What does lean look like?
It’s a riddle that every San Diego County defense contractor wants an answer for.
“Right now there are so many unknowns,” said Tony Nufer a local executive for defense contractor Vector Planning and Services Inc. “We don’t have a clear picture at this point.”
Geopolitical forces and domestic politics are working together to create what appear to be leaner defense budgets in coming years.
In the years since the Korean conflict, the ends of wars have brought dips in defense spending on the order of 32 percent, said Vice Adm. John T. Blake, a deputy chief of naval operations who is essentially the U.S. Navy’s chief financial officer. Blake made his comments during a recent visit to San Diego.
Pentagon budgets for 2011 and 2012 were $687.0 billion and $645.7 billion, respectively. President Obama has proposed a $613.9 billion budget for fiscal 2013, and it appears that more cuts are ahead.
‘Cliff’ Is Looming
Budgets could easily go lower with two efforts to trim the federal deficit. One is a series of cuts planned as part of the Budget Control Act. A second set of cuts, called “sequestration,” will take effect automatically if Congress and President Obama do not act by January.
In the Navy, sequestration will take 9½ percent off of every line item in the budget, Blake said. The cuts would not apply to military personnel, the admiral said. Any modification to those cuts would need special permission from Congress, a Navy spokeswoman said.
Across the board cuts would affect other services as well.
So what does lean look like?
To cut down on immediate spending, the military might reduce flight hours for aircraft, steaming days for ships and “maintenance availabilities” for ships, said Larry Blumberg, executive director of the San Diego Military Advisory Council, a local group made up of civic and military leaders. A maintenance availability is a window of time when a ship is available for shipyard work.
One way the Navy might save money is to berth its ships in overseas ports, closer to the places where they conduct military missions, Blake said. He also mentioned swapping out one crew for another while the ship stays overseas.
Fewer Capital Assets
Keeping ships “forward deployed” likely means that ship maintenance will be done somewhere else, said Derry Pence, president of the Port of San Diego Ship Repair Association, which represents San Diego’s shipyard businesses.
Pence suggested that a leaner Navy might have fewer ships. High-maintenance ships may be retired, he said.
Eric DeMarco, chief executive of San Diego-based Kratos Defense & Security Solutions Inc., said in his opinion, a leaner military would have fewer capital assets, including fewer manned aircraft; fewer tanks, Humvees and ground vehicles; and fewer soldiers and Marines. He said its emphasis may change from fighting “asymmetrical” wars (with adversaries such as terrorists) to fighting conflicts such as the Cold War.
Retired Rear Adm. Ken Slaght said, in his opinion, several parts of San Diego’s defense sector are poised to stay strong. They include:
• Unmanned vehicles. Producers include aircraft builders General Atomics Aeronautical Systems Inc., Northrop Grumman, and their suppliers.
• Cyberwarfare, or warfare centered around computer vulnerabilities. Slaght said that when he encounters people who work in the cyber realm, they report “more work than they know what to do with.”
• Maintenance of existing ships, if the Pentagon’s plan is to build fewer ships in the future.
Staffing Services at Risk
On the other hand, Slaght said, San Diego businesses that might see cuts include large companies that provide staffing services to the military.
Slaght added that small businesses offering services may benefit, since the Pentagon sets aside contracts for woman-owned, veteran-owned and wounded veteran-owned businesses.
Slaght’s last military job was commander of Space and Naval Warfare Systems Command, or Spawar. He is past chairman and president of the local National Defense Industrial Association chapter.
One big unknown is what sort of work General Dynamics Nassco will have in the future. Nassco is building three logistics ships for the Navy, called mobile landing platforms. A shipyard spokesman said Nassco is in conversation about several projects and is cautiously optimistic that it will get new work by the end of the year — though it was unclear whether that work could be military or commercial.
If there is a silver lining to the cloud, it is that the Navy says it wants to place more emphasis on the Pacific Ocean, putting 60 percent of its fleet in the Pacific and 40 percent in the Atlantic Ocean by 2020. That will benefit San Diego, said Blake.
Nufer agrees with Slaght that San Diego will retain and gain certain business — even as the military deals with budget cuts.
“Are we going to be immune from the effects? No,” Nufer said. “But we will probably feel the effects less than other areas.”