The need to rebalance DoD spending toward Procurement to deter China

The excellent Pete Modigliani had an interesting post recently on the proportion of RDT&E and Procurement in defense budgets. In the 1980s, Procurement was nearly three-quarters of the investment while RDT&E was just over one-quarter. Since the 1990s, however, the split had been more like 60/40 in favor of Procurement, and in FY 2023 the split is now 54/46 — approaching a one-to-one ratio.

Pete and others like Mislav Tolusic and John Ferrari advocate rebalancing investment away from RDT&E and towards Procurement to the tune of tens of billions. I agree. There’s enough mature technology out there. It needs to be exploited, made fit for mission, and put into the field to meet the “Davidson Window” of 2027 for deterring Chinese aggression.

The Congressional Budget Office had an interesting report on the Long-Term Implications of the 2023 Future Years Defense Program. They projected a rebalancing already underway back to 60.40. But I would provide some caution as to whether this rebalance will actually occur.

Share of DoD Investment Budget allocated to Procurement and RDT&E in FY23 FYDP + CBO Projection

In the chart below, I reconstruct actual RDT&E funding and lay in the FY 15, FY 17, FY 19, FY 21, and FY23 FYDP projections. You will notice quite clearly that DoD expects to flatline or decline RDT&E in the future years, but in reality ramps up RDT&E more than projected.

We’ve heard the story coming from CBO in the past. But trends that cannot persist indefinitely will not. Eventually there will have to be a conscious decision to prioritize Procurement. In the 1980s Reagan-era buildup, that seemed to come at the expense of O&M and MILPERS rather than RDT&E. But leaders today like CNO Gilday have said readiness is the top priority, not force structure. That will be a tough discussion.

Logically, the prototyping ramp up since roughly FY 2016 should be moving through the pipeline into fielding. The Army says it’s has 24 programs it wants to get into soldiers hands by FY 2023/2024. Time is short. Let’s hope DoD is laying in Procurement money for fielding in FY 2024 or else these systems are likely to miss the Davidson Window.