DOD’s First Year-Long CR

Last week the House and Senate avoided a government shutdown and passed an FY25 continuing resolution (CR) that will fund government agencies through the end of the fiscal year. President Trump signed the bill into law on March 15 (P.L. 119-4). The Department of Defense (DOD) had hoped to be spared a long-term CR by having the Congress pass an independent appropriation bill rather than an extrapolation of FY24’s spending levels.

Although this is the first year-long CR the Department has ever experienced, the Congress included language providing the Department more flexibility than a typical CR.

1. While CR’s typically prohibit “new starts,” Sec. 1409 of this CR allows for new starts included in either the FY25 Defense appropriations bill that was passed by the House or the FY25 Defense appropriations bill that was adopted by the Senate appropriations committee.
2. Section 1412 provides an increase in general transfer authority from $6 billion to $8 billion to help it manage its operations over the next six months.
3. Section 1411 increases the amount of funds the Department can obligate from 20% to 40% in the last two months of the fiscal Given all the turmoil of the transition and the late completion of FY25 appropriations this increase was essential and syncs with FBIQ’s procurement forecast.
4. DOD also received an $8 billion unallocated plus-up in Section 1421 that can be used for Military Personnel, Operation and Maintenance, or Working Capital Funds to support the Combatant Commander in the Central and European Commands.

As Chart I indicates, the appropriators also moved funds between titles. Compared to the omnibus spending bill that was passed last March (P.L. 118-47), this CR increases spending within the Military Personnel and Operation and Maintenance accounts while using the investment accounts (Procurement and RDT&E) as the billpayer. The investment accounts are showing a nearly $12 billion reduction in this bill compared to last year’s enacted level. The Army’s RDT&E accounts are being reduced by nearly $3 billion and the Navy’s Aircraft Procurement accounts are being reduced by nearly $4 billion. The Defense Health Program’s Operation and Maintenance accounts are being increased by $1.7 billion and the Military Personnel accounts collectively increase by nearly $6 billion even before the $8 billion in unallocated funds in Sec. 1421 are disbursed.

Chart I. Source: P.L. 118-47, P.L. 119-4, and FBIQ Analysis. Numbers may not add due to rounding. Rescissions have been spread to accounts. *Does not include Title XI Military Construction, Veterans Affairs, and Related Agencies.

The Department is just entering into the third quarter of its fiscal year, and while it has become used to working from a CR for a quarter, longer CR’s tend to be much more disruptive. From a contracting standpoint, the Department will back-load FY25 which is the reason Congress doubled the amount it can spend in the last two months of the fiscal year.

We expect the timing of this CR in conjunction with the civilian personnel disruption to limit the Department’s ability to execute contracts in a timely manner. Another variable complicating FY25 Q4 (July-September) procurement obligation predictions is that the acquisition accounts have more than one year to obligate funds.