Spending on Weapons to Grow Despite Overall Defense CutsJuly 09, 2010

 

Even as the Obama Administration trims the overall defense budget, spending on weapons will likely continue to grow, according to Pentagon Comptroller Robert Hale.

In an interview with Bloomberg News, Hale said spending on weapons through 2016 will likely grow faster than the overall defense budget, which will increase by only 1% above inflation.

"Our goal would be to get forces and modernization to grow by 2% or 3%,” Hale told Bloomberg News, adding, however, that "it’s not a given."

Several large contractors will benefit from the continued growth, including Bethesda, Maryland-based Lockheed Martin, which is building the F-35 fighter. The company also has contracts for new ground vehicles, ship construction, satellite systems and unmanned drones, according to the article. Los Angeles-based Northrop Grumman and Chicago-based Boeing Co. also stand to benefit.

The Pentagon is trying to cut $100 billion of overhead costs over five years but some of the savings might be shifted into equipment purchases. Cuts in support activities like operations and maintenance, and military construction, will help support procurement, acquisition and research, which Hale said are in the “gaining” portion of the budget.

The Pentagon has requested a $549 billion base budget for fiscal 2011, a 1.8% increase over fiscal 2010, in which the budget grew by 2.1%. These budgets may appear paltry to defense contractors after eight years of robust 4% average annual growth.

In May, Gates announced plans to revamp Pentagon spending, noting that future budgets will see little real growth because a defense-spending "gusher" that opened after the Sept. 11 attacks "has been turned off and will stay off for a good period of time," Bloomberg News reported.

Given the overall federal budget environment, Hale’s remarks nevertheless are welcome news for defense contractors, Todd Harrison, a defense analyst with the Washington-based Center for Strategic and Budgetary Assessments, told Bloomberg News.

"It sounds like they are trying to do everything they can now to avoid major program cuts in the next few years," Harrison said. But if the Pentagon fails to cut overhead and support costs as it hopes, "they will have no choice but to cut" programs, Harrison told Bloomberg News.