Sequester-constrained Army arsenal welcomes ... no, cheers small contracts
January 14, 2014
- Are small manufacturing contracts the future for the Army's Industrial Base?
- Large caliber manufacturer now highly values even the small stuff.
WATERVLIET ARSENAL, N.Y. (Jan. 14, 2014) -- The Watervliet Arsenal announced today that it received a contract valued at more than $1 million to manufacture 81 mm mortar clamp assemblies for the Army's TACOM Life Cycle Management Command.
"This million dollar order will add to our current workload more than 3,000 hours of direct labor," said Ed Stewart, the arsenal's program manager for the mortar order. "We will begin shipping in February 2015 and will complete the order by May 2015."
The arsenal completed nearly $100 million in orders last year and at first glance, this order might seem insignificant, said Ray Gaston, the arsenal's chief of production planning and control.
"Given the continued uncertainty with the defense budget, weapons program managers are now very cautious in soliciting new work," Gaston said. "And so, we now celebrate all orders, big or small, as a major achievement."
But are small contracts the future for the historic arsenal?
The arsenal worked very hard in fiscal year 2013 to operate within the framework of sequestration by reducing its cost structure through an implementation of a hiring freeze and a very limited, and heavily scrutinized, use of overtime to support the mission. These and other steps helped to reduce operating costs by more than $8 million in fiscal year 2013. For fiscal year 2014, the arsenal will further lower its cost of operation through such actions as reducing the size of its workforce and by limiting capital investments.
But sequestration has not gone away, albeit, it may not be as painful as it was in 2013 due to the bipartisan two-year budget agreement passed by Congress last month that capped DOD funding at about $498 billion for fiscal year 2014.
Nevertheless, Army Chief of Staff Gen. Raymond Odierno said earlier this month at a National Press Club luncheon that the budget agreement lawmakers reached last month will go some way toward alleviating the pain of sequestration for the Army. But even with that relief, sequestration forces the Army out of balance through 2016, because the Army cannot reduce the numbers of Soldiers fast enough to put dollars back into modernization and readiness.
Congressional appropriation committees are now hard at work but they are running up against the tyranny of time.
President Barak Obama signed on December 26 a National Defense Authorization Act funding the Defense Department at $526.8 billion for fiscal year 2014. Congress, by January 15, must reconcile an omnibus budget, which appropriates money, with the president's NDAA. Out of this reconciled budget will come more specification in regards to how DOD will fund its operations this year.
One must also keep in mind that we are already in the fourth month of fiscal year 2014. By the time guidance comes from Congress, through DOD, and then finally from the Army's senior leaders to the Watervliet Arsenal, this fiscal year will be about half over. Due to this budget uncertainty and its delay in guidance, there simply may not be much time to influence this year's manufacturing levels, as lead time for raw stock material for manufacturing can take up to 18 months from the time an order is received.
Compound that budget shortfall with a planned withdrawal of combat forces from Afghanistan by the end of 2014, and the downsizing of Army force levels from about 540,000 Soldiers to 490,000 by September 2015, a rather bleak future is painted for defense manufacturing beyond fiscal year 2014.
Quite simply, the U.S. military will become smaller and leaner ̶ something that has happened after every military conflict since the American Revolutionary War. A smaller army means that there will be fewer combat brigades that will use many of the weapon systems and parts the arsenal manufactures. Estimates are that up to 10 brigade combat teams may be inactivated over the next two years.
The arsenal is looking very hard at how to make up some of the potential workload fallout by seeking public-private partnerships and by tapping into foreign military sales. In the meantime, the arsenal will celebrate all contracts, no matter how small.
Stewart and Gaston both agree that given this era of fiscal uncertainty even a small order is critical to sustaining the critical machining skills required for today's and tomorrow's weapons systems.
The Watervliet Arsenal is an Army owned-and-operated manufacturing facility and is the oldest, continuously active arsenal in the United States. It began operations during the War of 1812, and celebrated its 200th year of continuous service to the nation on July 14, 2013.
Today's Arsenal is relied upon by U.S. and foreign militaries to produce the most advanced, high-tech, high-powered weaponry for cannon, howitzer, and mortar systems. This National Historic Registered Landmark has an annual economic benefit to the local community in excess of $90 million.