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\\ Tere one to ask the typical naval officer to list the W publications and references that most affect the [j ’ Navy’s day-to-day operation and administration, Qp^r she would probably include: Navy Regulations^
" J. s.S
the tr InSt ^*20.32A (“Organization and Regulations of tts- Navy”), ATP-1 (“Allied Maritime Tactical In- strUctic • • ~ •
dmiral Watkins testifies long and often tfore Congress defending the Navy’s budget, hat defense can be strengthened by Navy hr°fessionals who understand the budget proCess and are dedicated to reducing costs ^hile maintaining readiness.
ions and Procedures”), NATOPS (“Navy Air Train- p atl(i Operating Procedures Standardization”), etc. list \Jl0Wever> would likely include the budget on their [|eej evertheless, the budget determines the size of the ['UmJnUrn*3er shiPs’ airplanes, and submarines), the 3ns W PeoPie in the Navy, number and types of weap- steaand ammunition, the number of days per year ships sjji  ’ number of hours airplanes fly, the number of
struS °Verhauled, and the number of buildings con- iar Although tending toward hyperbole, some famil- lati0l Avays of Washington” assert that the formu- the[i'e budget is the chief raison d’etre for 95% of Wa°Usands of military personnel assigned to duty in the Qhlngton, D.C. area.
man^n budget’s impact and importance, all Navy §ers would be well served by having a better understanding of the budget’s contents and trends. A review of Navy budgets for 1964 through 1983 will be used to provide this understanding. The 1983 budget* will be used as the key point of reference.
The 1983 Department of the Navy budget is divided into 18 appropriations, totaling $80.2 billion. The appropriations categories are:
► Military Personnel, Navy (MPN)
► Military Personnel, Marine Corps (MPMC)
► Reserve Personnel, Navy (RPN)
► Reserve Personnel, Marine Corps (RPMC)
► Operation and Maintenance, Navy (OMN)
► Operation and Maintenance, Marine Corps (OMMC)
► Operation and Maintenance, Navy Reserve (OMNR)
► Operation and Maintenance, Marine Corps Reserve (OMMCR)
► Aircraft Procurement, Navy (APN)
► Weapons Procurement, Navy (WPN)
► Shipbuilding & Conversion, Navy (SCN)
► Other Procurement, Navy (OPN)
► Procurement, Marine Corps (PMC)
► Research, Development, Test, and Evaluation, Navy (RDT&E)
► Navy Stock Fund (NSF)
► Marine Corps Stock Fund (MCSF)
► Military Construction, Navy (MilCon,N)
► Military Construction, Navy Reserve (MilCon, NR) With the exception of nonappropriated funds from the Navy exchanges, every penny that the Department of the Navy spends comes from one of these appropriations.
♦The Congressional House-Senate Conference Committee completed action on the Fiscal Year 1983 Further Continuing Resolution on 20 December 1982. It was signed into law by the President on 21 December 1982. This resolution incorporates the provisions of the DoD Appropriations Bill and has the effect of enacting the DoD Fiscal Year 1983 Appropriations Act into law.
Table 1 presents the Total Obligation Authority (TOA) for each of the Navy (“blue dollars”) appropriations categories. (The Marine Corps [“green dollars”] portion of the Department of the Navy budget is not included.) There is an important distinction between TOA and outlays. TOA is the sum that Congress appropriates for the services to obligate. The entire authorized sum typically will not be spent in the budget year. Typically, 83% of TOA is spent or outlayed during the budget year. As a rule, 15% of the money authorized for procurement in a given budget will be spent the same year. The remainder is spent in “out” years subsequent to the “budget” year. For shipbuilding, less than 6% may be spent in the first year. Virtually all MPN (salaries for active duty military personnel) and OMN (operations and maintenance) appropriations are outlayed during the budget year.
Let us examine each of the “blue dollars” appropriations categories.
MPN Appropriation: From time to time, one hears about the “ominous,” increasing cost of manpower and that half or more of military spending is for personnel. This certainly is not the case for the Navy. As shown in Table 1, MPN represents but 14.1% of Navy TOA for 1983. Moreover, when viewed in terms of constant dollars, personnel cost has decreased from $13.6 billion in 1964 to $11.2 billion in 1983 (see Figure 1).
When personnel costs are considered, one usually thinks of the uniformed military rather than civilians who work for the military. And, in fact, civilian personnel costs are not reflected in the MPN appropriation. Rather, they are subsumed mostly in the OMN appropriation, with smaller amounts contained in the RDT&E and MilCon appropriations. In the 1983 budget, $8.3 billion dollars are
Table 1 1983 Navy Total Obligation Authority
Amount (Billion $)
Military Personnel, Navy
Reserve Personnel, Navy
Operation and Maintenance,
Operation and Maintenance,
Navy Reserve (OMNR)
Aircraft Procurement, Navy
Weapon Procurement, Navy
Shipbuilding & Conversion,
Other Procurement, Navy
allocated for Navy civilian pay, compared with $11-2 1 lion for Navy military pay (MPN plus RPN). Cornb|r|^ Navy military and civilian pay represents 26.6%
Navy TOA. In fact, a reduction of Navy civilian emp °j ees by 10% by attrition could result in a savings of aca $.9 billion per year or 1.2% of the 1983 Navy TOA- might be argued that reducing the number of Navy civi i employees by 10% would result in a more efficient a productive work force. Think about it. £
A review of the budget also discloses that Navy Rese^ pay represents .8% of the Navy TOA. By comparison,
U. S. Army budgets 2.1% of its TOA to reserve pay a ^ 4.9% to combined Army Reserve and Army NatK’n(0 Guard pay. The Marine Corps budgets 2.5% of its TOA ^ reserve pay. The U. S. Air Force, like the Navy, budge less than 1% of its TOA to reserve pay, but when the National Guard is included, the sum is 1.2% of the Force TOA. ^
It is noted that the armed services do not directly >u retired pay. Rather, the Department of Defense (P° budgets funds for all retired Navy, Marine Corps, Anni' and Air Force personnel under the “Retired Pay” a*"C tion fund. Were the DoD-funded retired pay for the Na
civ.?red *nt0 t*le Navy TOA, this plus MPN and Navy ' ian pay wou^ account f0r 32.2% of the Navy TOA. dur' l^e NIPN appropriation has shrunk by nearly 18% has Past ^ years, the number of ships in the fleet by 470'**ned 40% and the number of aircraft has fallen
fle . One might expect the decline in the size of the a le-> numbers of ships and aircraft) to be matched by stan|nlnensurate decline in the MPN appropriation (in con- plai ars)- This has not happened, and is partially ex- (he bact that there are 86% as many people in
as ]aravT today as in 1964 when the fleet was nearly twice
Appropriation; Table 1 shows that nearly 28% of the 1 aV^ is budgeted for OMN. Figure 2 presents l9g,ren(i in constant OMN dollars between 1964 and Hil ^Ur'n8 this period, OMN costs increased by 103%, and s t*le S*Ze ^*eet decreased from 889 to 535 ships >090 to 4,282 active inventory aircraft.
This increase in OMN is often-referred to as part of “ownership costs” or the cost to sustain existing assets. OMN includes a wide variety of activities related to operating and maintaining fleet assets. Among these are base and repair facility operations, federal civilian work force payrolls, contract work, training, fuel purchases, and other consumable material purchases. The apparent incongruity between the reduced size of the fleet and increased ownership cost appears to be largely the result of replacing obsolete weapon systems and platforms with new ones whose technical complexity and maintenance costs are commensurate with their capabilities and procurement costs. One need only to consider the difference in the servicing required, to say nothing of the costs for major repairs to their propulsion systems, between yesterday’s spartan diesel submarines and today’s missile-firing nuclear submarines. Rising fuel costs also played a role.
There is also a tendency to underestimate the time and costs of maintenance and repairs. For example, the Secretary of the Air Force in 1968, Harold Brown, endorsed a new avionics system for the F-l 1 ID airplane and asserted that it would be extremely reliable. He predicted that the system would go 60 hours between breakdowns (mean- time-between-failure), and that it would require less than 1.5 man-hours of maintenance per sortie. In 1980, the system went about three hours between failures and averaged 33.6 maintenance man-hours per sortie. That is, it required about 20 times as much maintenance as predicted on both counts.
On the whole, the counterintuitive result of rising ownership costs with a decreasing fleet can be attributed to the fact that newer systems are exceedingly complex, and the corresponding asset value is very high. However, to reduce the costs of doing business in the Navy, ways must be found to reduce the dollars spent on OMN.
Procurement Appropriations: The combined procurement appropriations (APN, SCN, WPN, OPN) make up the largest portion of the budget. Figure 3 shows that the burgeoning of the procurement appropriations is a much
Table 2 WPN Appropriations, 1979-82 (Constant Billion $)
1979 1980 1981 1982
WPN Appropriation: $2.6 $2.5 $3.2 $3.5
WPN Appropriation as
% of Total Navy TOA: 4.5% 4.2% 4.8% 4.7%
Table 3 RDT&E Appropriation Categories RDT&E FY 1983
Designation Title (Million $)
Management & Support
Operational System Development
more recent phenomenon than the steady, nearly two decade-old rise in OMN appropriations. The increase in the SCN and APN appropriations reflects the decision to build a 600-ship/15-carrier battle group fleet.
Figure 4 presents the percentage of Navy TOA programmed for procurement during 1983-88. Although the percentage of the TOA planned for procurement declines from 1983 to 1984 (because 1983 contains funds for two nuclear-powered aircraft carriers), the share begins to increase again in 1985 and grows to 51% of the Navy TOA by 1988.
One solution to the increasing cost of procurement is to procure fewer ships and aircraft. Clearly, had it been decided not to buy two nuclear-powered aircraft carriers, for example, $6.8 billion would have been saved in the 1983 budget. However, such a decision would fail to address the more systemic problem of the more efficient operation, management, and employment of the Navy. The point is that even in the face of an unprecedented construction program, OMN costs nearly equal SCN and APN costs. It is incumbent, therefore, that the Navy address directly the matter of ownership costs and devise less expensive ways to operate and maintain the fleet.
Four years ago, Admiral Thomas B. Hayward, then Chief of Naval Operations, stated that readiness and sustainability were the lowest he had seen during his career. He pledged himself to improve the situation. One measure of his remedial effort in the area of sustainability (and less so, readiness) is the level of funding in the WPN approprl ation. Table 2 shows the funding for the WPN appropna tion during Admiral Hayward’s tenure as CNO.
Clearly, after Admiral Hayward recognized the problem in 1980, he was successful in obtaining more funds for the purchase of weapons and ammunition. Indeed, based on constant dollar analysis, the WPN appropriation increase by 40% between 1980 and 1982. The same positive tren is projected in the Five Year Defense Plan as the Wr appropriation is programmed to increase to approximate y $11 billion by 1988 when the WPN appropriation wt account for nearly 8% of TOA.
RDT&E Appropriation: Figure 5 shows the trend in t e RDT&E appropriation during the past 19 years. ^-*eaI&p there has not been a dramatic aggregate change in RDT& funding during this period. Moreover, despite the discus sions one often hears in Washington with respect to econo mizing in “studies,” this area would not seem to be promising one for large savings. Indeed, a 10% savings1 RDT&E would net approximately $600 million or -8% 0 the TOA. In addition, a reduction in RDT&E funding probably mortgages the Navy of the future.
The RDT&E Appropriation is divided into six categ°r ies (see Table 3). The 6.1 and 6.2 subappropriations fu°^ the “seed com” for the Navy of the future—i.e., basi technological research. Unfortunately, these are the m° modestly funded of the RDT&E subappropriations. This is a portentous development.
MilCon and Stock Fund Appropriations: The MilC°a and Stock Fund appropriations are relatively small a collectively represent 2.1% of the TOA. The Stock Fun Appropriation has appeared as a discrete appropriate’ only in 1976, 1977, 1978, 1981, 1982, and 1983. A’ shown in Figure 6, there has been appreciable variation the MilCon appropriation during the past 19 years.
One need not be trained in political science or econom ics to realize that the armed forces will have to tight® their belts during the coming years as federal budget de 1 cits are predicted to increase to $200 billion and perhap higher. It is incumbent, therefore, that all Navy manager find ways to decrease costs without sacrificing readiness- Hopefully, a knowledge of the budget and its trends W help focus our efforts.
Commander Harris is presently serving on the Staff of the Chief of Operations Executive Panel. He has served in destroyers—most rece ^ as executive officer of the USS Tattnall (DDG-19) and previously operations officer of the USS Semmes (DDG-18). He also served on Staff of Commander Cruiser Destroyer Group Eight. He received his degree from Pfeiffer College, his MA degree from the University Georgia, and his PhD candidacy from the University of North Caron
 July 1983