Detailing The Potential Impact of Sequestration at DISA
The role DISA plays at DoD is mission-critical, making it more likely than not that sequestration cuts will fall more heavily on other Defense agencies than at DISA. Also, the agency receives much of its program funding via two sources, the DoD RDT&E budget and the Defense-Wide Working Capital Fund. How sequestration potentially places these funding sources under pressure is examined.
Here at FIA we have received a lot of inquiries about the potential impact of sequestration on IT spending at the Department of Defense. DoD IT is obviously about more than programs at the Defense Information Systems Agency (DISA), but DISA programs are central to the DoD’s enterprise IT and cloud computing strategies. Because of the importance of DISA’s role, it seemed like a good idea to take a closer look at the potential impact of sequestration on the agency. In doing so I hope to relieve some of the anxiety that industry is feeling about sequestration and clarify what the issues are that leaders at DISA may be struggling with when it comes to deciding where the sequestration axe should fall.
Sequestration and DISA’s Funding Sources
Let’s begin with where DISA gets its funding and how sequestration may affect those revenue streams. DISA receives an annual direct appropriation to cover its basic operating and personnel costs, but this is not as important to the funding of its IT programs as are the Defense-Wide Working Capital Fund (DWWCF) and the Research, Development, Test, and Evaluation (RDT&E) portion of the DoD’s annual budget request. Only $550M (1%) of the DWWCF ($55B in FY 2013), is subject to sequestration, so the impact of sequestration at DISA would be minimal from a percentage standpoint. Why is this important? Simple. The DWWCF is a fee-based revolving fund reflecting the revenue that DoD agencies like DISA, DLA, and DFAS bring in based on the services they provide to DoD customers. In DISA’s case, it projects $6B in revenue in FY 2013 from the services it provides, including critical operations like its transport network services, cloud services, computing services, and enterprise acquisition services. Many of the critical DoD IT programs and services that are commonly associated with DISA are thus expected to experience limited pain from sequestration.
DISA’s portion of the RDT&E budget is a whole different matter. Sequestration cuts $2B (11%) from the total FY 2013 DoD RDT&E requested budget of $18.1B. This is if an FY 2013 budget is passed. The DoD RDT&E budget funds 19 separate DoD centers and agencies, including DISA, so DISA would not be required to bear the burden of a $2B cut alone. In fact, DISA’s requested RDT&E funding for FY 2013 is $256M, or 12.8% of the $2B sequester amount. The “if an FY 2013 budget is passed” part of the statement above is important here because if an FY 2013 budget is not passed then sequestration cuts would be based on funding at the FY 2012 level because of the Continuing Resolution that is in place until March 2013.
In DISA’s case, FY 2012 RDT&E funding was $293.5M, including OCO funding. Based on the FY 2013 DoD budget request, DISA expected its RDT&E funding to decrease by $38M. In today’s twisted federal fiscal world, this means that it is actually more favorable for DISA if sequestration cuts are based on the FY 2012 actual RDT&E funding level of $293.5M rather than on the FY 2013 requested RDT&E funding level of $256M. Thanks to Congress’ inability to pass a budget, DISA actually has $38M more in RDT&E funding headroom to bear the brunt of sequestration cuts.
What is Vulnerable to Sequestration at DISA
Having established that DISA was already expecting a cut to its RDT&E funding before sequestration and knowing that any cuts which occur will be based on the higher funding level of the FY 2012 actual budget, what programs are most vulnerable to cuts that sequestration may force at DISA? I cannot go into all of the programs here, but the table below lists the top 10 (by funding) RDT&E funded programs/offices at DISA, based on FY 2012 funding levels.
These programs represent a total of $278M in RDT&E spending at DISA in FY 2012. The question industry needs to ask itself is as follows: based on what you know of strategic priorities at DISA and DoD, which of these programs could DISA afford to cut if sequestration became a reality? Perhaps you can see the magnitude of the difficulty that leaders at DISA will have if they are asked to cut hundreds of millions of dollars from programs. DISA leaders will be required to weigh which programs are considered critical and which are not.
The wild card in all of this is we do not yet know how much DISA will be asked to cut, if indeed the agency is required to cut at all. It could be that the $2B in RDT&E cuts demanded by sequestration fall more heavily on Defense agencies other than DISA. My best guess is that DISA will feel some cuts if sequestration becomes a reality, but these cuts will be minimal in comparison to cuts levied on other Defense agencies. I have this hunch because the DoD has already admitted its “network dependency” and it has already announced a new Asia-Pacific focused strategic shift that is absolutely dependent on the network infrastructure and services provided by DISA.
Active Contracts Related to the Programs Above
A bonus piece of information I am throwing in below are these tables of contracts that are related to some of the programs above. I’m certain there are others that I have not been able to identify. On 28 September 2012, Richard Ginman, Director of Defense Procurement and Acquisition Policy (DPAP) stated “The DoD does not anticipate having to terminate or significantly modify any contracts on or about January 2, 2012, as a result of sequestration.” In other words, these contracts should be unaffected. However, in case this situation changes, these tables will add to understanding of what is at stake for some vendors.
DISA Programs Minimally Vulnerable
The programs listed in the table below are funded through the DWWCF. These DISA programs should experience little pain from sequestration given that 99% of the DWWCF is exempt from sequestration. Funding figures were not provided due to the relatively small amounts of potential cuts. Readers will note, however, that these services for the core of DISA’s network, computing, telecommunications, and acquisition service offerings.
Sequestration in Perspective
Summing up, the important thing that industry needs to keep in mind when it comes to sequestration at DISA is that the potential impact is likely to be limited. Ironically, the CR puts DISA in a stronger position to withstand cuts to its RDT&E funding, if they materialize. Equally important is the fact that many of DISA’s most important programs are funded via the DWWCF, 99% of which is not subject to sequestration. Finally, the role DISA plays at DoD is mission-critical, making it more likely than not that sequestration cuts will fall more heavily on other Defense agencies than at DISA.
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