Defense budget short on modernization.

• Author: Stone, Ben
• Position: Government Policy Notes - Brief Article

President Bush's proposed defense budget of $379 billion for fiscal year 2003 represents a dramatic increase over current spending, but it is insufficient for the task at hand, NDIA President Lawrence P. Farrell testified at a mid-March congressional hearing.

The request "sounds large," Farrell told the House Armed Services Military Procurement Subcommittee. "But when compared with the needs-homeland security emergency requirements, past unpaid bills, increased ops temp-only about $10 billion is available for new requirements or increased procurements. And that is not enough."

The services have "a lot of tired iron"-old vehicles, ships and aircraft--and that affects how they perform in combat, said Farrell, a retired Air Force lieutenant general. "War and conflict are come-as-you-are events. The trained troops and the weapons systems employed are the products of previous investments," he explained. "Whether the troops and weapons are up to the task or woefully unprepared depends on the level and commitment over time to defense spending."

Whether the defense industrial base is healthy or not "depends on the same two factors-level and consistency of commitment over time," Farrell said. Although the U.S. defense industry is "second to none," Farrell said, its health "is threatened by smaller production runs, fewer new starts and increasing international competition."

Also, he said, a number of acquisition laws, regulations and procedures have forced many companies from the market, leaving the industrial base, as a whole, smaller and less diverse.

Furthermore, Farrell said, episodic funding and inadequate profit margins have resulted in a large number of single-source suppliers who have, in some cases, marginal capability to perform their industrial function. Many types of ammunition, for example, are only available from single sources, and a significant number of these are foreign, Farrell noted.

A healthy industrial base requires skills and personnel to cover the needs of science and technology, development, program management and production engineering, Farrell said.

Many of industry's problems are a result of bureaucratic barriers deterring companies from doing business with the federal government, Farrell said. As an example, he cited the need for increased contract flexibility in the procurement of commercial products and services.

"We also advocate more competitive sourcing," Farrell said. "The resulting increased outsourcing will make...