Continuing Resolutions: Budget Gridlock's Hidden Risk to Your Defense Program

The Perennial Specter: Why Budget Gridlock Still Haunts Defense Acquisition

If you're a Program Manager (PM) or work anywhere within the U.S. defense acquisition ecosystem, the term "Continuing Resolution" (CR) likely sends a shiver down your spine. FY2025 ran entirely on a CR, FY2026 opened with a shutdown, and FY2027 starts on October 1, 2026 under yet another CR. This recurring budgetary paralysis isn't just an inconvenience; it's one of the biggest, yet often overlooked, hidden risks to your defense program, costing time and money and directly impacting our ability to deliver critical capabilities to the warfighter.

A continuing resolution is a temporary appropriations measure that allows government agencies to continue operating when Congress fails to pass regular appropriations bills by the start of the fiscal year (October 1). It's a stopgap, but for defense acquisition, it's a particularly pernicious one.

Understanding the CR Impact: More Than Just Delays

The core problem with CRs is that they don't just delay funding; they fundamentally alter how you can operate. Here’s what CRs typically mean for your program:

• Funding at Previous Year's Levels: Your program cannot spend above the prior fiscal year's funding rate, even if your budget request for the current year is higher. This means if you were slated for growth, you're stuck.
• Prohibition on "New Starts": No new programs, initiatives, or production lines can begin, even if they've been authorized and fully budgeted for. This is a chokehold on innovation.
• Restricted Production Rate Increases: Programs planning to ramp up production cannot do so. This leads to massive inefficiencies and lost economies of scale down the line.
• Halted New Contract Awards/Modifications: Unless Congress writes in a specific exception (called an "anomaly," which programs have to fight for), new contracts or significant modifications for planned work are often delayed until full-year funding arrives.

We saw this play out starkly in FY2024, when the Department of Defense operated under a series of CRs from October 1, 2023, until its full-year appropriation was signed on March 23, 2024, nearly half the fiscal year spent in limbo. FY2025 was worse: after short-term CRs, Congress passed a full-year CR on March 15, 2025 (P.L. 119-4), and the whole government, DoD included, ran an entire fiscal year on a CR for the first time. FY2026 opened with a funding lapse from October 1 to November 12, 2025, then a CR, then a short lapse at the end of January, before the $839.2 billion Department of Defense Appropriations Act, 2026 was signed on February 3, 2026. And FY2027 starts under a CR (H.R. 6500, signed in early September 2026) that funds the government through December 11, 2026.

While the Fiscal Responsibility Act of 2023 (FRA) provided some top-line certainty with defense spending caps ($886.3 billion for FY24, $895.2 billion for FY25), it did absolutely nothing to prevent the timing problem of CRs. As a PM, understanding these specific restrictions isn't optional; it's essential for anticipating problems and planning mitigation strategies.

Program Aspect	Under Normal Appropriations	Under a Continuing Resolution (CR)
Funding Level	Spends at current fiscal year's authorized level	Spends at previous fiscal year's level (or lowest of requested/previous)
New Programs ("New Starts")	Can initiate new programs and projects	Cannot initiate new programs or production lines
Production Rates	Can ramp up production as planned	Cannot increase planned production rates
Contract Awards/Mods	Can award new contracts and modify existing ones	New contracts and significant modifications often delayed
Workforce Growth	Can hire new personnel as needed	Hiring and new commitments often slow down

The Hidden Costs: Lost Time, Money and Opportunity

This isn't just about administrative headaches. A 2026 GAO review of how CRs hit DoD found real delays, real costs and real paperwork:

• Schedule: 36 of the 74 acquisition programs GAO surveyed reported schedule effects, such as late contract awards or late delivery and fielding of equipment.
• Cost: The Marine Corps' Amphibious Combat Vehicle program reported $17.7 million in added cost from fiscal 2022 through 2024 because of CRs. At Joint Base San Antonio, a facilities contract estimated at $579,000 came back at $1,445,000 after CR-related delays.
• Burden: F-35 program officials estimated that 20 percent of their financial management staff's time goes to replanning the budget around CR limits.

For "new start" programs (those cutting-edge initiatives vital for maintaining our technological edge), the damage is simple: the work can't begin. Before fiscal 2018, DoD identified roughly 75 weapons programs being held up by the new-start ban (CRS). That means AI/ML initiatives, advanced sensor development, and next-generation munition variants can miss the moment they were planned for.

Programs planning to ramp up production get hit too. GAO found the Amphibious Combat Vehicle program couldn't place its full fiscal 2024 order because a CR froze it at the prior year's production rate. Smaller, later orders tend to mean higher unit costs.

Direct Impact on Your Program: A PM's Battle Plan

For you, the USG Program Manager, CRs create a perfect storm of challenges:

1. Planning Paralysis & Inefficiency:

• No New Starts: If your program planned to start something that wasn't funded last year (a new prototype effort, a new development phase, a new production line), you cannot award those planned contracts until full-year funding or an anomaly arrives. This leads to lost momentum and a dangerous erosion of technological advantage.
• Production Rate Stagnation: For example (hypothetical): a program planning to go from 20 units a year to 30 is held at 20 and can't order long-lead items for the higher rate. This directly leads to higher unit costs and schedule delays once full funding eventually arrives.
• Workforce Instability: You'll struggle to onboard new personnel, including critical engineering talent, when funding is uncertain and long-term staffing plans can't be committed. This impacts morale and retention, especially for highly sought-after skills.

2. Resource Allocation Headaches:

• Reprogramming Challenges: While some limited reprogramming is possible, it's often insufficient and requires lengthy approval processes, further delaying critical actions.
• Unfunded Priorities Lists (UPLs): CRs exacerbate the reliance on UPLs, as priority funding needs identified by the services often languish until full appropriations, if they are even addressed.
• Testing and Experimentation Delays: Critical test events or prototyping efforts, especially those requiring specific annual funding, are often pushed back, impacting the spiral development cycles of modern systems.

3. Increased Program Risk and Cost:

• Schedule Slippage: Nearly all programs experience some level of schedule delay, which inevitably translates into increased costs due to extended overhead, rework, and inflationary pressures.
• Supply Chain Disruptions: Your vendors, especially small businesses, face immense uncertainty, leading to potential layoffs, production pauses, or even closures. This creates ripple effects throughout your program's supply chain.
• Foreign Military Sales (FMS) Impact: Delays in U.S. production schedules due to CRs can impact FMS commitments, potentially damaging alliances and global security cooperation.

So what should you do? Plan for delays as if they are inevitable. Build in flexibility where possible (e.g., modular designs, phased development). Communicate constantly and transparently with all stakeholders (your leadership, your team, and your contractors) about the potential impacts and your mitigation strategies.

Beyond the Pentagon: Contractor & Industrial Base Vulnerabilities

Your program's success is intrinsically linked to the health of the defense industrial base. CRs inflict severe damage here, directly affecting your ability to execute:

1. Cash Flow and Investment Challenges:

• Delayed Contract Awards/Modifications: Prime contractors and their extensive supply chains face significant delays in receiving new contract awards or modifications for planned work. This directly impacts revenue streams and cash flow, particularly for smaller firms.
• Investment Deferrals: Companies defer internal research and development (IRAD) investments, capital expenditures, and workforce expansion plans due to the uncertain funding environment. This stifles innovation and the development of future capabilities that your program will eventually need.
• Difficulty Meeting Surge Requirements: Without consistent funding, contractors struggle to maintain surge capacity, impacting their ability to quickly ramp up production in response to geopolitical needs or unexpected program demands.

2. Workforce Instability and Morale:

• Hiring Freezes/Layoffs: Companies may implement hiring freezes or even resort to furloughs/layoffs if new contracts are delayed, leading to the loss of skilled personnel to other sectors.
• Brain Drain: The cyclical uncertainty makes it harder to attract and retain top engineering and manufacturing talent. These individuals seek more stable career paths, often outside of defense.

3. Supply Chain Vulnerabilities:

• Sub-Tier Risk: Small and medium-sized enterprises (SMEs) in the lower tiers of the supply chain are particularly vulnerable. They often lack the financial reserves to weather extended periods without new orders, leading to potential insolvencies or exits from the defense market.
• Increased Costs: When funding finally arrives, contractors often face increased costs from suppliers who had to scale back or find alternative revenue, passing those costs onto the prime and eventually the taxpayer.

So what does this mean for PMs? Recognize that your contractors are operating under extreme duress. Maintain open lines of communication, understand their cash flow challenges, and advocate for their stability where possible. A healthy industrial base is critical for your program's long-term success.

Conclusion: Navigating the Uncertainty

The recurring reliance on continuing resolutions for the defense budget, as we've experienced in FY2024, FY2025 and FY2026, and will again at the start of FY2027, is a self-inflicted wound on national security. It undermines strategic planning, erodes the industrial base, inflates costs, and ultimately delays the delivery of critical capabilities to the warfighter.

For defense PMs and all USG personnel involved in acquisition, the message is clear: brace for continued uncertainty. Proactive planning, clear and frequent communication, and a deep understanding of the specific limitations imposed by CRs are your best defense. While the nation faces complex geopolitical challenges, the inability to consistently fund its defense apparatus on time remains one of its most persistent and preventable vulnerabilities. Until Congress prioritizes the appropriations process, the shadow of the CR will continue to loom large over every acquisition program.

CR vs. Full Appropriation: Impact on Programs

Factor	Continuing Resolution	Full Appropriation
Funding level	Prior year rate (capped)	Full authorized amount
New program starts	Generally prohibited	Permitted
Contract awards	Limited to prior-year scope	Full scope permitted
Planning certainty	Low, month-to-month risk	High, full-year visibility
PM Action Required	Rate contracts, avoid new starts	Execute to plan