Sequestration Concerns International Partners

October 13, 2015
By George I. Seffers
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U.S. budget uncertainty impedes technology development cooperation.

This blog is a followup to an article in the October issue of SIGNAL Magazine, Operation Cooperation: U.S. Defense Officials Intend to Expand Asia-Pacific Partnerships.

Although tighter budgets motivate governments to cooperate on technology development, sequestration and the budget uncertainties in the United States have negatively impacted international partnerships, says Keith Webster, director of international cooperation, Office of the Under Secretary of Defense for Acquisition, Technology and Logistics.

Webster points out partnerships are important for developing capabilities for warfighters, but also for industry. With slimmer sales at home, U.S. companies need customers overseas. “We have an industrial base we need to support. We will no longer be able to do it off of our budget. They need to grow their international sales, and it needs to be done in a manageable and appropriate way,” Webster states.

On the one hand, those budget uncertainties may cause the Defense Department to seek greater international cooperation. “You will see more and more comments from [Defense Department leadership] that in a period of austerity, especially with the potential full weight of sequestration returning in fiscal 2016, we in science and technology and in acquisition need to be more thoughtful about potential foreign off-the-shelf capability that would be good enough to meet a requirement,” Webster says. “Because we’re not going to have the financial resources to do everything we need to do domestically. We need to stretch our acquisition dollars as far as we can.”

Allies and partners, of course, feel the same budgetary pinch. “Our partners are in the same situation globally, especially our European partners. They, too, need to be thoughtful about off-the-shelf solutions and minimal modifications and customization, which drive up cost over time. Periods of austerity bring international partners closer together and you see a natural rise in cooperative activity,” Webster points out.

On the other hand, international partners, or potential partners, are nervous. “Our lack of predictability in the Defense Department budget is raising caution with some partners who are almost fearful that if they commit to a project in year one, the United States won’t be there for year two, and they’re left holding the ball of wax financially,” Webster reports.

In 2013, Webster’s office cut travel by 70 percent, meaning they were not able to fulfill commitments to meet with international partners in their respective home countries. Normally, his team and their foreign counterparts will take turns traveling to meetings. Webster says those partners were understanding and flew to the United States instead, but he refers to 2013 as a “bad year.”

With greater budget certainty in 2014 and 2015, his team has been traveling again, but they’re unsure how long that will last. “We made up for lost time knowing that there might be a change again in 2016. We’re back on the road but now we’re preparing to cut back again,” he says. “[International partners] look at that and say that if America has that kind of challenge and unpredictability, they need to be cautious in what they need to agree to in the short term because [the United States] may be forced to leave us hanging tomorrow.”

Rebuilding confidence can present major challenges, Webster indicates. “We have instances where partners made a major political investment and we have had to cancel projects,” he says, adding that in some cases the United States stopped a project even before it got started, even though the international partners had the funding approvals to move forward. “It’s a good thing we didn’t seal the deal, but we now have a delay in capability development, and it’s an indefinite delay.”

He estimates 25 percent or less of projects were either stopped or delayed. “But some of them were highly visible, high-dollar collaborations, so even though it’s not a huge percentage of activity, it’s enough to make partners cautious about tomorrow,” he says.

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