Tracking Defense Contracts by Budget Account
By: Jesse Ellman
For nearly a decade, CSIS has analyzed trends in Department of Defense (DoD) contracting in order to ensure that discussions about the defense industrial base are informed by data rather than anecdote. One notable long-standing gap in the data was the inability to link contract obligations with Office of Management and Budget (OMB) budget data, but starting in 2012, DoD populated the data fields needed to perform that linkage. The FY2013 edition of the CSIS series of reports on defense contract trends debuted this capability, and with FY2014 data now available, CSIS has a three-year sample with which to analyze contracting trends within the major budget accounts. This data shows that, although sequestration affected budget accounts uniformly, other dynamics led to very different outcomes for contract spending within those budget accounts.
Overall defense-funded contract obligations declined by 22 percent between 2012 and 2014, but that decline was not evenly distributed among budget accounts. Contract obligations funded out of the Military Construction and Military Sales Program accounts declined at nearly twice the rate (40 percent and 39 percent, respectively) as overall defense contract obligations from 2012 to 2014. By contrast, contract obligations funded out of the Procurement account fell at the same rate as overall DoD contracts over the same period (22 percent).
Over that same period, contract obligations funded out of the Operations and Maintenance (O&M) account declined by only 16 percent. This contradicts the conventional wisdom that O&M would be a primary target for savings over the past two years. Similarly, contract obligations funded out of the Research, Development, Test, and Evaluation (RDT&E) account declined by only 19 percent over the 2012–2014 period.
It is important here to understand the difference between the RDT&E budget account and “R&D contracts.” CSIS has previously found that DoD R&D contract obligations declined notably faster than overall DoD contracts in FY2013. But not all contracts funded out of RDT&E are what would be considered “R&D contracts,” and not all R&D contracts are funded out of RDT&E. Only 70 percent of what CSIS considers to be “R&D contracts” are funded out of RDT&E (with most of the rest evenly split between Procurement and O&M), while only 51 percent of contracts funded out of the RDT&E account are for what CSIS considers R&D.
Overall, contracts funded out of the Military Construction and Military Sales program accounts have taken disproportionate cuts over the last two years, while Procurement has declined in parallel with overall defense contracts, and O&M and RDT&E were relatively spared. CSIS hopes to explore these issues more thoroughly in the months ahead.