ASMC Viewpoint

DEFENSE FINANCIAL HIGHLIGHTS

On the Hill

President's State of the Union Address set for January 27:  The President will address both houses of Congress on Wednesday night January 27th in the traditional annual State of the Union Address.  He will give his evaluation of the current condition of the nation and lay out the framework for his FY2011 budget and legislative plan.  The White House is scheduled to release the FY2011 federal budget on Monday, February 1st.  This address fulfills the President's constitutional responsibility to report "from time to time" to the Congress "on the State of the Union."  President George Washington gave the first address on January 8, 1790.  This address will mark the 221st time Presidents have reported to Congress (either in person or in writing).  The Congressional Research Service has historical information on the history of the State of the Union Address.

Defense Budget and Financial Management News

GAO recommends changes to national security planning and budgeting:  In a speech to the National Defense University, the General Accountability Offices' (GAO) Acting Comptroller General, Gene Dodaro, urged DoD to work in a more collaborative way with other agencies, particularly State and the Agency for International Development (AID), to meet the changing "complexities" in the national security environment.  Dodaro was critical of existing planning and budgeting processes that reflect individual agencies' concerns rather than a collective, interactive approach to meeting national security goals.  He cautioned that the current fiscal environment facing DoD and other agencies make the need for stronger partnerships, interactive planning, and mutually-addresses solutions even more important today.  The complex nature of emerging threats to US security "transcend the scope and authority of any one agency" he said.  Dodaro also criticized DoD's business management failures, lapses in cost control, and its stove-piped approaches to planning and budgeting.  He said they have produced inefficiencies and program and budget mismatches.  Regarding DoD's financial management improvement efforts, Dodaro thinks the current prioritization of efforts identified by the DoD Comptroller is reasonable, but a long-term commitment by senior leadership is essential to success.  He also encouraged DoD to continue its efforts to address GAO-identified contracting and asset management weaknesses.  On Interagency planning cooperation, he listed four opportunities where agencies can improve their collaboration efforts:  1) develop and implement overarching and integrated national security strategies; 2) formalize coordination mechanisms; 3) develop well-trained workforces; and 4) share and integrate security information across agencies.

Rule would allow payments withhold from contractors with business systems problems:  A DoD draft ruling published in the Federal Register this week, would amend the Defense Federal Acquisition Regulation Supplement (DFARS) to add a new contract clause requiring contractors to certify that they have no major business systems defects.  The ruling defines business systems are comprising: accounting, estimating, purchasing, earned value management, and material management systems.  This clause would be added to cost reimbursement, incentive type, time and materials, and labor-hours contracts, as well as fixed-price contracts with progress payments, and some military construction contracts.  It a contractor has business systems deficiencies documented by Defense Contract Audit Agency (DCAA) auditors, and does not provide DoD within 45 days with a plan to correct those systems, contract officers could withhold 10 percent of contract payments.  This withhold could rise to 50 percent if it is determined that a contractor has deficiencies in multiple systems and to 100 percent if defects could lead to improper payments or represent an unacceptable risk of loss to the government.  DoD will take comments on this proposed ruling until March 16, 2010. 

DoD names John James to shut down NSPS:  DoD has named John H. James as the Director of the National Security Personnel System (NSPS) Transition Office.  James is currently serving as the executive director for logistics, maintenance, and industrial operations at the Naval Sea Systems Command.  His new job will be primarily to: 1) close down the NSPS (repealed in the FY2010 Defense Authorization Act); 2) direct the transition of former NSPS employees to other pay systems; and 3) design a new DoD-wide performance management and bonus distribution system for civilian employees.  He has said that he would work closely with employee union representatives during the transition a development of a new system.

Defense Financial Highlights

DoD on the Hill

Congress reconvenes:  The Senate returned this week from its winter recess to begin the second session of the 111th Congress.  The House held a pro forma session on January 5th and will return next week to begin its work.  The Senate began to debate the House-passed bill to increase the public debt limit.  The main issue this month will be the Health Care Reform bill.  Congressional Democrats are working to resolve the differences between the House and Senate versions of the Bill.  It remains unclear when negotiators will have a final bill ready for a vote.  Some had hoped that the bill would be ready for the President's signature before he gave his State of the Union speech (normally presented to a joint session of Congress sometime in late January).  House Speaker Nancy Pelosi (D-CA) has said that it was "possible" that they may finish by the end of the month. 

Defense Budget and Financial Management News

FY2011 Budget countdown:  The FY2011 federal budget is scheduled to go to Congress on Monday February 1, 2010.  Highlights will track progress towards that date and provide readers with scheduling information (press conferences, congressional hearings, etc) as it becomes available.

FY2010 Enterprise Plan to be digital:  The Business Transformation Agency (BTA) announced that the FY2010 Enterprise Transition Plan (ERT) will be entirely digital.  The new electronic plan will replace earlier print versions that had become very bulky and increasingly difficult to use.  The new digital version has been streamlined and will present program milestones for DoD's business information investments and IT systems in easy to use charts and graphs. 

Other Issues of Interest

President issues executive order to set pay for FY2010:  The President set pay levels (beginning January 11, 2010) for federal civilian employees (executive level, senior executives, and general schedule employees), uniformed military personnel, and judges.  The pay levels (and locality pay) set in an executive order issued late last month comply with statutory pay caps and pay raises for civilian employees in the FY2010 Consolidated Appropriations Act, and for uniformed personnel in the FY2010 Defense Authorization Act.  Tables attached to the executive order list the pay levels by grade/rank and by years of service for each category of pay plan.  The Office of Personnel Management (OPM) website includes a detailed explanation of each pay plan and their originating authorities.

GSA issues new POV reimbursement rates:  Effective january 1, 2010,the new reimbursement rate for the use of privately-owned vehicles used for government business was set at 50 cents per mile.  The new rate is 5 cents lower than the previous rate of 55 cents, which was set last January.  This change marks the second consecutive rate reduction since it reached a high of 58.5 cents in March of 2008.

Secretary Gates agrees to stay on the job:  According to Army Times and other news sources, Secretary Robert Gates has agreed to remain as Secretary of Defense at least through the end of 2010.  Gates is the only holdover from the previous administration.  Pentagon press spokesperson Geoff Morrell told reporters that the Secretary and the President agreed to review the situation again at the end of the year. 

DEFENSE FINANCIAL HIGHLIGHTS

DoD on the Hill

Afghanistan and Health Care reform dominate Congress's' attention:  The President's troop increase announcement on Tuesday night and the Senate's continuing debate on Health Care reform (with a sidebar issue of White House security and party crashers) captured most of Congress' time and attention this week.  There was no movement on Appropriations bills.  It is likely that these two major issues will continue to command members' attention until adjournment later this month.  The Senate majority leadership's goal of finishing its Health Care bill before the end of the year means that only limited Senate floor time will be available to debate other legislation.  The President's announcement to commit an additional 30,000 troops to Afghanistan has already spawned four committee hearings  with testimony by State Sec. Hillary Clinton, Defense Secretary Robert Gates, and JCS Chairman ADM Mike Mullen and focused Appropriators' attention on how to pay for this deployment (see below).

FY2010 Omnibus Appropriations Bill(s) growing more certain:  With the end of the current Continuing Resolution (Dec. 18) approaching, congressional appropriators are working to come up with a plan to complete FY Appropriations Bills.  House Majority Leader Steny Hoyer (D-MD) expressed hope that final action on appropriations bills could be completed in the next two weeks.  But, the question now is:  In what form will the endgame be accomplished?  For some time, Hill observers have speculated that the remaining seven appropriations bills would be wrapped up into one bill, possibly the DoD bill.  Now they are talking about two bills.  GovernmentExecutive.com reported today that House Democrats are considering one bill that would include six Appropriations bills, as well as some job-related legislation and a short-term expansion of the Patriot Act.  The second bill, according to the report, would be the FY2010 DoD Appropriations bill, which could include an increase in the debt ceiling.  This latter approach might change due to strong opposition to including debt limit increases in other legislation. 

Defense Budget and Financial Management News

Congress proposes ways to fund Afghanistan troop increase:  When the President announced an increase in troop strength in Afghanistan by 30,000, he said he would work with Congress to fund his plan and strategy.  He didn't have to wait long for Congress' response.  Even before the announcement was made, members of Congress had begun sharing their ideas on how the $30 billion (Administration estimate) should be funded.  House Appropriations Chair Dave Obey (D-WI) proposed a special surtax to fund the additional costs.  Some Senate Democrats are taking about a special war tax.  Rep. Jerry Lewis (R-CA), also an appropriator, recommended reducing all nondefense agencies' FY2010 budgets by two percent.  Others have recommended transferring unused stimulus funding to DoD for the war.  In any case, Congress is likely to press for early consideration of a supplemental so they will have the opportunity to debate not only the funding but the strategy.

Other Issues of Interest

President formally recommends a 2 percent civilian pay increases 2010:  In a letter to House Speaker Nancy Pelosi (D-CA), President Obama reiterated his support for a two percent pay raise for federal civilian personnel and a freeze on locality pay at the 2009 level and issued an executive order to this effect,  The President cited sacrifices being made by employees in the private sector during the current economic downturn and budget affordability given the high deficits as the main reasons for his decision.  The Congress could still overrule the President if they pass and the President signs legislation providing for a higher raise.  This has often been done in past years.  Legislation for a higher raise would come in the FY2010 Financial Services Appropriations bill.  The House version of the bill, passed earlier this year, provides a 2 percent raise.  The Senate Appropriations Committee's bill, which has yet to come to the Senate floor, supports a 2.9 percent pay increase.  Hill observers think that is unlikely that the final bill will include a raise above 2 percent.

DEFENSE FINANCIAL HIGHLIGHTS

DoD on the Hill

Senate passes FY2010 Military Construction./VA appropriations bill:  The first piece of work for the Senate upon returning from the Veteran's Day recess was to pass, unanimously, the FY2010 Appropriations bill.  The House passed the bill In July.  The Senate bill provides $23.2 billion for total Military Construction appropriations, over $285 million above the request and $50 million over the House bill.  The Senate adds $350 million (not included in the House bill) to fund the remaining requirements of the temporary expansion of the Homeowners Assistance Program (HAP) provided in the economic stimulus legislation.  This expansion funds assistance to military members and certain civilians who have orders to relocate and have difficulty selling their homes or experience extreme loses in selling as a result of the current economic downturn.  For military facilities construction, the Senate bill reduces active forces funding by $350 million and adds $260 million to reserve forces construction.  The Senate makes no change to the Family Housing request and adds $25 million to funding for BRAC.  You can find additional detail in the Senate Appropriations Committee report.  The Senate will now conference with the House to resolve the differences in the bills.

Congress makes little progress on FY2010 Appropriations bills:  Except for the Senate's action on the Military Construction/VA bill, no FY2010 appropriations bills advanced in Congress this week.  The House has passed all 12 appropriations bills, while the Senate still has not passed three (Financial Services, Labor/HHS/Education, and State/Foreign Operations).  There are four bills in conference (Commerce/Justice/Science, DoD, Military Construction/VA, and Transportation).  Hill observers indicate that it is now looking more likely that the DoD bill, or any other bill for that matter, will not be reported out of conference before the Thanksgiving recess next week.  Under this scenario, it is a better than even chance that the DoD bill could include the other unfinished bills (in an Omnibus bill) and carry them into enactment. 

Defense Budget and Financial Management News

FY2010 Defense Authorization Act contains financial management-related legislation:  Want to know what financial management-related legislative language is in the FY2010 Defense Authorization Act?  No need to read the entire bill to find relevant items.  The Defense Finance and Accounting Center (DFAS) has done the work for you.  You will find all pertinent FY2010 legislative language on the DFAS web site in the legislative affairs section.  DFAS also has similar list for FY2009 and FY2008 on the same site.

Business Transformation Agency releases BEA 6.2:  The Business Transformation Agency (BTA) announced the release of Business Enterprise Architecture (BEA) 6.2, the second informational release since BEA 6.0 was delivered in March 2009.  The BEA defines DoD's business transformational requirements and the business capabilities to meet those requirements.  The annual informational releases contain interim content updates that allow stakeholders to better understand future requirements and for planning purposes and give them the opportunity to accelerate implementation.  This year's update (6.2) includes enhanced mapping of 15 End-to-End (E2E) business flows into the BEA and realignment of DoD Architecture Framework products:  OV-5 Node Tree and OV-5 Operational Activity Models.  According to BTA's announcement, the E2E improvement will provide a better alignment between business capabilities and Enterprise Resource Planning (ERP), which will make both more useful to decisionmakers.  The realignment of OV-5 Node Tree and OV-5 Operational Activity Models will make for a more consistent numbering of both activities.

 Other Items of Interest

Erin Conaton nominated to be new Air Force Under Secretary:  Last week, the President nominated Ms. Erin Conaton to be the new Under Secretary of the Air Force.  The position has been vacant since Ron Sega resigned in 2007.  Ms. Conaton has been on the staff of the House Armed Services Committee since 2001 and currently serves as the Staff Director.  Before that, she was a research director for the U.S. Commission on National Security (Hart-Rudman Commission).  She is a graduate of Georgetown University and received a master's degree from Tufts University Fletcher School of Law and Diplomacy.

Sen. Byrd becomes longest serving sember of Congress:  Sen. Robert C. Byrd (D-WVA) this week became the longest serving member of Congress in history--56 years and 320 days.  Sen. Byrd passed the previous record set by Sen. Carl Hayden (D-AZ), who served from 1912 to 1969.  Those who have followed much of his time in Congress, remember the many interesting aspects of his character and his legislative life.  Over his career, he has a 98 percent attendance record and has cast over 18,000 votes.  For many years as Chair and ranking minority member of the Senate Appropriations Committee, Sen. Byrd has underscored his strong belief in Congress' "power of the purse" to thwart presidential policies.  He has been referred to as the "king of pork" for his unapologetic support for congressionally-funded projects for his native West Virginia.  He is a recognized expert on Senate traditions (he wrote a four-volume Senate history) and is a master of congressional procedure.  He routinely quotes classical literature, especially Caesar, Plutarch, and Livy, during Senate debates.  If you have watched him over the years in the Senate, as this reporter has, you will remember how he would often reach into his pocket and retrieve a copy of the Constitution (which he always carries with him) to make a debating point and his frequent references to his dog Billy.  Congratulations to Sen. Byrd.

DEFENSE FINANCIAL HIGHLIGHTS

DoD on the Hill

Appropriations bills make little progress:  The President signed the FY 2010 Agriculture Appropriations bill this week, making it only the second appropriations bill signed so far (the Legislative Branch bill--including the Continuing Resolution (CR)--was signed in early October).  In the only other action of note, the final Homeland Security Appropriations bill passed the Senate and, along with the Energy and Water bill, awaits the President's signature.  House Majority Leader Steny Hoyer (D-MD) criticized the Senate for not passing five appropriations bills still on their docket.  There are three bills in conference that could be completed and be ready for the President next week (DoD, Interior & Water, and Transportation).  But even if this should happen, Congress will have to pass an extension of the current CR, which expires on October 31.  It is being reported on the Hill that the House is now working up a bill to extend the current CR until December 15.  there is also a possibility that Congress will not be able to finish all appropriations bills before Congress adjourns for the year.  If that happens, they will have to package the remaining bills in an Omnibus FY 2010 Appropriations bill.  Students of legislative history will remember the President signed an FY 2009 Omnibus appropriation bill in March of this year that contained 9 appropriations bills (all but DoD, Homeland Security, and Transportation, which were passed together on September 30, 2008). To follow the action on the FY 2010 appropriations bills, go to the Library of Congress' Thomas website.

FY2010 DoD Appropriations conference could end soon:  House and Senate conferees are winding down their work on the Fy 2010 DoD Appropriations bill.  They could be ready to pass and send the conferenced bill to the President next week.  House Appropriations Defense Subcommittee chair Jack Murtha (D-PA) stated in an interview this week that there are just a few items remaining to be resolved, including funding for the new presidential helicopter (which had drawn a presidential veto threat).  Action could slow down if, as reported, some members push to include unpassed appropriations bills in one Omnibus bill attached to the DoD bill, which is considered politically a must-pass bill.  However, there is no widespread support for such a move at this time so the bill is likely to go forward. 

FY2010 Defense Authorization bill sent to the President:  After voting to cut off debate, the Senate yesterday approved the final FY2010 Defense Authorization bill and sent it to the President for signature.  The President had earlier threatened to veto the bill if it contained funding for the F-35 alternative engine program.  The final bill contains this funding, but Senate leaders believe the White House will approve the bill notwithstanding.  The final bill contains a 3.4 percent military pay raise, repeals the National Security Personnel System (NSPS), and provides authority for federal retirees under the Federal Employment Retirement System (FERS) to receive credit for unused sick leave when calculating retirement payments.  It also funds more than requested F/A-18-E/F and C-17 aircraft and ends F-22 buys.  To read a summary of the FY2010 Defense Authorization conference report, go to the Senate Armed Services Committee website.

Other Items of Interest

Public-Private pay gap widens in 2009:  CovExec,com reported this week the Federal Salary Council announced that the difference between the average pay for federal and private-sector employees increased from 25.17 percent in 2008 to 26.42 percent in 2009.  However, the Council made no further recommendation on the 2010 federal pay increase, citing the lack of final congressional action on the raise.  Analysts expect the raise to be between 2 percent proposed by the President and approved in the House-passed Financial Services Appropriations bill and the 2.9 percent raise included in the Senate Appropriations committee version of the bill.  The FY2010 Defense Authorization bill includes a 3.4 percent military pay raise.

President nominates Gladys Commons to be Navy FM:  In case you missed it, President Obama has nominated Ms. Gladys J. Commons to be Assistant Secretary of the Navy (Financial Management and Comptroller).  The Senate Armed Services Committee held her confirmation hearing yesterday.  Most recently, Ms. Commons served as Comptroller of the Military Sealift Command.  Many ASMC members will remember that she was the Principal Deputy Assistant Secretary of the Navy (Financial Management and Comptroller) for eight years ans was Acting Assistant Secretary for a short time.

DEFENSE FINANCIAL HIGHLIGHTS

DoD on the Hill

Appropriations bills move forward, slowly:  After showing a flash of activity last week, congressional action to complete FY 2010 Appropriations bills slowed a bit this week.  Only two bills moved forward:  1) the final FY2010 Energy and Water bill passed the Senate and joined the Agriculture bill in the queue for the President's signature; and 2) the Homeland Security bill finished conference, was passed in the House, and now awaits Senate final action.  In a press interview, Sen. Inouye (D-HI), chair of the Senate Appropriations Committee, again stressed his desire to move appropriations bill along before floor action begins on the Health Reform bill later this month.  He has set his sights on the DoD, Transportation, and Interior & Environment bills.  To follow the action on the FY 2010 appropriations bills, go to the Library of Congress "Thomas" web site.

FY 2010 DoD Appropriations bill conference continues:  House ans Senate conferees continued work on the Fy 2010 DoD Appropriations bill this week, but no agreement was reached.  In a letter to the conferees, Secretary Gates again stated that he would recommend that the President veto a bill that provides funding for a new presidential helicopter and the F-35 alternative engine program.  Appropriators appear to be more supportive of the F-35 second engine program than funding for the new helicopter.  They may be helped by the authorizers in their efforts to save the engine funding.  The FY 2010 Defense Authorization conferenced bill also contains funding for the engine program.

FY 2010 Defense Authorization bill not yet ready for the President:  Last week it appeared that the FY 2010 Defense Authorization bill was going to the President for signature very soon.  The House had passed the bill and the Senate seemed ready to act.  However, a week has gone by and the Senate still has not brought the bill to the floor.  It may be that the Senate is waiting for the Appropriations conference to finish before they act.

Other Issues of Interest

No COLA adjustment for federal retirees and Social Security recipients in 2010:  A number of press sources reported this week that there will be no cost of living increase for federal retirees and Social Security recipients next year.  In 2009, federal retirees under CSRS received a 5.8 percent increase in their annuity checks and FERS retirees got a 4.8 percent increase.  The 2009 Social Security increase  was 5.8 percent.  To partially offset the lack of increase for those on Social Security, the President has announced his support for a one-time payment of $250.  This payment could come from already enacted stimulus funding.

DEFENSE FINANCIAL HIGHLIGHTS

DoD on the Hill

Senate moves to complete appropriations bills:  To date, Congress has completed and the President signed only one FY 2010 appropriations bill--the Legislative Branch bill, which includes a Continuing Resolution funding the rest of the rest of the government through October 31.  But, now the pace of congressional activity is increasing as it hopes to move appropriations bills before attention turns to Health Care Reform on both the House and Senate floors.  The Senate wants to complete the five bills they have not passed so conferees can finish as many bills as they can before the CR ends.  The Agriculture and the Energy & Water bills are on the verge of going to the President.  Four other bills are in conference (DoD, Homeland Security, Interior & Environment, and Transportation) and could be ready for the President's signature in a week.  And, the Commerce, Justice, & Science bill will soon be ready to go to conference.  o track the status of the FY 2010 appropriations bills, go to the Library of Congress' "Thomas" web site.

 FY 2010 DoD Appropriations conference begins:  The Senate passed the FY 2010 DoD Appropriations bill this week and began meeting with the House to iron out differences between the bills.  Among the issues conferees must resolve are funding for a new presidential helicopter and for the alternative engine for the F-35.  President Obama has issued veto threats (albiet not too strong as veto threats go) if the final bill includes funding for these two programs.  Many observers in the press indicate that the White House has recently eased back on its threat.  You can review the House-passed bill and the Senate-passed bill for further details.

FY 2010 Defense Authorization bill ready for the president:  House and Senate conferees finished work on the FY 2010 Defense Authorization bill this week.  The House passed the bill and the Senate will soon follow.  The final bill could go to the President next week.  Conferees provided a 3.4 percent pay raise for military personnel, up from the 2.9 percent requested by the President.  While the bill does approve many program terminations and adjustments the President requested, it does authorize buying more F/A-18E/F and C-17 aircraft than requested.  And in a challenge to a presidential veto threat, conferees agreed to provide funding for the F-35 alternative engine program. Of interest to DoD financial managers, the bill sets a goal for the achievement of a DoD auditable financial statement by September 30, 2017.  To review a summary of the FY 2010 Defense Authorization conference report, go to the Senate Armed Services Committee web site.

Defense Budget and Financial Management News

 OMB issues guidance on performance management:  OMB Director Peter Orszag sent a memorandum to agencies this week announcing a set of program evaluation initiatives as part of the FY 2011 budget process.  The initiatives include: 1) greater transparency in making evaluation information and results available online; 2) an interagency working group on performance management to develop government-wide guideline for performance evaluation; and 3) a voluntary program for agencies to request additional funding to support high-priority evaluation activities.  Initial efforts of these activities will focus on social, educational, and economic program.  Other programs, such as national defense, will not be included in the initial scope.

Other Issues of Interest

Congress repeals NSPS:  The final FY 2010 Defense Authorization bill ready for the President's signature repeals the National Defense Personnel System (NSPS) and requires DoD to transfer NSPS employees to existing personnel systems.  The bill also allows DoD to propose flexibilities in hiring, assigning, and rating personnel, but requires congressional approval.  Earlier this year, the Defense Business Board issued a report that recommended the reconstruction of NSPS.  Secretary Gates has directed a thorough review of the report and had asked the Defense Authorization Committee to give DoD time to complete the review before acting.

FERS employer to receive retirement credit for unused sick leave:   In a surprise move, conferees included a provision in the FY 2010 Defense Authorization bill (see above) that provides credit for unused sick leave to retiring federal workers covered under the Federal Employment Retirement System.  Earlier reports had indicated that the provision would not be in the final bill.  Heavy pressure from employees unions and congressional supporters seemed to have turned the tide.  The benefit, which will be phased in over four years, allows FERS employees to apply unused sick leave when they calculate their length of service to determine retirement pay.  Workers covered under the Civil Service Retirement System (CSRS) already have this benefit.

ADM Mullen to continue as Chairman of the JCS:  In case you missed it, last month the Senate confirmed ADM Mike Mullen for a second two-year term as Chairman of the Joint Chiefs.  ADM Mullen is the 17th Chairman and was sworn in for his first term on October 1, 2007.  As Chairman, ADM Mullen is the senior ranking member of the Armed Forces and is the principal military advisor to the President.  For more information on the functions of the Chairman, go to the JCS web site. 

Defense Financial Highlights

Defense Financial Highlights return to ASMC Viewpoint

Defense Financial Highlights returns this week to provide members the latest news and information on DoD budget and financial management issues.  Our goal is to make these weekly or bi-weekly reports relevant, informative, educational, and easy to understand.  If you want to comment or have a question on an issue addressed in a report, please use the "comments" section below.

DoD on the Hill

Continuing Resolution for FY 2010 certain for most agencies.  September is the month when federal agencies, their employees and contractors, ask the burning question:  Will Congress complete all appropriations bills by October 1, or will it have to pass a Continuing Resolution (CR) to keep the government running?  For FY 2010, congressional leaders expect very few of the 12 Appropriations bills will be ready for the President's signature by Sept 30.  House and Senate Appropriations Committee chairs still hope that they can complete some bills in time, but the outlook is bleak for most.  So far, the House has passed all 12 bills, but the Senate has passed only five--Homeland Security; Agriculture; Energy and Water; Transportation/HUD; and Legislative.  Senate Majority Leader Harry Reid (D-NV) is pushing to  pass more bills by next week, with the DoD bill a very likely candidate (see below).  However, even if as many as eight bills pass both chambers, the trick is to resolve the differences between the two versions of the bills in conference in one week--an extremely daunting task.  So there is certain to be a CR for most federal agencies, at least for awhile.  How long will a CR last?  House Majority Leader Steny Hoyer (D-MD) announced early this week that the House will move to pass a CR that lasts until the end of October.  This should give the Appropriators enough time to complete most bills.  For more information on the status of appropriations bills in Congress, go to the Library of Congress "Thomas" web site.

FY2010 DoD Appropriations bill may finish before October 1.  There is growing optimism on the Hill that Congress could complete action on the DoD bill by September 30 or early October.  The House passed the DoD Appropriations bill in July.  The Senate Appropriations committee completed action on its version of the bill on September 10, but has yet to take the bill to the floor.  Appropropriations Committee chair Senator Daniel Inouye (D-HA) is pressing to complete the bill by next week.  If this should happen, the conference could finish very quickly.  House and Senate staff have been preconferencing (staff work before the conference formally begins) and should be able to finish all but a few major issues quickly.  While the outlook is very promising, some obstacles do remain.  Most importantly, there is a presidential veto threat against the House bill's funding of the F-35 (Joint Strike Fighter) alternative engine program and for the presidential helicopter, VH-1.  The final bill is expected to approve most program changes requested by the President, but will probably cut the total request by about $3.5 billion.  The House-passed bill provides $507.4 billion for the FY 2010 baseline budget, $3.4 billion less than the request.  The bill approved by the Senate Appropriations committee (ready for floor action) provides $507.3 billion, a cut of $3.5 billion.  Both bills provide $128 billion for Other Contingency Operations (primarily war costs in Iraq and Afghanistan), just about what the president requested.  For a look at summaries, reports and copies of both bills, go to the House Appropriations Committee and Senate Appropriations Committee web sites. 

FY 2010 Defense Authorization bill in conference.  The FY 2010 National Defense Authorization bill has passed both the House and the Senate and is now in the final stages of conference.  Committee staff indicate that the target date for completion is October 1.  Both bills provide a 3.4 percent military pay raise, .5 percentage points higher than the request.  Also, both bills generally approve the requested weapons program adjustments and terminations proposed by the president.  However, the House bill contains funding for long-lead items for the F-22 (proposed for termination) and to continue to develop an alternative engine for the F-35.  The President has threatened to veto the bill if it contains funds for these programs.  To review summaries, reports, and copies of both bills, go to the House Armed Services Committee and Senate Armed Services Committee web sites.

Defense Budget and Financial Management News

Government's senior financial manager nominee testifies at confirmation hearing.  Daniel I. Werfel, President Obama's nominee to head OMB's Office of Federal Financial Management (OFFM) testified before the Senate Committee on Homeland Security and Governmental Affairs last week.  He has most recently served as the OFFM deputy and also has been acting head.  Mr. Werfel said that his main priorities for improving the government's financial management are:  eliminating payment errors and investments in unneeded real property; controlling costs of financial management systems; improving grants management; releasing financial information to the public as soon as it is available; and improving results on financial statement's audits.  To read Mr. Werfel's complete testimony go to "hearings" on the  Homeland Security and Government Affairs Committee/ web site.

GAO report urges Navy to revise ERP system procedures.  A recent General Accountability Office (GAO) report has charged that the Navy has not fully implemented several important components of Enterprise Resource Planning (ERP) system to standardize its business processes.  The report does acknowledge that "the Navy has largely implemented effective controls on Navy ERP."  However, GAO criticizes the Navy for not fully implementing controls on parts of test management and change control.  The report recommends that the Navy revise its ERP procedures to estimate the impact of a proposed change's life-cycle cost when making decisions on change requests.  To review the GAO report, go to the GAO website.

Other Items of Interest

Per Diem rates set to increase in 2010.  The General Services Administration (GSA) announced that daily per diem rates in Standard areas for lodging and meals and incidental expenses (MI&E) willl increase about 6 percent in 2010.  The daily lodging rate will remain the same ($70), while the MI&E rate will increase almost 18 percent.  For Non-Standard areas, the total average daily rates will increase slightly less due to lower lodging rates in many locations.  This is especially true in many major cities, where lodging rates decline as hotel chains lower prices in response to the weak economy.  MI&E average rate increases for Non-Standard area will be similar to that for Standard areas.  For a description of per diem rates and the latest tables showing rates for Standard and Non-Standard areas go to the GSA Per Diem website.

Parity for Civilians in FY 2010?  For the last 7 years and for 20 of the past 28 years, annual civilian pay raises have equaled military raises.  The President has routinely requested a lower civilian raise and the Congress routinely (but not always) increases it to match the military raise.  It appears that parity may not be the rule for 2010.  The President requested a 2.9 percent raise for the military and a 2 percent raise for civilians.  Both the House and Senate versions of the FY 2010 Defense Authorization bill increased the military raise to 3.4 percent.  For federal civilians, the House-passed FY 2010 Financial Services appropriations bill provides a 2 percent raise, while the Senate committee bill includes a 2.9 percent raise.  The President sent a letter to House Speaker Nancy Pelosi (D-CA) stating that he would use his authority to set the civilian raise at 2 percent, but would work to achieve parity in future raises.  The final appropriations bill could still provide a higher raise than the 2 percent request.  But even the strongest Hill supporters of pay parity think that it highly unlikely that the final civilian raise will equal the military raise.  To review military and civilian pay raises since 1948, go to Table 5-12 in National Defense Budget Estimates for FY 2010

Defense Financial Highlights - October 24, 2008

DoD on the Hill Congress Passes and President Signs Continuing Resolution: Before adjourning to hit the campaign trail, the 110th Congress passed the financial rescue plan and a continuing resolution (CR) to fund the government until March 6, 2009. But the normal provisions of the CR will not apply to DoD because the bill includes full FY 2009 appropriations for Defense, both for DoD and the Military Construction appropriations.

FY 2009 CR Includes DoD Appropriations Bill: The FY 2009 CR includes the full DoD Appropriations Bill. The bill provides over $487 billion, $4 billion less than the President requested. You can find details of the bill in the House and Senate Defense Appropriations Subcommittee press releases. To view a copy of the conference report including the bill, go to the Library of Congress’ “Thomas web site/. Click on “Appropriations Bills” under the heading “Find More Legislation.” The details are included in the CR bill and report.

FY 2009 CR Includes Military Construction/VA Appropriations Bill: The FY 2009 CR includes the full Military Construction/VA Appropriations Bill. The bill provides $344 million more than the President requested. Almost $320 million was added to the military construction accounts--$37 million less for the active components, but $356 million more for the guard and reserve components. The bill also added $13 million to the family housing accounts, $10 million to Chemical Demilitarization Construction, but only $1 million to the BRAC accounts. You can review the contents of the bill and report by going to the Library of Congress’ Thomas web site and clicking on “Find More Legislation, Appropriations Bills.”

Congress Approves and President Signs FY 2009 Defense Authorization Bill: The President signed the FY 2009 Defense Authorization Bill last week. The bill authorizes a 3.9 percent military pay increase, .5 percent higher than the President requested. You can find a summary of the bill and the text of the conference report and bill by clicking on the House or Senate Armed Services Committee web sites (www.house.gov/hasc/ or www.armed-services.senate.gov/ ).

Congress will return November 17th 2008: In early October, the 110th Congress adjourned to hit the campaign trail. They are scheduled to return on November 17th to organize after the election. There is also heightened speculation that they will remain in a lame duck session for as long as a week to consider another economic stimulus package. The 111th Congress will begin in January.

Don’t Forget—Feb 3, 2009 is Budget Day.

This is the last Defense Financial Highlights for 2008. They will resume in 2009 at the end of January.

Defense Financial Highlights

House Passes Military Construction/VA Appropriations Bill: In a rush to complete some appropriations action before leaving for the August recess, the House passed the MilCon/VA Appropriations bill, the first appropriations bill passed in the House this year. The House bill provides $400 million more than the President requested. Over $370 million was added to the military construction accounts--$169 million to the active components and $209 million to the guard and reserve components. The bill also added $80 million to the BRAC accounts, but reduced the family housing accounts by $37 million and the NATO Security Investment Program by $22 million. You can review the contents of the House bill and report by going to the Library of Congress "Thomas" website and clicking on “Find More Legislation, Appropriations Bills.”

Senate Appropriations Committee Reports out Military Construction Appropriations Bill: The full Senate Appropriations Committee completed action on the MilCon/VA Appropriations Bill, but did not take the bill up on the Senate floor. The Senate bill provides $344 million more than the President requested. Almost $320 million was added to the military construction accounts—$37 million was cut from the active components, but $356 million was added to the guard and reserve component. The bill also added only $1 million to the BRAC accounts, and $13 million to the family housing accounts. Chemical Demilitarization construction received an additional $10 million in the Senate bill. You can review the contents of the Senate committee bill and report by going to the Library of Congress "Thomas" website, and clicking on “Find More Legislation, Appropriations Bills.”

House Defense Appropriations Subcommittee Marks up FY 2009 DoD Appropriations Bill: Also before leaving for the August recess, the House Appropriations Defense Subcommittee marked up the DoD Appropriations Bill, but did not move it in full committee. Few details of the bill have been released, but Chairman Murtha (D-PA) did issue a 3-page press release summarizing the bill. You can view this summary by going to the House Appropriations Committee website and clicking on “Defense.”

Congress Set to Return after Labor Day: Congress will return right after Labor Day in early September to begin the final push before the election. It is still unclear whether Congress will pass any appropriations bill. Most observers think they will pass a long-term continuing resolution and take up the bills in the new Congress in 2009.