Installation Leadership Forum Dr. Craig College, February 28, 2012 2012 ADC WINTER FORUM | PAGE 1 Efficiencies… the Last 12 Months • Secretary Gates efficiencies ($100B) and reductions ($78B) • POTUS April 2011 deficit speech… cut $400B in defense over 12 years… amended by OMB to 10 years • Budget Control Act of 2011… cuts $487B from defense over 10 years, and potentially an additional ~$500B with sequestration • FY12 Army budget ($203B) enacted 23 December 2011 – ~$13B below President’s Budget (PB) Request ($216B) • POTUS and Secretary Panetta announce defense strategy 5 January 2012 • FY13 Army PB ($185B) submitted without consideration of sequestration 2012 ADC WINTER FORUM PAGE 3 The Fiscal Driver 2017 2019 2013 2015 2011 2007 2009 2003 2005 2001 1997 1999 1993 1995 1991 1987 1989 1983 1985 1981 1977 1979 1973 1975 1969 1971 Federal Deficit/Surplus 4% Surplus / Deficit as % of GDP GDP 2% 40-year average (1969-2009): -2.6% FYDP average (2011-2015): -5.4% 0% -2% -4% -6% Federal Surplus / Deficit 200 -8% 0 -200 -10% TY $ in B -400 -600 -800 -1,000 -1,200 -1,400 -1,600 1940 1942 1944 1946 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 -12% FY08 – $459B FY09 – $1413B FY10 – $1500B FY11 – $1341B FY12 – $915B 2012 ADC WINTER FORUM PAGE 4 CBO 5 Mar 10 Projection The Defense Budget Over Time • Discretionary spending is ~35% of total federal budget – Defense budget is ~50% of discretionary spending • Increasing emphasis on reducing spending/deficit – Congress and the Administration • Historically, funding levels have decreased as military demand decreases $800 B $700 B DoD Military Manpower Korean War Armistice (1953) $600 B DoD Total Manpower Height of Vietnam War (1968) Vietnam War Ends (1973) DoD $ (FY12 Constant $) Height of Cold War (1985) 9/11 (2001) FY01-11 Base (FY12 Constant $) 8.0 M OCO? Gulf War Ends (1991) 7.0 M 6.0 M $500 B 5.0 M BCA $400 B 4.0 M $300 B 3.0 M $200 B 2.0 M BCA impact 1.0 M ? $100 B $B 2012 ADC WINTER FORUM PAGE 5 .0 M The Army Budget $300 B Base OCO OCO Request $252 $250 B $235 $243 $240 $221 $203 $200 B $167 $121 $177 $92 $99 $185 $100 $68 $109 $143 $150 B $64 $123 $50 $72 $40 $26 $100 B $78 $50 B $86 $78 $84 FY01 FY02 $97 $103 $103 $105 $112 FY03 FY04 FY05 FY06 FY07 $131 $143 $144 $140 $135 $135 FY09 FY10 FY11 FY12 FY13 $B Execution 2012 ADC WINTER FORUM PAGE 6 FY08 Approp Request A Strategic Budgetary Way Ahead • Future budget decisions must… – Preserve ability to provide national security – Be capability-based (not ad hoc or piecemeal) – Not break faith with the men and women who are fighting, or their families (preserve the all-volunteer force) • Challenges – Impact of budget Control Act 2011 – Uncertain status of FY13 Defense Appropriation timelines – Ability to sustain modernization objectives • To achieve budget reductions, everything is on the table – Force Structure, O&M, and Investment programs – Military compensation – Military health care 2012 ADC WINTER FORUM PAGE 7 Three Time Horizons • FY 12: Current Year / Year of Execution • Must adapt to a ≈$1.5B reduction from FY11 • Must reduce manning by 3766 employees this FY • FY13: Transition Year • Execute changes in organization, manning, contracts, & services to adapt to expected funding • FY 14-18: IMCOM Operations in the “New Normal” • IMCOM delivers to standards set by HQDA adapting to a ≈$2.5B reduction from FY10 funding levels Sustain Army’s Commitment to Soldiers and Families 2012 ADC WINTER FORUM PAGE 8 Installation Management Efficiencies • • • • • • • • FY11: Eliminated 2620 Temporary and Term Employees FY12: Further reductions of Department of the Army Civilians MILCON transfer to SRM Reductions in IMCOM reliance on contractors and quarterly reviews of contracts Reductions in Conferences and Travel Reductions in Regions from 7 to 4 Eliminated National Capital Region Division Eliminated 2-Star FMWRC and merged into IMCOM HQs 2012 ADC WINTER FORUM PAGE 9 Organizational Theory Spider “Cut off the head and it dies” Hierarchical Chain of command Centralized Starfish “No head, cut off an arm, and it grows into a new starfish” No defined leader (catalyst) Devoid of chain of command (circles) Decentralized Open system Standing on five legs Passion and enthusiasm Building Spider and Starfish Collaboration and Partnerships The most affordable future for military installations and their surrounding communities is to create partnerships in far greater numbers that feed off each other’s strengths and economize on our weaknesses to survive the coming economic challenge. These approaches must become routine and pervasive and the Community Covenant is one such effort. 2012 ADC WINTER FORUM PAGE 10 Concept taken from : The Starfish and the Spider: The Unstoppable Power of Leaderless Leadership by Ori Brafman and Rod Beckstrom 9 A Starfish Strategy • • • • • Army Garrisons and municipalities tend to think like spiders – but we both need to begin thinking like starfish The deleterious effects of municipal and federal budget challenges can be ameliorated through public-public partnerships Army Community Covenant is one very successful example - BUT We must catalyze the search for partnerships to solve everyday problems shaved by communities and installations Much remains to be done to make these broadly applicable – most importantly, new ways of thinking 2012 ADC WINTER FORUM PAGE 11 Impact on Defense Communities • Potential Reduction in Department of the Army Civilian and Military personnel • Potential reduction in dollar value of contracts • New opportunities for Public-Public and Public-Private initiatives • Some potential for additional units arriving from overseas 2012 ADC WINTER FORUM PAGE 12 Team of Teams “We play with our cards facing out.” 2012 ADC WINTER FORUM PAGE 13