An internal struggle over the allocation of resources within the Defense Department came to a head last week as Defense Secretary Ash Carter ordered the Department of the Navy to invest in more capability-oriented programs for fiscal 2017.

In the strongly worded letter, Carter stated the Navy’s 2017 budget fails to fall in line with DoD policy, despite discussion and guidance from the Office of the Secretary of Defense.

The letter publicly exposes the difference in warfare ideologies between the Defense secretary and Navy Secretary Ray Mabus, as Carter continues to invest heavily in maintaining technological superiority over U.S. adversaries.

“For the last several years the Department of the Navy has overemphasized resources used to incrementally increase total ship numbers at the expense of critically-needed investments in areas where our adversaries are not standing still,” Carter wrote to Mabus on Dec. 14.

The Navy’s 2017 budget is “accordingly unbalanced, creates too much warfighting and technical risk and would exceed the numerical requirement of 308 ships,” Carter said.

The letter stated that DoD’s priorities were to build advanced capabilities, to close growing gaps in naval aviation and ensure sufficient ship capacity.

As a result, the letter orders the Navy to reduce the number of Littoral Combat Ships it planned to buy from 52 to 40. Furthermore, the Navy will only make one variant of the ship instead of two.

Dan Gouré, the vice president of the Lexington Institute, said the letter was “a taking to the woodshed of the secretary of the Navy.”

He added the letter was written to make very clear Carter is making changes and he wants to see them now. It is also a statement to all the services and the Joint Staff that the premises that went behind force structure and procurement previously are now defunct, and there is a new set of rules that will guide those areas, Gouré said.

A Navy spokesperson said in a statement that “shipbuilding has always been a priority for the Navy and we will continue to balance capability with capacity in our shipbuilding programs as we have always done. We are aware of the memo, however budget discussions are pre-decisional. It would be inappropriate to discuss anything further until the FY 17 budget is finalized.”

Senate Armed Services Chairman John McCain’s (R-Ariz.) office provided a statement on the letter.

“The Senate Armed Services Committee has not been briefed on any final decisions regarding the Littoral Combat Ship, and I will not be speculating on media reports. That said, my concerns with the LCS, from cost overruns to schedule delays to poor performance, are well known. I hope these reports are an indication that the Pentagon is thinking strategically about the size and composition of the future force, including the LCS program. I look forward to taking a close look at the administration’s budget request.”

Instead of the extra 12 LCS, Carter’s letter directed the Navy to buy 10 Flight III destroyers throughout the future year’s Defense plan.

The letter also pushes the Navy to maximize its undersea warfare advantage and buy an additional Virginia Payload Module to add to fast attack submarines.

Finally, Carter told the Navy to procure 31 additional F-35Cs.

The changes reflect the policy of DoD’s third offset strategy.

The strategy puts a focus on making the United States military more technologically sophisticated than its enemies by investing in the cyber, space and nuclear realms. That also includes technologies like automated systems and artificial intelligence, which Deputy Defense Secretary Bob Work championed in a speech last week.

The Navy is spending more money to maintain  the technological edge and will end up having less to buy the capacity it wants for weapons — the 52 ships Mabus wanted.

“It’s a difference in priority and your view of where the competition is headed in the future,”  said Todd Harrison, a senior fellow at the Center for Strategic and International Studies. “Capacity helps you more today, it helps you with the kind of challenges and threats that we are facing today, and the real demand on the Navy right now is to be in more places than they can cover.”

Carter’s method capability states that threats are growing and getting more complex and the country’s weapons need to be ahead of those threats in the future, Harrison said.

Bryan Clark, a senior fellow at the Center for Strategic and Budgetary Assessments, said Mabus has tried to increase the capacity of his fleet and increase shipbuilding since he took office.

“Ever since sequestration … it’s been a real challenge to maintain shipbuilding because there’s much less money available in the budget, about 10 percent. So to make up that loss of money in the budget the Navy has been taking money out of other accounts, out of procurement of new weapons, out of procurement of new sensors and electronic warfare systems, and out of procurement for aircraft and maintaining money for shipbuilding,” Clark said.

Despite DoD’s emphasis on capability, Mabus has been able to appeal to the previous secretaries of Defense and convince them to allow the Navy to invest in capacity, Clark said. That trend continued until Carter put his foot down last week.

Some analysts question if Carter’s posturing to the Navy really matters though. The Obama administration has about a year left and the 2017 budget will be implemented by the next administration.

“They are submitting an FY17 budget in February and ultimately that’s a budget that number one has to be enacted by Congress, but number two it’s going to be executed by the next administration, not this administration,” Harrison said. “A lot of the decisions they are talking about in this memo are things that won’t take effect even beyond the 2017 budget. It will be the 2018, 2019 budgets where these things will actually matter.”

It’s possible the next administration will value capacity more, he said.

Harrison said it will be interesting to see how Mabus handles the congressional budget hearings in March, to see if he will stick with the Navy’s need for capacity or buckle down and support Carter’s push for capability.

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