Fifteen months after the Obama Administration's initial request and seven months after it was needed, POTUS signed into law an omnibus federal budget for FY 2017 that increases overall Pentagon budget authority by $25.7B (+4.4%) over FY 2016. The chart compares the final FY17 tally to FY16 by "colors" of money:
Of key interest to clients are changes to investment plans: FY17 budget authority for R&D was increased y/y by $3.8B (+5.3%) to $73.8B, $1.9B more than requested, while procurement was increased y/y by $5.1B (+4.3%) to $124.1B, $6.5B more than requested.
R&D. +5.3% y/y. Congress focused its R&D plus ups to last year's request on earlier stage R&D (6.1, 6.2, 6.3). Later stage R&D, i.e., Demos/Validations (6.4), Engineering & Manufacturing Development (6.5), and Operational Systems Development (6.6), were generally funded as requested with only a few nips and tucks.
- More money for early research and tech development of ground force requirements. Congress added over $750M to the development of advanced land force weapons: railgun, directed energy weapons (microwave, laser), missiles and rockets.
- Creation of Tools and Resources to Accelerate Prototyping and Innovation Although former SecDef Carter's Silicon Valley tech incubator initiative, DIUX, saw its request whacked by two-thirds (-$20M) to $10M, a blank check worth $100M for a Rapid Prototyping Program was created without a detailed proposal on how to spend it (DoD is directed to come back with a plan in 20 days). Similarly, the moribund Defense Rapid Innovation Fund was funded for $250M although 0 was requested by the Obama Administration.
- Coupled with the previous approval of wider use of "Other Transactional Authorities" vice traditional acquisition contract procedures, Congress is trying to provide the resources and authorities to force DoD to cut the time it takes to get "good ideas" into the hands of warfighters and cut the acquisition timeline.
Procurement. +4.3% y/y. Clear winners in the final bill in terms of plus ups to procurement were the Navy (+$5.7B more than the Obama request and $2.4B more than FY16) and the Army ($2.8B more than the request and $1.9B more than FY16). The Air Force gained $2.5B over the request but was essentially flat compared to FY16 (+$280M). Defense-wide procurement which includes Missile Defense Agency and SOCOM gained $875M above the request, $217M more than FY16.
- Aviation $38.1B Total: -$1.6B y/y; + $4.5B to request
- F-35 (LMT et al). Congress added 11 aircraft (+$578M to request) for a total buy of 74 ($8.2B) (compare to 68 in FY16). It also ordered the Joint Program Office to get the appropriated aircraft on contract in the same year the money is appropriated, i.e, before September 30. All indications are that this will happen for the first time.
- UH-60 Blackhawk (LMT). Congress added 26 (+$340M) for a total buy of 62 ($1.2B)(compare to 107 in FY16).
- C130J (LMT). Congress added 2 aircraft ($160M) for a total buy of 17 ($1.3B)(compare to 29 in FY16).
- F/A-18E/F (BA). The Administration had requested 2 aircraft and Congress added 12 (+$980M) for a total of 14 ($1.1B). (compare to 15 acft in FY16).
- AH-64 Apache (BA). Congress added 7 new buys for +$262M. Also funded 52 remans for $774M (64 in FY16).
- C-40 (BA). Added 2 aircraft for +$207M.
- Shipbuilding $21.2B Total: +$2.5B y/y; +$2.8B to request
- LPD-29 (HII). Congress added unrequested ship (+$1.8B). Covers Ingalls production gap to LX(R).
- Littoral Combat Ship (LMT). Congress added one ship (+$475M) for a total of 3 ($1.6B). (compare to 3 in 16)
- National Security Ship (HII). Congress added + $150M for Advanced Procurement of USCG icebreaker.
Further detail and/or analysis is available on request.
