Year ends with more budget uncertainty

Story

December 05, 2012

As 2012 closes, 2013 budget policy is still up in the air, leaving both defense primes and COTS suppliers on unstable footing.

This past year has been a stressful, nerve-wracking one for many in the defense electronics community. Their main customer – the Department of Defense (DoD) – is making major cuts to its budget and the threat of sequestration promises to cut another $600 billion in defense funding.

The latter would result in thousands and thousands of defense industry jobs being cut. Most would be at the prime contractor and system integrator levels, as the cuts from sequestration would hit major programs and platforms.

As I write this, the Administration, Senate, and House are not creating a lot of public confidence that they can avoid the fiscal cliff – not having a balanced budget by Jan. 1, 2013 – which then triggers automatic sequestration. For an understanding of the government’s negotiations on the budget deficit, entitlements, and taxes, I highly recommend Bob Woodward’s latest book, “The Price of Politics.” It retells how the government avoided default last year and gives an understanding into the key issues the three bodies are negotiating today, as they are pretty much the same. Obama and the Senate Democrats are insisting on raising tax rates for the rich, while the Republican-led House refuses to budge unless there are major entitlement cuts to programs such as Medicare and Medicaid.

I find the continued rhetoric on raising taxes for the richest Americans to be just ridiculous at this point. Even if they did, the revenue wouldn’t be anywhere near what is needed to solve the deficit, yet the Democrats are pushing fiction by claiming it will make the difference. They refuse to cut anything without the rate increase.

A scene from Woodward’s book captures this dynamic well. It is an exchange between Republican Sen. Jon Kyl from Arizona and Gene Sperling, Director of the National Economic Council. During one negotiation, Kyl said to Sperling: “So you’re saying to me that even though there are Medicare savings that you think are reasonable – that we could do – you won’t do them unless we’re going to raise taxes on somebody?” Sperling replied: “Well yeah. We can’t agree to any of your stuff without any of our stuff.”

Despite this nonsense, my gut is telling me Congress will come up with some sort of deal to either avoid sequestration or push it off to the next Congress, and do it so they can get home for the holidays. So either I’m psychic or just hopeful. We’ll probably know by the time you read this.

Much of our content in 2012 has touched on these issues and how they will not only affect the big boys at the primes, but the third party Commercial Off-the-Shelf (COTS) suppliers. The COTS folks are much more optimistic than those at the first or second tiers. They see the government looking to require more open standards and COTS technology and fund nondevelopmental items. However, this same environment means the government will be at the whim of commercial market cycles more than ever.

Program managers working on smartphone technology (see page 20) and enterprise software (see page 16) are already facing the headaches of trying to get hardware and software certified to government standards before their device or operating system goes obsolete. They’re having a hard time keeping up.

“The problem is a company like Apple can write a complete new operating system in less time than it takes the Defense Information Systems Agency (DISA) to generate a certification standard for the older operating system,” says Bill Toti, VP at The HP NGEN Alliance, who also lends insight in our Special Report on enterprise software on page 16. “By the time they certified iOS 5 [for use in the Navy Marine Corps Intranet], it was already out of production and iOS 6 was being introduced. We keep chasing our tail because the current government process cannot adjust to a technical environment that moves at the speed of Moore’s law. We could have gotten iPhones to the whole fleet two years ago if not for policy. Technology is easy, policy is hard.”

Policy is hard, but covering the technology that supports our armed forces is a privilege. Thanks for reading and supporting Military Embedded Systems this past year. Have a wonderful holiday, and be sure to thank an airman, sailor, soldier, or Marine for their service if you get a chance this season. They deserve it. We will see you next with our Jan/Feb 2013 Radar Guide edition.

John McHale [email protected]