Sequester Will Slam Shipbuilding Hardest; Navy League Rallies Resistance

Everyone’s scared of sequestration. But the US Navy and its shipbuilders are particularly upset by the prospect, because both the large-scale nature of naval construction and a historic quirk of the appropriations process leave warships particularly vulnerable. That’s why the Navy League of the United States, one of the nation’s oldest and most influential advocacy groups, is about to mobilize its members against sequestration.

“The bottom line is we just want Congress to do their job, repeal the Budget Control Act, [and] end sequestration,” Navy League President Philip Dunmire told Breaking Defense. “How they come about that, that’s the job of Congress to figure out, but we want them to do it through bipartisan consensus.”

Nor is a lame-duck compromise after the elections good enough, Dunmire went on. “We need to encourage Congress to take action on this hopefully before July,” he said. Shipbuilding is a business with long lead times, with some items bought a year or more ahead. The nation’s “Big Six” shipyards — soon to be the “Big Five” once Huntington-Ingalls Industries closes its yard in Avondale, La. — depend almost entirely on Navy contracts, and if their cashflow from the government is going to stop in January, however temporarily, they need to start planning now, including for possible layoffs.

“From the perspective of shipbuilders, it’s workforce management,” MacKenzie Eaglen, a member of Breaking Defense’s Board of Contributors, told the oversight panel of the House Armed Services Committee Wednesday. “They need to plan now for what their workers are going to do… in January.”

Officially, no one in the federal government is doing comparable planning. The Administration’s position — unsettling similar to a driver in a game of “chicken” who ostentatiously takes his hands off the wheel — is that the law leaves them no real leeway to plan.
“We are not planning for sequestration, [because] there is very little to plan for,” said Navy Under Secretary Robert Work in a speech Wednesday at the annual “Sea-Air-Space” convention, sponsored by the Navy League. (Dunmire, who introduced Work, used the opportunity to call on League members to ask their legislators to vote against sequestration). “It is assessed at the line item level,” Work went on. “The only thing you can plan for is how to pick up the pieces.”

But that’s not necessarily so, according to testimony later that day at the House Armed Services hearing. Next to Eaglen at the witness table sat Congressional Research Service analyst Ronald O’Rourke, one of the most widely respected naval experts in Washington and a veteran of the last time Congress actually did sequesters, back in the eighties under the Gramm-Rudman-Hollings Act. (O’Rourke has worked for the non-partisan CRS since 1984). O’Rourke’s unenviable task at the hearing — and in two follow-up calls and an email exchange with this boggled Breaking Defense reporter — was to explain the implications of the arcane and long-disused procedure.

The Administration has insisted, as in Work’s remarks on Wednesday, that a sequester would strike automatically and equally at every single “program, project, and activity” in the federal budget, taking a fixed percentage (estimated at 9 to 10%) off every one. However, O’Rourke argued, there are alternative interpretations of the law.

First of all, said O’Rourke, there is an obscure 1990 amendment to the Gramm-Rudman-Hollings sequestration procedure that might allow the Administration to reprogram money from one account to another before apply the sequester cut, if Congress approves. Whether or not the Budget Control Act as written overrides this loophole or allows it is agonizingly unclear.

Second, O’Rourke went on, even without reprogramming, it is possible to read the sequestration language as applying the fixed cuts only to the accounts actually named in the language of the Appropriations bill — broad categories such as “Missile Procurement, Army” and “Aircraft Procurement, Air Force” — which would allow the Administration to distribute those cuts among the individual items within each account at its discretion, giving it leeway to sacrifice some programs to protect others. However, by a historical quirk, the legal language appropriating funds for “Shipbuilding and Conversion, Navy” goes into much greater detail, which would under any interpretation of the sequestration law requires the Administration to cut each class of ship — destroyers, submarines, aircraft carriers — by the exact same percentage.

It gets worse, however, because shipbuilding programs buy a small number of extremely expensive items and can’t easily “make change.” Make a 10% cut to a program buying ten aircraft, and you’re left with nine planes. Make a 10% cut to a program buying two ships, and you can’t buy 0.8 of a ship: You end up with only one. Make a 10% cut to a program buying one ship — the typical rate for Navy programs — and you end up with zero.

That’s the outcome the Navy, the Navy League, and the shipbuilders all dread. “It is such a blunt instrument that no one ever expected it to trigger,” Under Secretary Work told the League on Wednesday. “They expected the super committee to come up with a solution to our problems, but that did not happen.” Now no one wants sequestration to happen, but no one is quite sure how to stop it.

The Navy League is urging its members to call on Congress to find a compromise, but does it have any plan for what that compromise should be? “We don’t,” Dunmire said frankly. “The Navy League is not telling Congress how to do their job. We’re telling them to do their job.”

Edited to clarify sequestration details at 10:05 am.