Sequestration: Observations on the Department of Defense's Approach in Fiscal Year 2013

What GAO Found

Spending reductions under sequestration affected DOD’s civilian workforce and many programs and functions, and required DOD to accept some risk in maintaining the readiness of military forces. However, DOD was able to mitigate some near-term effects of sequestration on its mission. Reduced spending levels required DOD to take actions such as furloughing most civilian employees for 6 days, cancelling or curtailing training for units that were not preparing to deploy by early in 2014, postponing some planned equipment maintenance at its depots and repairs or renovations of facilities, reducing some weapon system quantities or deferring modifications, and delaying system development and testing. DOD took various actions to plan for and implement sequestration, such as issuing guidance and establishing processes to identify priorities and evaluate alternatives for spending reductions. Generally, DOD’s approach to sequestration was a short-term response focused on addressing the immediate funding reductions for fiscal year 2013. DOD was able to reduce spending levels for the remainder of fiscal year 2013 without making permanent changes, such as adjusting the size of its forces or canceling weapon systems programs. By setting priorities for funding and using available prior year unobligated balances to help meet required reductions, DOD was able to protect or minimize disruptions in certain key areas, such as maintaining support for ongoing operations and adhering to plans for major weapons systems acquisitions. In addition, because of the flexibility afforded from its reprogramming and transfer authorities, DOD was able to manage and, in some cases, later reverse some initial actions taken to implement the spending reductions, such as resuming aircraft training. DOD officials reported that some effects of the spending reductions were felt in fiscal year 2013 but that the full impact of sequestration would likely not be fully realized until fiscal year 2014 and beyond, and may vary by service. For example, DOD made adjustments to some of its procurement programs, such as deferring modifications or delaying system development and testing. DOD officials stated that some of these decisions may result in increased costs over the next few years.

The absence of legislation to reduce the federal budget deficit by at least $1.2 trillion triggered the sequestration process in section 251A of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), as amended. Pursuant to the BBEDCA, the President ordered sequestration of budgetary resources across non-exempt federal government accounts on March 1, 2013—five months into fiscal year 2013. In a March 2013 report to Congress, the Office of Management and Budget (OMB) calculated the overall reduction at $85.3 billion and estimated that the Department of Defense (DOD) would be required to take a 7.8 percent reduction in nonexempt defense discretionary funding, based on the continuing resolution in place at that time. Subsequent to the sequestration order, the Consolidated and Further Continuing Appropriations Act, 2013 provided DOD with a full appropriation for the remainder of fiscal year 2013. As a result, OMB determined the total federal government sequestration reduction for fiscal year 2013 to be approximately $80 billion. This figure included reductions to DOD’s resources of about $37 billion in discretionary appropriations and about $37.4 million in direct spending. DOD was required to apply the reductions to all programs, projects, and activities within a budget account.

In response to congressional committee requests, GAO reviewed DOD’s approach and planning for managing the required spending reductions for fiscal year 2013. This report describes the extent to which (1) DOD developed plans and methodologies to implement spending reductions in light of the Budget Control Act of 2011 and relevant guidance, including identifying potential impacts on U.S. military capabilities and DOD personnel and (2) DOD has made use of any reprogramming and transfer authorities to manage spending reductions during fiscal year 2013. In addition to reviewing DOD’s overall approach to identify and manage the spending reductions, GAO focused on a number of specific areas within DOD, specifically civilian personnel; training and readiness; depot maintenance; base operating support; and procurement and research, development, test, and evaluation.