1

DEPARTMENT OF THE NAVYFY 2013 PRESIDENT’S BUDGET

Rear Admiral Kevin J. Kovacich, USNDirector, Joint Capabilities & Integration Division

(N83)

27 September 2012

2

The Budget Control Act 20112 August 2011

Establishes caps on discretionary funding through 2021 and proposes further reductions to at least $1.5T in budgetary savings over the next 10 years. It appears a pro-rata distribution

would leave DoD funding levels at $529B/$525B/$528B over FY 11-13.

Current DoD Fiscal Environment

Mechanics of Sequestration and its Effects on Defense Operations

3 January 2013• An automatic across-government spending cut of $1.2T over 9 years

(FY 2013-FY 2021)• Includes FY 2013 (base budget + Overseas Contingency Operations +

unobligated balances of defense funds from prior years )• with one half of the sequestration to be assigned to Defense funds

resulting in an additional $600B reduction beginning in January 2013 applied equally to each category of spending

~$487B

~$600BFY 2013 base request $551B + OCO $88B + Unobligated balances $82B = Total base for

sequestration $721B

2

33

The Budget and Accounting Act of 1921 – Section 201

“The President shall transmit to Congress on the first day of each regular session, the Budget, which shall set forth in summary and in detail:”

June 10, 1921

Budget

Acquisition

Programming

4

Managing Three Budgets at a Time

FY 2012 Mid Year Review• Budget performance monitored against plans • Realignment of funds in accordance with

prioritiesFY 2012 Close Out• Annual appropriations must be fully

obligated • Intense effort to pull back

unobligated funds and reissue to other programs

• Funds not obligated cannot be restored

Feb 12

Mar 12

Apr 12

May 12

Jun 12

Jul 12

Aug 12

Sep 12

Oct 12

Nov 12

Dec 12

Jan 13

Feb 13

Budget Execution (FY 2012) FY 2013

Congressional Review (FY 2013) FY 2014

Budget Formulation (FY 2014) FY 2015

PLANNINGBUDGETING

EXECUTION

PROGRAMMING

DoD manages three budgets simultaneously. This requires a process that is:

Ongoing, Cyclic, and Overlapping.

Developed plans and

programs forFY 2014

Formulating budget for

FY 2014

Defending budget forFY 2013 to Congress

4

5

Priorities for 21st Century Defense

Primary Missions of

the U.S. Armed Forces

Counter Terrorism and

Irregular Warfare

Deter and Defeat

Aggression

Project Power Despite Anti-Access/Area

Counter Weapons of

Mass Destruction

Operate Effectively in

Cyberspace and Space

Maintain a Safe, Secure, and Effective

Nuclear Deterrent

Defend the Homeland and

Provide Support to Civil Authorities

Provide a Stabilizin

g Presence

Conduct Stability and

Counterinsurgency Operations

Conduct Humanitarian,

Disaster Relief, and Other Operations

1

2

3

4

5 6

9

8

7

10

5

6

Department of the Navy Objectives 2012 and Beyond

Lead the Nation in Sustainable Energy

KEY EFFORTS

Maintain Warfighter

Readiness in an Era of Reduced

Budgets

Drive Innovative Enterprise

Transformation

Take Care of Our People

6

Lead the Nation in Sustainable Energy

Dominate in Unmanned

Systems

Take Care of Our People

Promote Acquisition

Excellence and Integrity

1 2

6

5

4

3

7

Economic Reality

Department of the Navy Fiscal Balancing

(In Billions of Dollars) FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FYDP

DON TOA (PB12-PB13) -9.5 -13.2 -10.7 -12.5 -12.1 -58.1

Tough Leadership Decisions

New StrategyRevised Missions

Restructured ForcesTempered CapabilitiesRefocused Manpower

DoD Strategic Review

ReshapingControlled GrowthReductionsTerminations

7

8

30 35 36 37 37 38 40 42 44 45 46 44 44 45 46 47

3338 43 35 36 37 40 42 42 46 46 50 49 49 50 51

3944

4748 54 52

5964 69

69 65 62 62 68 67 7010

513

17 2526 17

1820

16 14

0

20

40

60

80

100

120

140

160

180

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17MilPers O&M Investment OCO ARRA

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17Total Funding $101.8 $126.4 $123.5 $133.6 $144.7 $151.7 $165.2 $166.5 $173.2 $176.8 $173.0 $170.1

Baseline Funding $101.8 $116.8 $118.4 $120.9 $127.9 $127.2 $139.5 $148.1 $155.3 $156.2 $157.3 $155.9 $155.8 $162.4 $163.4 $167.4

Bil

lion

s of

Doll

ars

Numbers may not add due to rounding

Department of the Navy Topline FY 2002-2017

8

FY13-17 -$58.1B (to PB12)

-13.2

-10.7

-12.5

-12.1

-9.5

(FY 2009 $1B TY)

(TY)

(TY)

9

Infrastructure: -$3.3B

MILCON -$3.2

BRAC +$0.1

Family Housing -$0.2

MilPers: -$17.9B

Basic Pays -$6.9Housing Allowance+$2.3 Retired Pay Accrual -$4.8 Health Accrual -$7.2Reserve Personnel -$0.9Subsistence +$0.1 Allowances -$0.2 Special Pays -$1.4Other +$1.1

Procurement: -

$32.0B

Aircraft

Ships

Weapons

Marine Corps

Ammunition

Other Navy Procurement

O&M: -$2.6B

Ship Ops Aviation OpsBase OpsMarine Corps O&MCombat/Weapons SupportService Wide Support Training and Education Reserve O&MEnvironmental RestorationMobilization

R&D: -$2.3B

Basic ResearchApplied ResearchAdvance Tech DevAdv Component Dev System Dev & Demo Management Support Ops Systems Dev

$

FYDP Changes by Appropriation TitlePB 2012 to PB 2013

PB 12 $862.9BPB 13

$804.8B

-$58.1B

9

+$1.3

-$3.0

+$2.0

-$0.3

-$1.2

-$0.6

-$0.2

-$0.7

$0.0-

$0.5

$0.0$0.0

-$0.2+$1.3-$2.0$0.0

-$1.4

-$14.6

-$10.1

-$1.1

-$2.5

-$0.7

-$3.0

Numbers may not add due to rounding

NCBC June 2012 Office of Budget

Infrastructure: $2.4B

MILCON$1.7BRAC $0.2 Family Housing $0.5

MilPers: $44.2BBasic Pays $18.2Housing Allowance$7.3 Retired Pay Accrual $5.8 Health Accrual $2.1Reserve Personnel $2.6Subsistence $2.1 Allowances $1.0 Special Pays $1.6Other $3.5

Procurement: $42.5BAircraft

$17.1

Ships $13.7

Weapons $3.1

Marine Corps $1.6

Ammunition $0.8

Other Navy Procurement $6.2

O&M: $49.9BShip Ops $11.9Aviation Ops $9.4 Base Ops $8.1Marine Corps O&M

$5.8Combat/Weapons Support

$5.2Service Wide Support

$4.6 Training and Education

$1.7Reserve O&M $1.5Environmental Restoration

$0.3Mobilization $1.5

R&D: $16.9B

Basic Research$0.6Applied Research

$0.8Advance Tech Dev

$0.6 Adv Component Dev

$4.3System Dev & Demo

$5.8Management Support

$0.8Ops Systems Dev

$4.0

Navy Strength 322,700 Marine Corps 197,300

182,100 Base 15,200 OCO

$

Summary by Appropriation TitleFY 2013 Base Budget

FY13: $155.

9B

Numbers may not add due to rounding

DON (Base+OCO)

Committee

FY13 Change

HAC-D/M +$2.5B

HASC +$1.7B

SASC +$0.3B

SAC-D/M +$1.3B

DoD (Base+OCO)

Committee FY13 Change

HAC-D/M +$2.8B

HASC +$3.3B

SASC +$0.5B

SAC-D/M -$0.7B10

11

202,100 202,100 202,100

192,100

182,100

182,100 182,100 182,100 182,100 182,100

197,300

192,200

187,700

196,415

170,000

175,000

180,000

185,000

190,000

195,000

200,000

205,000

FY2012 FY2013 FY2014 FY2015 FY2016 FY2017

PB12 Base PB13 Base w/OCO Actuals as of 18 June

Military Personnel

Str

en

gt

h (

K)

Str

en

gt

h (

K)

11

Active Marine Corps StrengthRight Sizing The Force

- FY2013 end strength 197,300

- Reduces Marine Corps end strength from 202,100 to 182,100 by the end of FY 2016

- Remaining agile, flexible, and ready for a full range of contingencies

- 39,600 Reserve Strength in FY 13

Str

en

gt

h (

K)

Stabilizing the Force- FY 2013 end strength 322,700- Decrease from FY 2012 to FY 2013

by 3,000 personnel as a result of FY 2011 to FY2012 Enlisted Retention Board (ERB) identified for separation due to overmanned ratings

- 66,500 Reserve Strength in FY 2013

Active Navy Strength

Str

en

gt

h

Str

en

gt

h (

K)

325,700

322,700319,900

319,000320,300322,700

322,700

319,000318,300 319,300 319,500

321,053

314,000

316,000

318,000

320,000

322,000

324,000

326,000

328,000

FY2012 FY2013 FY2014 FY2015 FY2016 FY2017

PB12 PB13 Actuals as of 18 June

Str

en

gt

h (

K)

12

Civilian Personnel

130.8 132.9 130.9

79.6 79.7 79.1

1.8 2.0 2.0

0

25

50

75

100

125

150

175

200

225

FY 2011 FY 2012 FY 2013

O&M NWCF Other

Fu

ll-T

ime E

qu

ivale

nts

(F

TE

s)(#

K)

FY 2011 FY 2012 FY 2013 Change212.3 214.6 212.1 -2.5

Workforce sized to meet the workload

Scientist

Engineer

IT Technician

12Numbers may not add due to rounding

13

Marine Corps Ground Equip

94% of projected maintenance funded in FY13

Ship Depot Maintenance

100% of projected maintenance funded

Aircraft Depot Maint/Logistics94% of projected

maintenance funded

Ship Operations58 days/qtr deployed

24 days/qtr non-deployed

Flying Hour Operation

Navy T-Rating 2.5 Marine Corps T-Rating

2.0

Readiness

FY 2011 FY 2012 FY 20130.0

1.0

2.0

3.0

4.0

5.0

6.0

3.6 3.84.7

1.4 1.10.5

FY 2011 FY 2012 FY 20130.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

4.7 4.5 5.1

2.51.5

1.3

FY 2011 FY 2012 FY 20130.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

4.2 4.5 4.9

1.4 1.3 0.9

FY 2011 FY 2012 FY 20130.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

1.2 1.3 1.3

0.3 0.2 0.2

Bil

lion

s of

Doll

ars

Bil

lion

s of

Doll

ars

Bil

lion

s of

Doll

ars

Bil

lion

s of

Doll

ars

Bil

lion

s of

Doll

ars

Bil

lion

s of

Doll

ars

FY 2011 FY 2012 FY 20130.0

2.0

4.0

6.0

8.0

10.0

12.0

2.8 3.0 3.0

6.4 6.5 6.9

1.0 0.5 0.2

13

FY 2011 FY 2012 FY 20130.0

0.1

0.2

0.3

0.4

0.5

0.6

0.1 0.10.2

0.40.3

0.2

USMC BASE

NAVY BASE OCO

Base SupportNavy 80%/USMC 90% of facility

sustainment model, BOS at targeted capability levels

NCBC June 2012 Office of Budget14

Shipbuilding Procurement Plan

LCS 2

LPD 19

SSN 782

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FYDP

CVN 21 0 1 0 0 0 0 1SSN 774 2 2 1 2 2 2 9DDG 51 1 2 1 2 2 2 9LCS 4 4 4 4 2 2 16LPD 17 1 0 0 0 0 0 0LSD(X) 0 0 0 0 0 0 0LHA (R) 0 0 0 0 0 1 1T-ATF(X) 0 0 0 0 2 0 2MLP/AFSB* 1 0 1 0 0 0 1JHSV 2 1 0 0 0 0 1T-AO(X) 0 0 0 0 1 0 1T-AGOS 0 0 0 0 0 0 0SSBN (X) 0 0 0 0 0 0 0

New Construction Total QTY 11 10 7 8 9 7 41New Construction Total ($B) $14.2 $10.9 $9.9 $14.6 $13.1 $16.2 $64.7

LCAC SLEP 4 2 4 4 4 4 18Oceanographic Ships 1 0 0 0 0 0 0Ship to Shore Connector** 0 1 0 2 5 5 13Moored Training Ships 0 0 0 1 0 1 2CVN RCOH 0 1 0 0 1 0 2

Total Shipbuilding ($B) $15.4 $13.8 $13.2 $16.9 $16.3 $20.2 $80.5*Funded in NDSF (FY 2011: $880M, FY2012: $400M, FY 2013: $38M, FY2014: $562M)

**Two Lead SSCs are funded in RDT&E (FY 2011 and FY 2013)

+1

AP (all) +1

AP

HAC-D

+$1.7B HASC +$0.9B SASC +$0.8B SAC-D +$2.0B

AP

+1

NCBC June 2012 Office of Budget

Aircraft Procurement

MQ-8B

MV-22B

EA-18GFY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FYDP

F-35B (STOVL JSF) 6 6 6 6 9 14 41F-35C (CV JSF) 7 4 4 6 9 14 37F/A-18E/F 28 26 13 0 0 0 39EA-18G 12 12 0 0 0 0 12E-2D AHE 5 5 5 7 6 7 30P-8A (MMA) 11 13 17 20 20 13 83C-40A (USMC) 0 0 0 0 0 1 1KC-130J (NAVY) 0 0 0 0 0 0 0KC-130J (USMC) 1 0 2 2 2 2 8

AH-1Z/UH-1Y* 26 28 27 27 26 31 139CH-53K (HLR) 0 0 0 0 2 2 4MV-22B 30 17 18 19 19 18 91MH-60R 24 19 19 31 38 0 107MH-60S 18 18 18 8 0 0 44

MQ-8 (VTUAV) 12 6 7 7 8 6 34RQ-4 BAMS UAS 0 0 3 4 4 5 16STUAS (NAVY) 0 5 5 5 0 0 15

T-6A/B (JPATS) 36 33 31 0 0 0 64

TOTAL 216 192 175 142 143 113 765*Includes Overseas Contingency Operations request of one AH-1Z in FY 2013

Fixed Wing

Rotary Wing

UAV

Training

15HAC-D

+$0.4B HASC +$0.1B SASC +$0.06B

SAC-D -$0.2B

AP +15

+11

+1

+2

+5

+2

+5

AP +1

+2

+1

AP +15

-2

16

FY2011 FY2012 FY20131.0

10.0

100.0

2.0 2.1 2.0

1.2 0.8 0.9

14.3 14.8 14.1

Science & Technology Management

Development

FY 2012

Bil

lion

s of

Doll

ars

R&D Investment

Numbers may not add due to rounding

$17.6B $17.7B $16.9B

FY 2011 FY 2013

Major Systems ($M) FY 2011 FY 2012 FY 2013

Joint Strike Fighter (F-35) 1,256 1,310 1,481

CH-53K 558 624 606

MMA (P-8A) 907 609 421

Next Generation Jammer 84 171 187

Ohio Replacement Program 610 1,067 565

LCS 164 293 429

CVN 21 179 137 173

DDG-1000 362 258 127

Virginia Class SSN 167 112 165

RQ-4 UAV (BAMS) 526 548 658

NUCAS - D 258 198 142

UCLASS 0 76 122

Amphibious Combat Vehicle 0 37 95

Joint Light Tactical Vehicle 18 47 45

Marine Personnel Carrier 7 20 40

Defense Research Sciences 417 454 473

JTRS 609 676 337

AMDR 204 166 224

MC Comms Systems 170 215 219

Sat Com (Space) 410 263 188

Surface Electronic Warfare Improvement Program 85 158 126

Surface Ship Torpedo Defense 50 119 93

G/ATOR 58 107 75

Aviation

Shipbuilding

Unmanned

Other

HAC - D+

$105MHASC

-$835M

SAC-D-

$237MSASC-$9M

16

17

FY 2011 FY 2012 FY 2013

NAVY 1049 1129 1011

USMC 2314 1200 741

$250

$750

$1,250

$1,750

$2,250

$2,750

$3,250

$3,750

FY 2011 FY 2012 FY 2013

FHOPS 372 368 378

FHCON 197 101 102

$50

$150

$250

$350

$450

$550

Military Construction & Family Housing

Military Construction

568TOTAL 480469

Family Housing

197

378

372

101

102

368

Million

s of

Doll

ars

Milli

on

s of

Doll

ars

2,314

1,200 741

1,049

1,129 1,01

1

17

3,363TOTAL 1,7522,329

Numbers may not add due to rounding

No BRAC Construction in PB 2013

*FY 2012 includes OCOCommittee

FY13 Change

HAC-M** -$151M

HASC -$151M

SASC -$54M

SAC-M -$52M

Committee

FY13 Change

HAC-M No change

HASC No change

SASC No change

SAC-M No Change

**HAC added $151M to OCO

18

Energy Investment

18

F/A-18 Super HornetApril 2010

PV SystemMCAS Miramar

DDG-51 Hybrid Electric Drive

Test Platform: USS TRUXTUN

Numbers may not add due to rounding

Allison 501k G/T Generator

January 2011

Reduce Drag & Power Demand

Examples: Stern Flaps & Solid State Lighting

Operations & PolicyExample: Air Energy

Conservation Program

TY$M FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FYDPNavy Total 706 776 728 701 745 682 3,632USMC Total 261 226 172 127 130 133 788DON Total 967 1,002 900 828 875 815 4,420

Department of the Navy PB 2013 Energy Investments

19

Overseas Contingency Operations Funding

19Numbers may not add due to rounding

FY 2011 FY 2012 FY 2013(In Millions of Dollars) Actual OCO OCO

1,248 1,248 875

26 - -

49 44 39

8,527 7,518 5,880

88 74 56

600 481 165

188 135 152

405 236 99

91 41 24

215 48 53

- 190 -

USN Subtotal 11,437 10,016 7,342

638 659 1,621

- - 65

21 23 25

4,463 3,538 4,066

29 36 25

1,946 1,234 944

492 182 134

41 6 7

USMC Subtotal 7,630 5,678 6,888

19,067 15,693 14,230

Department of Navy OCO Budget

Research, Development, Test and Evaluation, Navy

Aircraft Procurement, Navy

Procurement Ammunition, Navy and Marine Corps

Other Procurement, Navy

Weapons Procurement, Navy

Military Personnel, Navy

Reserve Personnel, Navy

Operation and Maintenance, Navy

Operation and Maintenance, Navy Reserve

Health Accrual, Navy

Military Personnel, Marine Corps

Reserve Personnel, Marine Corps

Procurement Ammunition, Navy and Marine Corps

Health Accrual, Marine Corps

Military Construction, Navy

DON Grand Total - Supplemental

Operation and Maintenance, Marine Corps

Operation and Maintenance, Marine Corps Reserve

Procurement, Marine Corps

Research, Development, Test and Evaluation, NavyHAC -

D+

$627M

SAC-D+

$1,303M

20

FY12 Navy O&M Priorities

20

• OMN presented with significant challenges in FY12⁻ Fuel pricing shortfalls ($0.6B)

• In previous years was sourced through Supplemental, outside reprogrammings• FY11 shortfall was smaller and sourced through OCO force structure assets• Recent reductions in the FY12 Fuel pricing to $97.02/bbl relieved most of FY

2012 shortfalls

⁻ CENTCOM demand has grown out of cycle ($0.5B $0.6B in FY13)

• SECDEF order book to provide more presence (CSG/ARG/MCM)• ISR initiatives (2X Fire Scout, transfer Army OIF Scan Eagle dets to OEF, etc)• Fastlane Initiatives (PC’s to Bahrain, AFSB)

⁻ Ship maintenance shortfalls ($0.6B)

• Unfunded at Pres Bud due to late imposition of OMB OCO cap• Execution year growth during “open and inspect”• USS MIAMI fire repair

• Significant mitigations completed⁻ Bought down shortfalls at end of FY11

⁻ OCO transportation asset applied, equipment retrograde deferred

⁻ Operational mitigations

⁻ Reprogramming – ($0.7B)• Largely from Military Personnel and Defense Health Program• This solution set is not available in the future

OMN wholeness achieved, solution set may not be repeatable

21

FY12 Afloat Readiness FY12 Shore Readiness

FY12 Readiness

21

FY12

Oct-11 Sep-12

Program PB EOY Proj.

Facilities Sustainment ($1.4B)

% Funded 80% 84%

Renovation andModernization

($0.7B)% Funded 73% 80%

Base Ops Support($4.8B)

% Funded 87% 87%

Overall Shore Readiness

($6.9B)% Funded 83% 85%

FY12

Oct-11 Sep-12

Program PB EOY Proj.

Flying Operations % Funded 99% 100%

Ship Operations % Funded 100% 100%

Air Maintenance % Funded 95% 100%

Ship Maintenance % Funded 94% 107%

22

Now Repeat After Me – “I Will . . .

. . . Develop better and more accurate budgets and exhibits

. . . Embrace CNO’s “Culture of Judiciousness”

. . . When given a new task, do not immediately ask • “Where are my new and greater resources?”

. . . Ask everyday “Is this a need or a want?”• FMB corollary – Almost every stated need is actually a want

. . . Challenge every growth, strive to match the NAVFAC and the CEC and achieve negative 7 to 10 % returns

• Beware of DAU standard numbers• Look for the second knee in a curve

. . . Beware the “Fallacy of savings”• “10X the gigabytes for only twice the price” is still twice the price • Its not just the Rate it is the Total, it is not the Unit Price it is the Total

Price• True energy efficiency is not Biofuel, it is not BTU’s/sec, it is Total

Energy Use

22

23

Investments aligned to strategic

priorities and budgetary

goals

Key Take Aways

“… we are united in the belief that this strategy and the resulting budget decisions followed the right approach to meet the country’s most pressing security challenges and to preserve the strongest military in the world and at the same time meet our fiscal responsibilities.“

Secretary of Defense Leon E. Panetta – 26 Jan 2012

Resulting Force: Smaller and Leaner Agile, Flexible and Ready Rapidly Deployable and Expeditionary Innovative and Technologically Advanced Capable of Confronting and Defeating Aggression

Manned and Led by the Highest Quality Professionals

23