Army secretary optimistic on relief from budget caps

Reuters News
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Posted: Feb 25, 2015 10:43 AM

By Andrea Shalal

WASHINGTON (Reuters) - U.S. Army Secretary John McHugh on Wednesday said he was optimistic lawmakers would agree to some form of relief from congressional budget caps for fiscal 2016, given widespread recognition the resulting spending cuts would undermine military readiness.

McHugh said that if the budget caps, known as sequestration, remained in place, U.S. lawmakers would have to make tough decisions about which missions it wanted to Army to abandon.

"You do reach a point ... in sequestration where our overseers are going to have to say what they don’t want us to do any longer," he told a defense writers breakfast.

If sequestration cuts take effect, he said, the Army would try to protect two big weapons programs for new ground vehicles: a Humvee replacement contract due to be awarded this year, and a new armored personnel carrier deal won by British company BAE Systems Plc's U.S. unit.

Lockheed Martin Corp, Oshkosh Corp and AM General Llc are vying for a contract valued at over $20 billion to replace over 17,000 Humvees used by the Army and the Marine Corps. The Army plans to choose one company by the end of fiscal 2015, which falls on Sept. 30.

McHugh said the Army would also risk breaking several multi-year procurement agreements if the cuts kicked in, since order levels would likely fall below negotiated levels. That means the Army would pay more for fewer weapons.

(Reporting by Andrea Shalal; Editing by Jonathan Oatis)