Janine Davidson

Defense in Depth

Janine Davidson examines the art, politics, and business of American military power.

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How the Overseas Contingency Operations Fund Works—and Why Congress Wants to Make It Bigger

by Janine Davidson and Emerson Brooking
June 16, 2015

U.S. Marines with the 15th Marine Expeditionary Unit's Maritime Raid Force fast-rope from an MH-60R during maritime interoperability training off the coast of Santa Barbara, Calif., Jan. 16, 2015. (Sgt. Jamean Berry/U.S. Marine Corps/Flickr) U.S. Marines with the 15th Marine Expeditionary Unit's Maritime Raid Force fast-rope from an MH-60R during maritime interoperability training off the coast of Santa Barbara, Calif., Jan. 16, 2015. (Sgt. Jamean Berry/U.S. Marine Corps/Flickr)


By Janine Davidson and Emerson Brooking

For nearly fourteen years, the U.S. military has been on a war footing. Extraordinary amounts of money—often in excess of $100 billion dollars each year—have been appropriated beyond the military’s base budget to fund operations in Iraq, Afghanistan, and elsewhere. At the peak of the Iraq surge in late 2007, $211 billion was allocated for the Overseas Contingency Operations (OCO) fund, on top of $541 billion in base spending. Today, even as most of our troops have redeployed from Afghanistan and Iraq, the OCO fund has remained high. Atop a base budget of $496 billion, Congressional leaders have added an OCO of roughly $89 billion. By contrast, President Obama has requested a base budget of $534 billion with an OCO of $51 billion. While both requests total approximately $585 billion, debate over the size of the OCO has sparked sharp disagreements in Congress and a veto threat from the White House. This whole showdown raises questions: Is this just a political shell game or does it actually matter which pot of money funds what if the total amount is nearly the same? More broadly, why—if the number of U.S. troops in direct combat roles has shrunk to its lowest point since 2001—is the OCO still so large a percentage of the total budget?

To understand the current stand-off, we must take a step back to understand the purpose of OCO. This fund, known as the “Supplemental” until 2009, is designed to provide emergency funding for pop-up missions and, more generally, a congressional check on presidential authority to wage war. The military’s legal (Title 10) responsibility is to organize, train, and equip the force through annual appropriations (that the Congress also approves) and then to be ready to execute when the time comes. There is generally no operational “slush fund” authorized in the base budget. There is an “operations and maintenance” budget for steady-state things like normal ship deployments and training rotations, but if and when the president wants to wage war or otherwise send troops abroad into harm’s way, she or he must ask the Congress for the money to do so. Although this seems like a perfectly reasonable democratic process in theory, in practice, the lines are never quite clear as to what should or should not qualify as OCO.

This is not a new issue. After the first Gulf War, and throughout the 1990s, the United States maintained a “no-fly zone” over Iraq, which was funded for a long time through the “Supplemental.” The same was true for multi-year, follow-on peacekeeping mission in the Balkans. When such things were eventually moved to the base budget, difficult questions were raised. Did this mean the operations were destined to go on indefinitely? Was it wise to fund current operations in the base budget?

For both Congress and the Pentagon, therefore, it can sometimes be politically expedient to keep expenses wrapped up in OCO. Because OCO is technically appropriated for “emergencies” (the definition of which may be very vague), the White House and Pentagon have significantly more latitude in determining how the money is divvied up and spent. In the case of Congress, OCO is a great way to authorize funds without having to exercise the same level of oversight and responsibility. Because OCO can swing so drastically from year to year, this also leaves Congress the option to “turn off the spigot” without confronting the same level of institutional resistance that a base budget cut might provoke—this is an important lever of congressional power over the executive, even if it is rarely used.

This brings us back to the current debate over how big OCO should be, especially given the significantly smaller number of “boots on the ground” in Iraq and Afghanistan as compared to previous years (based on current trends, we estimate an average of 13,500 U.S. service members deployed in these countries in 2016—down from a peak of 187,000 in 2008), though OCO does support operations in other parts of the world. The actual size of OCO is driven by three factors.

Bureaucracy: The Nature of the Beast

The first driver is bureaucratic politics. The Pentagon bureaucracy has a hard time agreeing on what should or should not qualify for OCO. If your job as Chief of Naval Operations or Chief of Staff of the Army or Air Force is to organize, train, and equip, your service, then actually having to fight wars is a bummer. Combat (and high tempo operations in general) breaks your gear, depletes your ammo stockpiles, and leaves big maintenance and training gaps—all of which cost money to repair, replace, and reset. So if your war goes on for a long time, as they tend to do, and is exacerbated by inevitable pop-up crises (natural disasters, an Ebola outbreak, an air campaign in Libya), what is the legitimate “cost” of a given operation? Fuel, ammo, and food, for sure, but what about replacement costs for wear-and-tear on big weapons platforms and all the other gear that gets blown up or used down?

After years of operating in Iraq and Afghanistan, the distinction between OCO and base budget began to blur. In 2009, lawmakers tried to use OCO to acquire eight new C-17’s, which former Secretary of Defense Robert Gates did not want, and to procure more F-22’s, even though the plane had never been used in Iraq or Afghanistan. With such light oversight of the OCO process, people jokingly started calling it “budget crack,” because it was too addictive and too easy to use. As part of the quest to wind down American operations abroad, the Obama administration began to move many questionable items out of OCO and back into the base budget. Thus the slope of the line the interactive above (“A Closer Look at OCO”) reflects not only redeployments, but also a rebalancing of some of the pathologies driven by bureaucratic politics.

“Tooth to Tail” Math

The second consideration when examining the data is the fact that OCO costs will never correlate perfectly with the numbers of boots on the ground. Just because the “tooth” goes down does not mean the “tail” declines in linear proportion. Commanders still need to maintain a certain level of logistics and enablers for a given operation: things like intelligence, surveillance, and reconnaissance (ISR); airfield and base security and utilities; and enough people to run the coalition headquarters, whether there are 5,000 or 50,000 combat troops to support a mission. Likewise, maintaining a carrier battle group in the Gulf to support airstrikes costs the same despite the number of troops ashore (though other costs may change with the number of sorties ). So while the proportion of defense spending devoted to OCO should decrease as troops come home, a linear relationship cannot be assumed.

Consider, for instance, some of the items present in the White House’s original 2016 OCO request. The Under Secretary of Defense (Comptroller) lists nearly $4 billion dollars for the Afghanistan Security Forces Fund, $715 million for the Iraq Train and Equip Fund, $500 million for anti-IED research, and $300 million specifically for the procurement of missiles for the Air Force (on top of $3 billion more for Air Force missiles already in the base budget). There is nearly $8 billion for U.S. operations in Afghanistan and $16 billion for “in-theater support”—things that form the critical “tail” for U.S. operations abroad. There is even an extra $10 million request for the Office of the Inspector General, to ensure all these other appropriations are used in a responsible way. This is an immense sum, only a fraction of which may go to directly fund operations abroad

The United States Capitol is seen at sunset in Washington November 11, 2014. The Capitol dome is currently under scaffolding for repairs. (Gary Cameron/Courtesy Reuters)

The United States Capitol is seen at sunset in Washington November 11, 2014. The Capitol dome is currently under scaffolding for repairs. (Gary Cameron/Courtesy Reuters)

Politics: How Things Get Done (or Don’t)

The third and final driver of OCO pathologies, of course, is the political fight over sequestration.

The fallout of the Budget Control Act of 2011 (or BCA, popularly known as “sequestration”) has launched thousands of op eds and frequent predictions of doomsday. Conceived as a series of ugly, automatic cuts to defense and domestic spending intended to drive a bipartisan budget compromise and avert a default on the national debt, the BCA’s authors underestimated just how deeply the two sides disagreed. After a congressional “super committee” failed to find a solution, the automatic cuts began in early 2013. Although the BCA imposed harsh restrictions that saw a more than $40 billion reduction in base defense spending between 2012 and 2013, OCO was exempted from the spending caps that would trigger mandatory sequester cuts. From 2013 onward, therefore, OCO has become a vehicle for both the White House and Congress to fund Pentagon requirements while testing the limits of the OCO “emergency” spending classification. Thus a “slush fund,” outside the BCA, was born.

In his 2016 request, President Obama sought to force a renegotiation of the BCA (and particularly the deep cuts to domestic programs like welfare and food stamps that have no OCO safety valve) by purposefully breaking the base defense spending limit of $496 billion. Senator John McCain (R-AZ) and other key figures in the Senate and House Armed Services Committees decried the move as “holding defense spending hostage.” They have responded with their own defense spending bill that moves an additional $38 billion from base into OCO, thus conforming to the letter of the BCA. Some of these proposed “emergency” OCO authorizations include $7 billion in regular compensation and $13 billion in long-term acquisitions projects. The White House has threatened to veto.

Regardless of the outcome of this particular fight, OCO’s increasing use as a budgetary linchpin is a bad deal for both the Pentagon and Congress. Relying on “emergency,” year-by-year appropriations to fund standard personnel expenses and multi-year acquisition projects makes it virtually impossible for Pentagon officials to think ahead. Organization, training schedules, research, technology development, and maintenance are all subject to extreme unpredictability under OCO—particularly unwelcome for an institution built on long-term strategic planning.

This OCO “shell game” hurts Congress, too. By funneling routine defense appropriations through flexible “emergency” accounts, it becomes perversely harder for Congress to control how this money is actually spent. In a society defined by strong democratic control of the military, this is a poor solution.

The Future of OCO

Even barring major emergencies abroad and (optimistically) assuming a renegotiation of the current BCA sequester caps, a large OCO is here to stay for the foreseeable future. In modern conflict, whatever line that once stood between “war” and “peace” has gradually dissolved. The United States no longer musters a temporary army of citizen-soldiers as the Constitution envisions, releasing them to their fields once the moment of crisis has passed. Instead, the U.S. military is a highly trained, professional force, constantly in demand around the world. This requires a high level of readiness and a budgeting cycle flexible enough to respond rapidly to global contingencies—precisely the purpose of OCO.

Of course, without a frank conversation about these defense spending trends and (perish the thought!) a bit of bipartisan compromise, the OCO may instead become a “second defense budget,” stuffed with items from the Pentagon’s base budget request. This will frustrate long-term planning and impair congressional oversight—a bad bargain for all parties involved.

Editor’s note: This article originally misstated the 2016 BCA spending caps, which stand at $496 billion, not $490 billion. A few other edits were made for clarity. Special thanks to Gordon Adams for his feedback and recommendations. Adams’ own recent defense budget analysis may be read here.

Emerson Brooking is a research associate for defense policy at the Council on Foreign Relations.

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