U.S. Defense Bill Boosts Procurement Despite Topline Cuts

by Shaun McDougall, Military Markets Analyst, Forecast International.

EA-18G Growler. Source - U.S. Navy

EA-18G Growler. Source – U.S. Navy

U.S. lawmakers released an omnibus appropriations bill on December 16, 2015. The legislation was passed by Congress and signed into law on December 18. The bill provides $514.1 billion in base discretionary funding for the Department of Defense, $12.8 billion below the request. This cut is partially offset by a $7.7 billion increase in the Overseas Contingency Operations account, which totals $58.6 billion. Overall, the Pentagon saw a net funding reduction of $5.1 billion, but the amount provided is still $18.7 billion more than FY15 enacted levels.

The funding within the appropriations bill is in line with revised spending caps contained in the Bipartisan Budget Act of 2015. That legislation, signed into law in November 2015, provides an additional $80 billion in base discretionary spending in FY16 and FY17, split evenly between defense and non-defense. The OCO account, which serves as a sort of emergency account to pay for military operations, is padded with additional funding in both years as well. The OCO account is capped at $58.8 billion in FY16 and FY17.

Despite the topline cut, the appropriations bill provides a net increase of $4.7 billion for procurement, including $3.8 billion in the base budget and $871.6 million in the OCO account. The OCO adjustments include an additional $1 billion for National Guard and Reserve equipment, partially offset by smaller cuts for Army and Defense-Wide programs. The bill provides a net increase of just $39.7 million for research, development, test and evaluation.

The Navy was the primary benefactor of increased acquisition funding, receiving an additional $2.1 billion for ships and $1.4 billion for aircraft procurement. The bill adds $1 billion in incremental funding for an additional DDG 51 class destroyer and $60 million for destroyer modifications, $635 million for an additional Afloat Forward Staging Base, $250 million in advance procurement funding and another $29 million in development funding to accelerate the LX(R) amphibious ship program, $199 million in advance procurement funding to accelerate the LHA replacement program, $225 million for an additional Joint High Speed Vessel (JHSV), $34 million to accelerate the Landing Craft Utility (LCU) replacement, and $75 million to accelerate the T-ATS(X) fleet tug. The RDT&E account includes an additional $50 million for CVN 78 shock trials, but the FY16 defense policy bill included a waiver authority allowing the service to delay shock trials until after the ship’s first deployment.

Congress is also helping the Navy expand its Super Hornet and Growler fleets. Navy officials have indicated a desire to procure additional F/A-18E/F Super Hornets to offset a fighter shortfall, and the service’s FY16 list of unfunded priorities included funding for one squadron of 12 aircraft. Rather than funding a dozen Super Hornets, as recommended in the Senate markup, the final appropriations bill adds $350 million for five of those aircraft, as well as $660 million for seven EA-18G Growlers. The bill also adds $780 million for six F-35Bs, $225 million for two F-35Cs, $24.5 million for one UH-1Y helicopter, $95.6 million for one MQ-4C Triton unmanned aerial vehicle, $60 million for three MQ-8C Fire Scout UAVs, and $15.1 million for one UC-12W aircraft. The bill adds a total of $300 million in development funding for the Unmanned Carrier-Launched Airborne Surveillance and Strike (UCLASS) system, comprising $250 million for air vehicle risk reduction and $50 million for source selection preparation. The bill also reverses the Navy’s plan to wind down production of Tomahawk cruise missiles, adding $30 million for 49 missiles. The legislation also adds $50 million for Javelin missiles and $70 million for TOW missiles for the Marine Corps.

The Air Force receives $294 million for three additional F-35As, but that funding came from efficiencies within the program itself, as well as a $180 million cut resulting from a sustainment contract delay. The bill also adds $64.5 million for an attrition CV-22, $80 million for four MQ-9 Reapers, $170 million for Air National Guard F-15 AESA (active electronically scanned array) radars (including $20 million for development), $40 million for Air National Guard F-16 radar development, $28.7 million for C-130 modifications, and $28.7 million to prevent the Air Force from retiring any of its EC-130H Compass Call aircraft as previously planned. The legislation follows through on terminating the Defense Meteorological Satellite Program, cutting $89.4 million for the last satellite and $120 million for the launch vehicle that would have put it in orbit. The service also receives $143.6 million for the development of a domestic rocket engine to replace the Russian-made RD-180. The bill cuts $510 million for the Long-Range Strike Bomber (LRS-B) due to program delays.

The Army’s aircraft, missile, and vehicle coffers each saw a net funding increase, partially offset by a reduction to the service’s Other Procurement account. The bill adds $65 million for MQ-1 upgrades and payloads, $138.8 million for Army National Guard UH-60M Black Hawk helicopters, $100 million for Patriot Missile Segment Enhancement (PAC 3 MSE) missiles, and $91 million for Javelin missiles. Lawmakers continue to support the heavy vehicle industrial base, adding $72 million for 16 M88A2 recovery vehicles and $23 million for M1 Abrams tank upgrades. Another $314 million is added to the OCO procurement account to help install 30mm cannons on Stryker vehicles under the Stryker lethality upgrade. And $97.5 million is added to the RDT&E budget for the lethality upgrade. Congress also adds $100 million for HMMWV upgrades and $60 million for HMMWV ambulances. Unit cost savings resulted in a $58.4 million cut to the Army’s portion of the Joint Light Tactical Vehicle (JLTV) program, and the service also lost $88 million for the Warfighter Information Network-Tactical (WIN-T).

Elsewhere, the bill adds $250 million for the Defense Rapid Innovation Fund, as well as $100 million for an assessment of cyber vulnerabilities within the military. Another $100 million is added for the Pentagon’s technology offset initiative, an effort to develop technologies to “offset” the technological advances of potential adversaries. Israeli missile defense programs, meanwhile, receive an additional $164.8 million in development funding and $150 million for procurement.

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