U.S. Congress Passes $441B Budget for FY 2006

In the wake of the U.S. Secretary of Defense’s FY 2006 budget requests for $419 billion after making a number of significant program cuts, the U.S. House of Representatives (Congress) passed H.R.1815, a $441 billion defense budget for FY 2006. The legislation passed on a 390-39 vote, but the budget will not be final until the U.S. Senate passes its own bill after June 6; the two bills must then be reconciled in committee before the U.S. President can sign a final budget.

Highlights of the Congressional Pentagon budget include:

• The $441 billion represents an increase of about 1.9% above inflation, in contrast to the roughly 4% average increases Congress approved between 2000-2005.

• The overall figure includes $421 billion for defense programs, $16.4 billion for Energy Department national security programs, and about $3.2 billion for defense-related costs at other agencies.

• Above and beyond the defense budget, the bill authorizes $49 billion in supplemental war funding for FY 2006, the same amount the Senate Armed Services Committee recommends that chamber approve. That amount would bring funds approved to date for the Global War on Terror to at least $350 billion.

Overall, Congress approved spending $79.1 billion on weapons procurement, $1 billion more than the administration sought. Nevertheless, there were changes made to the Pentagon’s original requests, with programs cut and dollars shifted around.

• It set spending limits on the Navy’s three top shipbuilding programs: the DD (X) destroyer, Virginia class submarine, and Littoral Combat Ship. Congress rarely imposes cost caps on defense programs.

• Signaling skepticism of the DD (X) program, which is managed primarily by Northrop Grumman Corp. Ship Systems, the House cut $300 million from a $1 billion research request and $716 million sought for advance purchase of parts for the first ship. It also imposed a $1.7 billion cost ceiling on what’s estimated to be a $3 billion vessel. The Senate version of the bill does not contain a cost cap, but if the restriction survives reconciliation and the U.S. Navy can’t find a way to bring in the DD (X) Destroyer at that price, this restriction could effectively end the program. Ironically, the House and Senate have also been pressing the Navy to award the DD (X) contract in ways that will add substantially to the per-ship cost.

• The biggest increase was the addition of $2.8 billion and three vessels to The House approved adding $2.5 billion to buy two additional DDG-51 Arleigh Burke class AEGIS destroyers built by General Dynamics Corp.’s Bath Iron Works unit, and $384 million for one additional dry cargo vessel also built by General Dynamics. The Navy had requested $8 billion for four vessels, and ended up with 7 vessels for $10.8 billion.

Overall, however, the House legislation includes a report from the Armed Services Committee saying it’s “deeply concerned with the skyrocketing costs of weapons systems that cannot be explained by inflation or by reduced economies of scale… The committee is particularly concerned with the Navy’s rising shipbuilding costs and the recent statements from Navy officials that they are uncertain about what to do about the problem.” Defense Industry Daily has covered this issue and its effects on both program cost and the U.S. shipbuilding industry. We have also covered the growing bipartisan concern about rising costs generally.

• The House approved the Navy’s request for $2.73 billion to buy 38 more Boeing F/A-18E/F Super Hornet fighters

• It also approved $1.47 billion for 11 more V-22 Osprey tilt-rotor aircraft, built jointly by Textron Inc.’s Bell Helicopter unit and Boeing. The MV-22 Program has been a longstanding source of controversy over its cost and the aircraft’s capability.

• The bill authorizes the Air Force to enter into negotiations with Boeing to buy 42 additional C-17 transports over the 180 currently on order. The C-17 is currently running at $150-180 million per plane. Airframes have service hour limits, however, and the extensive use being made of the C-17s since the Global War on Terror began is both straining lift capacity and wearing them out prematurely.

• For the Air Force, the House approved the full request of $3.685 billion for 25 Lockheed Martin Corp. F/A-22 Raptor fighters. As DID has noted, the Raptor program has been a source of some controversy on the basis of both doctrine and cost. See also DID’s coverage of the relevant GAO study.

• Deliveries will be completed on Lockheed’s five-year, $4.1 billion C-130J Hercules transport program. In an act supported by several watchdog groups, Defense Secretary Donald Rumsfeld had ordered the program ended at the end of FY 2006, cutting 37 planes and as much as $1.9 billion from the program. He reversed that decision earlier this month under pressure from senators, congressional representatives, and governors.

• Refueling has been another capacity shortfall area during the Global War on Terror. $735 million of $1 billion requested to buy KC-130J Hercules aerial refueling planes was shifted to the Air Force from the Marines. The KC-130J is indeed a variant of the C-130J Hercules described above, with additional modifications specific to its mission as a refueller. Under the new plan, the Air Force would purchase 9 of the Lockheed planes. The Marines would buy 4 but would be able to buy 12 more in subsequent years. The Senate panel had similar provisions.

• Some space programs also came under scrutiny. The panel slashed the Air Force’s funding request for the Space Radar surveillance satellites and the Transformational Satellite Communications System (T-Sat), directing the service to restructure both efforts. The panel recommended providing $436 million of the $836 million request for T-Sat and $100 million of the $226 million request for the Space Radar.

• The House approved $69.3 billion for defense research, a net of $112 million more than last year.

• The Army’s budget included $3.8 billion for research related to the $100+ billion Future Combat Systems (FCS) “program of weapons programs”, a cut of $400 million or 10.5%. Boeing is the lead integrator, and General Dynamics, Lockheed Martin, Raytheon Co., Northrop Grumman, BAE Systems PLC and its acquisition United Defense Industries Corp., Textron, and Computer Science Corp. are the major subcontractors. FCS’ rising costs and procurement policies have been singled out for criticism in both the House and Senate.

• The House also agreed to $137 million in cuts from a $537 million request to the Boeing-managed Joint Tactical Radio System that will be used by all the services. The Senate Armed Services panel also cited concerns about potential cost overruns in cutting $308 million. Per the Army’s “show cause” request in order to continue the JTRS Cluster 1 contract, Boeing submitted its response on May 25, 2005. Pending review, JTRS now faces a second program restructuring with an additional schedule delay estimated at 24 months.

N.B. In addition to the sources linked above, this article also relied on this May 26 Bloomberg report.