Navy’s FY 2014 IT Budget – It’s All About Priorities

Published: May 01, 2013

BudgetForecasts and SpendingNAVYOMB

OMB’s release a few weeks ago of the federal government’s FY 2014 budget request finally gave us an updated visibility into where departments are headed with their mission priorities and technology investments. Looking across the Defense information technology (IT) landscape, the Navy is the only component in the FY 2014 budget that is targeted for an IT budget reduction from its FY 2013 enacted budget. Scratching just a little below the surface shows that there are still pockets of growth to be found, but these are fairly targeted around key priority areas.

Navy IT Budget Highlights
  • Total IT request decreases $410 million or -5.2% from FY 2012-14. The FY 2013-14 budget decrease is $626 million or -7.7%. The FY 2012-13 budget increase was $216 million or +2.7%
  • New development (DME) decreases $418 million or -19% from FY 2012-14. The FY 2013-14 level decreases $524 million or -22.7%. Navy sees the largest percentage DME reduction among the 4 DoD branches, going from 28% of total to 24% of total agency IT Budget.
  • Operation and Maintenance (O&M) or Steady State (SS) increases slightly by $8 million or +0.1% from FY 2012-14. An FY 2013-14 decrease of $102 million or -1.8% almost negates the $110 million increase from FY 2012 to FY 2013.
Historical Perspective
To gain a little historical perspective on the Navy IT budget the chart below provides their IT budget for the last decade, from 2005 through the current FY 2014 budget request. Over the decade the Navy’s IT budget has somewhat oscillated through periods of growth and softening like a sign curve, but generally trending in the upward direction. Recently, from FY 2011 to FY 2013, their budget has been resilient to budget cutting pressures when the Army and Air Force IT budgets have softened and declined.
As we might expect given recent fiscal environment the greatest rate of growth came in the first half of the decade, with a compound annual growth rate (CAGR) from FY 2005-2009 of 6%. If Congress approves the Navy’s FY 2014 IT budget request of $7.5 billion then the second half of the decade from FY 2010-2014 would see a CAGR of 2% and an overall FY 2005-2014 CAGR of 3%. Only the Army fared better CAGR-wise over the decade with a 5% CAGR while the Air Force and OSD/Defense Agencies both having negative growth rates.
The FY 2014 IT budget request for the Navy includes a $626 million cut from FY 2013, making it the big loser among the four major Defense components during this budget cycle. This would put their FY 2014 budget in line with their FY 2013 requested level. Comparing the Air Force’s yearly IT budget request to what it eventually receives shows that they have generally received several hundred million dollars more than they request. This was the case from FY 2008 to FY 2010. That trend broke in FY 2011 and FY 2012, when the Navy received less than their budget request, and rebounded in FY 2013. (See chart below.) 
Setting Priorities
When fiscal pressures mean tighter IT budgets the Navy is no exception when it comes to focusing its resources on key priority programs for new development spending to drive things forward. Even decreased budget plans can drive a higher proportion of spending to new development spending. The following Navy initiatives have some of the largest budgets over the last few years and also include a significant portion of development funding (DME.)
Balancing this equation are several programs slated for reductions in FY 2014. At the Navy these cuts impact a broad array of systems and programs with the back-office and legacy systems among the most common. The programs below are scheduled to have their budgets reduced in the coming fiscal year, some eliminated completely.
What these historical trends and individual program investment levels reveal is nothing too surprising. In a resource-constrained environment you have to pick your priorities and find savings elsewhere. For FY 2014 the Navy will continue to pursue its network and information infrastructure priorities which they have defined and embarked upon several years ago, but still remain unfinished. What this means is that there may be limited new IT opportunities at Navy in the coming year, even for programs with significant new development dollars budgeted.
For more information on Deltek’s analysis of the FY 2014 federal budget submission and what it could mean for the market check out our report FY 2014 Federal Budget Request: Challenges and Opportunities.