Army Contracts Decline Shows Signs of Plateau in FY2015

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Army Contracts Decline Shows Signs of Plateau in FY2015
By: Jesse Ellman
@csis_isp

Since 2008, the Department of Defense’s (DoD) contracting portfolio has faced significant resource pressures, as a result of the ongoing budget drawdown, sequestration, and its aftermath. Those pressures have not been evenly distributed within DoD. As discussed in CSIS’s recently released report on Defense Acquisition Trends, the Army has borne a disproportionate share of the decline in contract obligations since 2008, falling by nearly three-fifths in a period when overall DoD contract obligations fell by only a third. The winding-down of combat operations in Iraq and Afghanistan has been a major driver of this decline, which has consistently been notably steeper than the overall decline in DoD contract obligations in each year.

With FY2015 contract data now available through the Federal Procurement Data System (FPDS), CSIS has begun to examine whether the trends observed in the first two years of the post-sequestration defense contracting environment would continue to hold. For the Army, at least, the data shows a notable slowing of the decline in contract obligations in 2015. Overall Army contract obligations dropped by 6 percent in 2015, roughly in line with the overall decline in DoD contract obligations, and less than half the rate of decline observed for the Army in 2014. 2015 is thus the first year since 2010 that the rate of decline for Army contracts has not exceeded the rate of decline for DoD contracts overall.

Even within the Army’s contracting portfolio, the decline in contract obligations has not been evenly distributed. Army contract obligations for services have been relatively preserved during the drawdown, falling by less than half since 2008, despite widespread belief that services would bear a disproportionately large share of cuts in a constrained budgetary environment. Meanwhile, Army contract obligations for products and for research & development (R&D) have both declined by nearly two-thirds since 2008.

This disparity is not simply a factor of the declining pace of overseas combat operations; rather, as discussed in the aforementioned CSIS report on defense acquisition trends, this represents a larger issue with Army acquisition. Since the failure of the Army’s Future Combat Systems program, the Army has been largely unable to start and sustain development programs for Major Defense Acquisition Programs (MDAPs), resulting in a five-year trough in the Army’s major weapons system development pipeline.

2015 represents a break in the trends seen within the Army’s contracting portfolio. Contract obligations for Army services declined at nearly twice the rate of overall Army contracts, while both products and R&D were nearly flat. While that data represents another year in the Army’s developmental trough, it also indicates that the fundamental decline may have plateaued. With little money committed to major developmental programs, the Army does find itself with a potentially significant opportunity: to take a step back, draw lessons from the wars in Iraq and Afghanistan, evaluate potential future threats and missions, and direct its requirements and developmental priorities accordingly once more resources become available.

CSIS will continue to examine the implications of the FY2015 data on defense contracting in the coming weeks and months on the CSIS Defense360 portal.

Jesse Ellman is a research associate with the Defense-Industrial Initiatives Group (DIIG) at CSIS. Other posts by .

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