Acting SECNAV Kicks off Navy ‘Night Court’ Cost Savings Drive with Aim to Save $40 Billion

February 18, 2020 6:08 PM
Under Secretary of the Navy Thomas Modly speaks to Navy, Marine, and Coast Guard officers during the National Naval Officers Association (NNOA) symposium on Aug. 7, 2019. US Navy Photo

The Navy is kicking off an effort to repurpose $40 billion in spending over the next five years as it faces pressures to grow the fleet, continue to boost readiness and build a new fleet of ballistic missile submarines amid flat budgets.

Acting Secretary of the Navy Thomas Modly wrote that, “as we prepare to go to Congress to defend our Fiscal Year (FY) 2021 budget request, it has become increasingly apparent that we have a challenging story to tell. We are facing three critical pressurizing mandates that are conspiring to limit our ability to deliver the Integrated Naval Force required by the National Defense Strategy,” reads a memo signed today.

The FY 2021 request fully funds the Columbia-class SSBN, as required by the National Defense Strategy and as part of an overall recapitalization of the nuclear triad by the Navy and Air Force. However, the budget does little to grow the force, and in fact proposed early decommissionings of some ships would mean the Navy would have one fewer ship by the end of 2025 than it would at the end of 2021. The budget appears to continue previous years’ efforts to fund aircraft and ship maintenance as fully a possible, though ship maintenance funding is limited by industrial base capacity in some cases, the budget request notes.

“All thee of those mandates are occurring within a flat budget environment we expect to continue to several years. Therefore, we must act now to make tough, fiscally-informed choices in order to fund our key strategic priorities using the budget we have, not the budget we wish we had,” Modly continues in the memo.
“We must find savings within the Department to reinvest in the kind of decisive naval force that will provide for our nation’s future economic and political security. The bottom line is that we need to find at least $40 billion in real line-of-accounting savings to fund the development, construction, and sustainment of this new fleet over the next 5 years, and to set the Department up for continuing this trajectory in the 5 years that follow.”

The Department of the Navy (DoN) Stem-to-Stern (S2S) Review will seek savings of $8 billion a year over the next Future Years Defense Program (FYDP), from FY 2022 through 2026, and those cost savings will be reinvested in growing the fleet in line with the results of the upcoming Integrated Naval Force Structure Assessment, accelerating digital modernization across the force, and “advancing our intellectual capacity and ethical excellence,” reads the memo.

Modly notes that $8 billion a year is actually only 7 percent of the topline — though it is more aggressive than the similar Army effort last year, dubbed “Night Court,” which similarly sought to find cost-savings in the budget by looking at every spending item to evaluate its need.

“The Department of the Army has engaged in similar reviews as the S2S over the last two years through a process they called ‘Night Court.’ In these ‘Night Court’ sessions, they identified approximately $13 billion in savings over the FYDP. As always, it’s time to BEAT ARMY!” the secretary wrote, ending the memo with the same line he’s used in his weekly SECNAV Vectors memos.

Word of the planned review first leaked out Friday, in a Forbes article.

The Navy has tried squeezing savings out of budgetary belt-tightening before. Last year, Navy officials said they intended to head into the Fiscal Year 2021 budget cycle using a “zero-based budget” approach.

Under this scenario, the Navy’s budget starts at zero and requires the owners of each spending line to justify their requests. Navy budget hawks were said to focus on programs and activities not tied into the service’s efforts to align its activities with the National Defense Strategy.

The Navy used a zero-based budget review to form the FY 2021 budget request, Rear Adm. Randy Crites, the Navy’s director of fiscal management, said during a FY 2021 budget briefing on Feb. 10.

“The department is focused completely on improving our processes to free up time, to free up money and manpower. This is a strategic imperative to ensure that we’re getting the most out of every taxpayer dollar,” Crites said during the briefing.

Former Secretary of the Navy Richard V. Spencer instituted the zero-based budget approach to build on savings already realized by taking a critical look at where the Navy was spending money. Since FY 2017, the Navy saved about $30 billion thanks to new congressionally-approved spending authorities, block buys, multiyear buys and process improvements, Spencer told members of the Senate Armed Services Committee in April.

Last year, the Army’s similar budgetary review strategy yielded more than $30 billion in savings to reinvest in the department’s top priorities. Money gleaned from lower priority programs is being spent on six modernization programs – long-range precision fires, next-generation combat vehicles, future vertical lift, network, air and missile defense, and soldier lethality, according to an Army statement.

The Army dubbed its review program “night court” because the department’s leaders reportedly meet after hours to look for ways to cut redundancies, end wasteful programs and redirect funds from less important activities to the top six priorities.

With a flat military budget request in Fiscal Year 2021, finding ways to save money becomes even more critical. The latest round of “night court” helped prioritize what programs to fund, Secretary of the Army Ryan McCarthy said in a statement.

“There were some hard choices,” McCarthy’s statement said.

However, not everyone is convinced the Navy can quickly realize similar savings as the Army. The Navy appears to be setting an “extraordinarily aggressive target,” Mark Cancian, a senior adviser with International Security Program at the Center for Strategic and International Studies, told USNI News in an email.

“If the Navy was unable to find that kind of savings during the year-long budget build, I don’t see how they will do it in six weeks,” Cancian said. “Night Court took many months and it mostly shifted money around in modernization programs, from lower priority to higher priority. In general, such large savings require a change in strategy, which has not been proposed.”

The example, cited in the Forbes article, of reducing the Chaplain Corps, might be warranted Cancian said, but the corps only has about 2,000 personnel. Cutting the number of chaplains in half might save $250 million, not close to the sort of savings the Navy wants to gain from this effort.

“What has likely happened is that Modly asked for more money, and (Secretary of Defense Mark) Esper told him to look more aggressively internally before asking for outside help,” Cancian said.

Modly’s memo says the effort begins today and will run through April 15, to support a June deadline related to the FY 2022 budget request process. He states that no part of the budget is exempt from the review but that a focus will be given to duplication of information technology systems, streamlining logistics, consolidating headquarters, identifying enablers that could be outsourced or consolidated, reductions in Global Force Management offerings and others.

“The Navy’s Stem-to-Stern (S2S) review expands and accelerates ongoing reforms to ensure we’re making the most of the resources Congress provides. The National Defense Strategy (NDS) requires relentless and ruthless prioritization to balance near term challenges and prepare for great power competition, particularly given the fiscal realities confronting us. To accomplish these NDS goals, we need to grow a bigger Navy, but for now, we cannot count on a bigger budget. By focusing on processes that free up time, money, and manpower, S2S will directly inform development of future Department of the Navy budgets – this is a strategic imperative. The Navy is committed to recapitalizing our nuclear ballistic missile submarine force, continuing to prioritize further readiness recovery, while also investing in increased lethality/modernization and growing capable capacity,” reads a Navy statement on S2S.
“Building on the past decade’s reform efforts will be key, including targeted work on readiness recovery over the past three years. The DON is following Secretary Esper’s guidance that ‘no reform is too small’ and that we must think differently to make every dollar advance the NDS. The S2S will help us extract significant savings within projected budgets that we can apply strategically over this decade.”

Ben Werner

Ben Werner

Ben Werner is a staff writer for USNI News. He has worked as a freelance writer in Busan, South Korea, and as a staff writer covering education and publicly traded companies for The Virginian-Pilot in Norfolk, Va., The State newspaper in Columbia, S.C., Savannah Morning News in Savannah, Ga., and Baltimore Business Journal. He earned a bachelor’s degree from the University of Maryland and a master’s degree from New York University.

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