Defense budget: a look inside the numbers

With all the cuts, can the Defense Department meet the mission, and which contractors will be feeling the bite? We ask defense contracting expert, Jim McAleese.

By Suzanne Kubota
Senior Internet Editor

Defense Secretary Robert Gates said Monday that the Pentagon’s proposed FY 2012 budget would preserve the military’s fighting strength.

Jim McAleese, defense contracting expert and founder of McAleese and Associates, told Federal News Radio in a “remarkably short and sweet” briefing, Secretary Gates “delivered a message to the Congress that said DoD had asked for $21 billion dollars of growth in 2011 over 2010, and that he expected to receive effectively half of that. In other words, he laid down the guantlet of saying the troops need $540 billion in the base budget in 2011 to not endanger the mission.”

That would apply to the current continuing resolution.

Under the proposed FY 2012 budget, said McAleese, the big winners were operations and maintenance funding, increasing about $20 billion from FY 2010 through FY 2012.

Procurement, said McAleese, also “did well yesterday. It was a significant winner. It’ll grow from $103 billion dollars in 2010, which is where we’re currently capped at under the CR right now, to $113 billion dollars in 2012. That’s about a $10 billion dollar increase, about a 10 percent increase.”

On the downside, the “two big bill payers” for Defense are the research and development account and “the MILCON bucket,” military construction.

Looking inside the numbers for the Army, as an example, McAleese told anchor Tom Temin they had requested a budget of $145 billion in the base budget and “they will also receive another $71 billion dollars of OCO (Overseas Contingency Operations) to support Afghanistan. That’ll give them about $221 billion dollars for the year.”

McAleese breaks it down further:

Big winners, yesterday Tom, were aircraft at about $7 billion dollars. Great news for Boeing, great news for Sikorsky. Communication electronics did well at about $5.1 billion dollars yesterday. Tracked combat vehicles improved slightly, not hugely, but good news for General Dynamics. They’ll be building about $800 million worth of Strykers. Profit margins on those will be particularly high, because those particular Stryker vehicles are about $8 million dollars each because they’re packed with sensors – nuclear, biological, chemical sensors.

Losers yesterday for the Army, Tom, were obviously missiles. Big cancellations in SLAMRAAM (surface-launched, medium-range air-to-air missile). MEADS (Medium Extended Air Defense System) was announced yesterday. That program’s going to run out. Not good news for Lockheed. Good news for Raytheon there. And the wheeled tactical vehicles was very disappointed yesterday.

McAleese noted that by taking responsibility to make cuts to the budget, Secretary Gates has “brought tremendous credibility. I think if you’re one of the…any one of the several million servicemen and women that support DOD, I think that’s the kind of leadership that really makes a difference.”

This story is part of Federal News Radio’s daily DoD Report. For more defense news, click here.

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