Jan. 11 (Bloomberg) -- The Pentagon has authorized its senior managers to freeze civilian hiring, curtail travel and training, dismiss temporary workers, review contracts and cancel some weapons maintenance because of budget uncertainty.
“We have no idea what the hell’s going to happen,” Defense Secretary Leon Panetta said yesterday at the Pentagon, in explaining the need to begin cost-cutting measures. “All told, this uncertainty, if left unresolved by the Congress, will seriously harm our military readiness.”
Steps outlined in a memo yesterday by Deputy Defense Secretary Ashton Carter mark the first concrete actions the Pentagon is taking in response to automatic cuts, known as sequestration, that would require slicing about $45 billion from the defense budget by Sept. 30 if Congress and President Barack Obama fail to agree on an alternative deficit-reduction plan by March.
In addition to the threat of across-the-board cuts, the Defense Department is being squeezed by stopgap funding bills passed by Congress that froze spending at last year’s levels.
“Either of these problems, in isolation, would present serious budget execution challenges to the Department, negatively impacting readiness and resulting in other undesirable outcomes,” Carter said in the memo.
Defense contractors have cited the risks they face in planning operations and projecting revenue this year, after Congress acted Jan. 1 to avert tax increases for most Americans while postponing for two months the automatic cuts that were to have begun on Jan. 2.
Boeing Co. said yesterday that it would consolidate its facilities in El Paso, Texas, this year, eliminating as many as 160 positions. “Anticipated U.S. defense budget cuts likely will mean less demand” for electronics made there, the Chicago-based company said in a statement.
The Pentagon’s actions yesterday “will help mitigate some, but certainly not all, of the negative effects if sequestration does occur,” Todd Harrison, a military budget analyst at the nonpartisan Center For Strategic and Budgetary Assessments in Washington, said in an e-mail.
“The sooner the department starts implementing these actions -- particularly the hiring freeze for DoD civilians and delay of maintenance activities -- the more money it will have available to see it through the remainder of the fiscal year,” Harrison said.
While authorizing steps to save money, Carter also called for caution in his memo, saying, “Any actions taken must be reversible at a later date in the event that Congress acts to remove the risks.”
He said any cancellations of maintenance for ships, aircraft and ground vehicles should wait until at least Feb. 15, a delay that give Congress an additional month to resolve funding disputes.
Carter also made it harder to get research and development and production contracts approved quickly. Any such contracts valued at more than $500 million will require approval from the undersecretary of defense for acquisitions -- the top Pentagon weapons buyer -- before they can be awarded, according to the memo.
To prepare for the possibility of sequestration in March, Carter directed managers to begin “intensified planning” to reduce civilian workforce costs by laying off temporary workers, imposing hiring freezes, authorizing buyouts, and considering furloughs for as long as 30 calendar days.
“This planning does not assume these unfortunate events will occur, only that we must be ready,” Carter said.
Over the next decade, sequestration would force the Pentagon to cut about $500 billion from future spending.
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