cost growth that has continued in many parts of our budget. Regardless of any specific reductions we may take, the Air Force--and truly the broader Defense Department--must slow the rate of growth in a number of accounts or we will find ourselves having to make additional programmatic or force structure reductions over time.
Let me give you just a couple examples. Even though we have become a smaller force overall - about seven percent smaller than we were seven years ago-- our personnel costs have actually risen by 16 percent. We were struck enough by that that we asked staff, as a planning exercise, to look at what it would take to hold personnel spending constant over the Future Years Defense Program (FYDP). To do that - just to keep our personnel costs flat between now and 2017 -we would have to shrink the force by 47,000 people. Now I'm not suggesting we do that, but it gives you a sense of the scope of the problem.
Personnel costs are not the only area where we see costs going up while resources go down, however. We've driven our energy use down by 16 percent, for instance, but our energy costs have increased three-fold. Our operating costs are up 19 percent, even though our operational inventory has decreased by 10 percent. And you know of many of the investment programs where we have had cost and schedule overruns.
So while I can't tell you where the strategic review will end up, or the size and content of budgetary reductions for the Air Force, these are some of the things we're trying to work our way through.
As if that wasn't a big enough challenge, we have to achieve the substantial efficiencies included in our Fiscal Year 2012 budget request. The Air Force took Secretary Gates' mandate last year to find 28.3 billion dollars across the FYDP very seriously. In our case, we went further; we're pursuing 33 billion dollars in efficiencies. Crucially, most of the savings that we found in overhead, support and less mission-essential areas have been re-invested into modernization and readiness
To identify possible savings, we thoroughly reviewed how we do things, applied continuous process improvement methods, and we compared best practices in industry to our own operations. We looked across every category of support activities to find specific efficiencies, including:
· The consolidation of 4 Air Operations Centers into 2, and 3 Numbered Air Forces staffs into the staffs of collocated Major Commands;
· Improvements to logistic support, including how we sustain weapon systems and fuel efficiencies;
· IT consolidation; and
· Space acquisition initiatives - which I'll expand on in a minute.
Identifying these efficiencies allowed us to plan for investments in our warfighting capabilities, including:
· Developing an affordable, long range penetrating bomber as part of a Long Range Strike Family of Systems;
· Procuring more Evolved Expendable Launch Vehicles to ensure access to space and to stabilize the industrial base; and
· Transitioning our MC-12 ISR aircraft into the base budget as an enduring capability.
These investments depend on the savings from planned efficiencies, so we have to deliver. To help ensure success, we're making individual senior leaders responsible by name for developing and executing detailed implementation plans. The Vice Chief and I are using our corporate governance structure and frequent updates with the Secretary and Chief to regularly review our progress to make certain we stay on track.
Senior Air Force Energy Official
Now that I've delivered all that cheery budgetary news, let me spend a couple minutes on my energy and space roles before we open up the discussion.
While the Department of Defense is the largest consumer of energy in the federal government, the Air Force has that distinction within the Department. To improve our efficiency, we are working to quite literally do more with less. Let me give you an example. We burn up a tremendous amount of jet fuel moving cargo into theater - more than 1.5 billion gallons in FY 2010. And as you might be aware, the price of petroleum fuels lately has been going up - it jumped 28 percent just from FY09 to FY10.
So the Air Force made a priority of moving that cargo more efficiently. The great folks at Air Mobility Command applied proven commercial aviation practices for flight planning and weight reduction to limit fuel consumption in our tanker and cargo fleet. We took this approach not just to save fuel and therefore dollars, although we have done just that. We also did it to bring more capability to the fight, and we've done that, too. In fact, we are now moving more cargo into the CENTCOM AOR with less fuel consumed per ton of cargo-27 percent more from FY06 to FY10, to be precise.
Across the Air Force, we are also diversifying our sources of energy. Over the past five years, the Air Force has certified more than 99 percent of its aircraft to operate on various blends of synthetic and traditional fuels, and we are moving ahead in certifying biofuels as well. We are using more and more solar and wind power at dozens of bases - enough for the EPA to recognize the Air Force as one of the largest purchasers of green power in the country. And in the next few years, we will quadruple the use of solar power and increase wind energy on Air Force bases.
All of this is good for our bottom line in a time of rising fuel prices, and it allows us to put money we would have put into fuel into warfighting capabilities.
Focal Point for Space
Another big part of my portfolio is Air Force space. As you all know, the Joint warfighting community, a range of other federal government functions, and civil society at large all rely on the Air Force to deliver the full gamut of space-based capabilities - space launch and range operations, satellite communications, space situational awareness, GPS, missile warning, and weather. Our on-orbit capabilities are the world's most sophisticated, and we have had over a decade of successful launches delivering these assets into space, including the long-awaited successful launch of SBIRS GEO-1 last Saturday. There is much to be proud of.
At the same time, a despite that pride, the SBIRS launch itself illustrates that getting these world class capabilities into operational status has often taken too long and cost too much. In the constrained fiscal environment we are in now, it's more important than ever to put our dollars where they're most needed.
Reducing costs and improving our acquisition processes is certainly not a simple challenge. But the way we've been acquiring space capabilities - on a one-at-a-time or just-in-time basis, often following production breaks and requirements changes - reduces our buying power, weakens our industrial base, and contributes to capability gaps.
To address this, and consistent with Dr. Ash Carter's "Better Buying Power" initiative, we're developing more efficient and cost-effective approach to space procurement. These efforts include rigorous "should cost reviews," a renewed focus on accountability in our contracts, a developing strategy for launch acquisition, and the "EASE" proposal for satellite acquisition.
EASE is short for "Evolutionary Acquisition for Space Efficiency." Recurring, persistent challenges in our satellite acquisition efforts have prompted multiple calls from Congress and others for a smarter approach. This year we are not only listening but acting.
EASE has four basic tenets: block buys of satellites; stable research and development investment; fixed price contracting; and full funding of those block buys over multiple years through advance appropriations. With Congress' partnership, we are confident that EASE will help drive down costs, improve space industrial base stability, and allow for investments in technology that will lower risk for future programs.
In tandem with EASE, we're pursuing a robust examination of contractor costs, and we're pushing aggressively for cost reductions. We have a superb Service Acquisition Executive in Dave Van Buren who is leading a rigorous "Should Cost Review" of a number of key programs--including AEHF and SBIRS.
His review into what these capabilities should cost will put the Air Force in a position to get a better deal for the taxpayer. Our premise is that in exchange for the stability and commitment afforded to the industrial base by the EASE approach, our industry partners can help us achieve real savings.
Another area where the Air Force is working toward a more cost-effective acquisition strategy is space launch. Along with our NRO partners, we deliver assured access to space through the Evolved Expendable Launch Vehicle, or EELV, program. EELV has delivered a 100 percent launch rate for more than a decade - 40 in a row now with the successful launch of SBIRS GEO-1.
Of course, this success wouldn't have been possible without the hard work, skill, and professionalism of our fantastic launch and range operators. We put a lot of pressure on these Airmen, and they continue to deliver.
Unfortunately, at the same time, the operational success of EELV has in recent years been accompanied by rapidly increasing costs. Some of these increases are owed to the expiration of favorable terms the Air Force benefited from after ULA's establishment. But some of the growth in launch costs goes beyond that.
To get at this problem, we are aggressively scrutinizing EELV acquisition using an internal Should Cost Review, as well as a several blue ribbon external reviews. The EELV Should Cost Review produced 84 cost-saving recommendations for the near and mid-term, and Air Force Space and Missile Systems Center is already working to implement these recommendations. Meanwhile, Air Force acquisition leaders continue to dig deeper into the current cost structure.
In addition, consistent with recommendations from several independent studies, we have partnered with the NRO to ensure a baseline level of annual production for EELV cores. Predictable, recurring block buys will have the effect of lowering the cost per booster and any additional boosters our launch schedule might require. This approach will also contribute to a more stable market for our industrial base.
In closing, I want to again thank the AFA - and all of you who are here - for your interest in the future of the Air Force. As we adapt to the strategic challenges faced by the DoD and the Nation, we're pursuing efficiencies and investing in enhancements that we believe will increase support to the warfighter and keep our country secure. We're making significant steps to ensure the best use of the resources America has entrusted to our stewardship.
As we move forward, we clearly will face real challenges... but your Air Force is well-postured and prepared to meet them head on.
Thank you. I look forward to our discussion.