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NTU supports Senate Committee's Decision on Funding the SM-3;
Urges House to Embrace the Senate Committee's Decision.

November 29, 2011

The Honorable Daniel Inouye, Chairman                             
The Honorable Thad Cochran, Ranking Member                   
Committee on Appropriations                                                 
United States Senate                                                              
Room S-128, The Capitol                                                       
Washington, DC 20510            
The Honorable Harold Rogers, Chairman
The Honorable Norman Dicks, Ranking Member
Committee on Appropriations
United States House of Representatives
Room H-307, The Capitol
Washington, DC 20515

Dear Chairman Inouye, Ranking Member Cochran, Chairman Rogers, Ranking Member Dicks, and Members of the Committees:

      During the course of this year, your Committees have confronted numerous budgetary challenges in a particularly difficult economic and fiscal environment. Nowhere has the need to craft effective and efficient policy for the nation and its taxpayers been more critical than in America’s defense programs. As you and your colleagues continue discussion of these matters, I write today to offer the views of the 362,000-member National Taxpayers Union (NTU) on a decision the Senate Committee on Appropriations recently made whose importance cannot be overstated: the decision to concentrate federal funding in the Fiscal Year 2012 Defense Appropriations Bill for development and procurement of the SM-3 Block I-B and II-A defensive missiles instead of the more tenuous II-B program. NTU believes that the Senate Committee’s funding choice on SM-3 represents the best possible prioritization of resources based on prudent risk assessments, and would urge that any conference agreement reflect this stance.

      As you may know, since its founding in 1969 NTU and its members have been involved in a plethora of discussions over defense purchasing policies, including in recent times the F-35 alternate engine, the Common Vertical Lift Support Program, and the Evolved Expendable Launch Vehicle. With each of these cases, our mission has been to obtain maximum value to servicepeople and taxpayers. Few areas of military procurement pose more difficulties for striking this appropriate balance than in highly complex air and missile defense systems such as the Aegis platform. Although the SM-3, the primary weapon component of Aegis’s latest phase, has a considerable lineage in the Navy’s missile inventory, its variants have major differences in performance and feasibility. Currently the most ambitious SM-3 design is the Block II-B interceptor, whose deployment is not likely to occur before the year 2020. Meanwhile the Block 1-B is slated for production in 2013, while the Block II-A could be fielded by 2018. These latter two versions show promise of offering solid anti-missile capability in the intermediate future, while II-A offers the advantage of a willing development partner (and funder) in the nation of Japan and continued compatibility with existing shipboard launchers.  

 Thus, NTU was pleased to learn of the Senate Committee’s concern in its September report that:  

[N]ear-term requirements are underappreciated in order to fund uncertain long-term efforts. In addition, the Committee notes that the requirements for the SM-3 Block II-B remain in flux, as does its acquisition strategy and the associated costs for integration into the Fleet. Finally, the Committee understands that in its current form, the SM-3 Block II-B missile is of limited mission value due to technical constraints. 

      To be clear, NTU may not have deep technical expertise in military hardware and software issues such as these. Nonetheless, our four decades of experience with government procurement give us confidence in the wisdom of the Committee’s unanimous vote to redirect funding away from Block II-B and toward Blocks I-B and II-A. It seems a tautology to acknowledge that projects involving major leaps of technology likewise tend to carry major risks of being over-budget, behind schedule, and underwhelming in performance. Yet, policymakers must often relearn this hard lesson about diligent oversight, at both taxpayers’ expense and a loss to the services’ practical capabilities. One example is the Airborne Laser (ABL), which according to the Government Accountability Office (GAO) has been plagued with “long-standing technical problems, cost growth, and schedule delays.” In a 2010 assessment, GAO noted that “the program currently estimates that the cost of the ABL through the first lethality demonstration is nearly $5.1 billion, almost five times the approximate $1 billion estimated for the original contract in 1996.” Another program with an all-too-familiar fiscal history was the Comanche helicopter; this project was terminated in 2004 after various restructuring attempts over the period of two decades failed to contain unit costs, which had quadrupled even when accounting for inflation. The $11 billion Crusader artillery system threatened to inflict pain on taxpayers before it was ended in 2002 amid a controversial development spanning nearly eight years.

      NTU actively supported DoD’s actions to end the latter two projects, which occurred at a time when the gross federal debt was less than half what it is today in dollar amount and about 40 percent smaller than today as a share of Gross Domestic Product. Clearly, the current, more perilous state of the federal government’s finances argues for even greater attention to avoiding cost-spirals and failures in programs with “known unknowns” (as former Defense Secretary Rumsfeld often put it). SM-3 Block II-B is fraught with such factors, giving cause for many leaders in the Ballistic Missile Defense field to advocate for accelerated Block I-B and Block II-A evolution. They do so not only out of concern for the fiscal implications, but out of military necessity to counter emerging threats with better-proven technologies. Retired Admiral Williams and Rear Admiral Hicks are just two such leaders who believe that current SM-3 blocks have demonstrated a higher value as missile interceptors than most warfighters had anticipated.

      Granted, there are critics of the Senate Committee’s funding plan who insist that pushing ahead with full funding for Block II-B could lead to breakthroughs in new defensive capacity against long-range ballistic missiles. Furthermore, NTU remains a steadfast proponent of vigorous competition for future contracts in missile defense and in numerous other applications, military or civilian. Unfortunately, as GAO has amply documented, the Ballistic Missile Defense program – ranging from the THAADS system to ABL – has been burdened with schedule slippages, budget overages, and systems whose performance has fallen short of initial design goals or claims of manufacturers. Several billion dollars in potential savings are at stake from avoiding immediate commitments to a program (Block II-B) that is more in the conceptual stage than the full-scale development stage. The path the Committee has chosen, in carefully allocating finite funds to missiles with more predictable costs and capabilities, is the best course both for our national security and our economic security.  Senate Appropriators are to be commended for recognizing the need to move in this direction.

      As we have pointed out in previous communications, given the present fiscal climate it is more imperative than ever before to heed the advice from former Joint Chiefs Chairman Admiral Mullen and “steward every dollar that we have.” The Senate Committee on Appropriations has done so in the case of SM-3 Blocks I-B and II-A, and we are hopeful that the House will embrace this thoughtful policy in the next steps of the appropriations process as well. NTU stands ready to assist you in this regard.


Pete Sepp
Executive Vice President