Syria Strikes Raise Questions Over Future of OCO Funding | Defense News


WASHINGTON — As the price tag for operations in Iraq, Syria and West Africa continues to grow, Pentagon leadership insists that it is well prepared to pay for all of these previously unforeseen long-term operations.

Part of the reason is that the building has been able to shift money around within its overseas contingency operations (OCO) supplemental budget, and is already working with Congress to make sure that more funding is on the way.

“We’re going to require additional funding from Congress as we go forward,” Defense Secretary Chuck Hagel said on Sept. 26. “We’re working now with the appropriate [congressional] committees on how we go forward with the funding.”

Two prominent Democrats on the Senate Armed Services Committee, Sens. Carl Levin and Tim Kaine, have already said they expect to grant the Pentagon more money for the latest Middle East bombing campaigns.

But this willingness to fund operations comes as the US was supposed to be weaning itself from large supplemental wartime budgets, calling into question just how long the Pentagon will require extra-budgetary maneuvers to fund itself.

“I think there was a strong desire at the beginning of this administration to make the scrub of OCO more rigorous than it had been before,” said Kathleen Hicks, formerprincipal deputy undersecretary of defense for policy in the Obama administration.

“I think the reality is, you have to have it because you cannot always plan sufficiently to take into account operations,” she added, cautioning that “we’ve kicked to the right this question of when does OCO come to an end?”

Money for the Ebola response in West Africa and Iraq/Syria operations is being partially funded from about $5 billion taken from the Army’s operations and maintenance account in OCO, Hicks said.

President Barack Obama has pledged 3,000 US troops and $1 billion to fight the outbreak of Ebola in West Africa, while the daily cost of the airstrikes in Syria and Iraq — more than 240 since Aug. 8 — has been running $7.5 million to $10 million a day.

While the Pentagon has steadfastly refused to offer a hard number for the cost of the air campaign, a rough tally places the bill at about $540 million from June until the end of August.

“We don’t dispute that number, but that is not a number we put out,” Pentagon spokesman Navy Cmdr. Bill Urban warned when asked about the overall price tag.

But even taking the lower estimate of $7.5 million — which was made before the start of operations in Syria — would add $232 million to the bill from late August to late September.

The Defense Department has been funding all of these operations out of the $85 billion OCO account for fiscal 2014, and leadership remains “confident that we will be able to continue to do that for this fiscal year,” Urban said.

But a major wrinkle remains the inability of Congress to push through budgets on time.

Fiscal 2014 ends on Sept. 30, and with a continuing resolution in place to fund the federal government through Dec. 11, the Pentagon would continue to be funded at 2014 levels — as opposed to being taken from the $59 billion requested for 2015.

Retired Lt. Gen. David Deptula, who helped the Air Force plan air operations in Afghanistan and Iraq, expressed hope that the Syrian situation will drive the Hill to reconsider shutting down the OCO account.

“When they said it would end in 2016, you didn’t have this operation ongoing,” he said. “That’s what it’s there for. That’s the purpose of those funds.”

But how to plan for those operations — and how to fund them — is something that should be up for debate, some experts say.

“There has to be a conversation among [the White House, Pentagon and Congress] about how we should think about OCO, and how we want to plan for the future,” said Hicks, director of the International Security Program at the Center for Strategic and International Studies.

“With the reduction of the DoD topline budget, we’re pushing things into those OCO accounts because it provides a politically easier release valve for the problems of sequestration,” Hicks said.

Opportunity for Industry

As industry monitors what the conflicts will do to US defense spending, they’ll most likely continue to pay attention to new export prospects brought on by the airstrikes.

The American-led operation in Syria was joined by Saudi Arabia, the United Arab Emirates, Qatar, Bahrain and Jordan, countries that are largely flying US jets with US munitions. That interoperability will be important for future operations — and it’s not by chance.

In the past decade, the Bush and Obama administrations have used weapon sales to drive closer relations with Arabian Gulf allies, said Andrew Shapiro, a former senior State Department official who headed the bureau responsible for foreign military sales.

“It’s a means of cementing the relationship between these partners and the US in a time of great uncertainty,” Shapiro said. “Partners in the region continue to want US equipment, they continue to want close partnerships with the United States, and those sales, transfers and coordination are now paying off in these coalition attacks against [the Islamic State group].”

The conflict provides an opportunity for US industry to capitalize on those commercial ties, said Richard Aboulafia, an analyst with the Teal Group.

“For many decades, the gulf states would buy lots of high end aircraft and park them. Now they’re buying them and using them. That, in and of itself, promises good things from a business standpoint,” Aboulafia said. “From a standpoint of US exports, this is very good.”

The obvious beneficiary from the US are the manufacturers of weapons such as joint direct attack munitions, which can be mounted on US planes and the F-15s and F-16s used by gulf allies.

“As most of the aircraft flown by Arab partners are US platforms, a coalition of regional partners would rely almost exclusively on US contractors,” noted a Sept. 25 report by the Royal United Services Institute, a UK think tank. “US stockpiles are substantial but have been reduced through the effects of sequestration.”

Aboulafia expects a small, but not particularly significant, bump in munitions. Similarly, he notes a potential increase in fighter orders as these air forces continue to engage in strikes, given the region’s fondness for buying fast jets.

But while recent gulf state procurement plans have largely been based around the threat from Iran, the Islamic State represents a different kind of threat — one that may open opportunities for largely neglected parts of the fleets.

That includes ISR aircraft, both manned and unmanned, along with key enablers such as tankers and cargo transports.

“The fight against [Islamic State] is more about information, range and then payload,” he said. “They are getting into a situation where it’s less about short-range defense and more about power projection.”

Shapiro, managing director at Beacon Global Strategies, expects the gulf nations to grow and learn from these operations, which could drive new requirements.

“I think this operation will identify gaps [in their inventory] as they learn by doing,” Shapiro said. “I think from the after-action reviews of these kinds of operations, you’ll hear what they need.”

Michael Blades, an analyst with Frost & Sullivan, expects a “notable” increase in the unmanned market for the region in a post-Islamic State world. But he notes that companies that provide weapons and sensors for unmanned systems could be the true beneficiary.

Smaller precision weapons such as MBDA’s Brimstone or Textron’s new G-CLAW, which can be mounted onto lighter unmanned systems, could benefit as gulf countries turn to armed drones for precision strikes against militant groups, Blades said.

“An MQ-9 with a Hellfire takes out a building. A Brimstone takes out a vehicle,” he said. “If you’re talking about no boots on the ground, but you want to be precise, that’s when you start using smaller tactical platforms and precise guided munitions. You’ll see some companies really start to salivate over this.”

Blades also noted that the commercial UAV market may benefit — but not in the way US allies will appreciate.

“Conflicts like this are also going to drive some of the little hobby stuff that the resistance will use, because it’s all they can afford,” he warned, highlighting how easy it would be for the Islamic State to buy small, commercial drones online and turn them into ISR aircraft for their own use.

via Syria Strikes Raise Questions Over Future of OCO Funding | Defense News.