Bloomberg News

U.S. Senate to Vote on House-Passed $662 Billion Defense Plan

December 20, 2011

Dec. 15 (Bloomberg) -- The U.S. Senate may vote as early as today to approve a $662 billion defense authorization measure and send it to President Barack Obama to be signed into law.

The House of Representatives yesterday passed the legislation, which seeks to control rising costs of the Lockheed Martin Corp. F-35 jet, the Pentagon’s most expensive weapons program. The vote was 283-136 on the bill, which sets military policy and spending targets for the fiscal year that started Oct. 1.

Endorsed by negotiators from the House and Senate on Dec. 12, the measure also mandates that members of al-Qaeda be placed in military detention and includes a provision passed by the Senate to impose sanctions on Iran’s central bank.

“We have demanded more accountability from nations like Iran; we have aided our forces fighting in Iraq and Afghanistan; and we look to emerging issues, like proliferation and cyber threats,” said Representative Howard P. “Buck” McKeon, the California Republican who heads the House Armed Services Committee. “We have assured that the Department of Defense will be a more efficient steward of the taxpayer dollar”

The negotiators agreed to a provision that directs the Pentagon, in a forthcoming sixth F-35 production contract, to place greater risk on Lockheed Martin to absorb overruns.

If costs exceed a negotiated target, the company would absorb the entire amount instead of splitting the increase with the U.S. government. The U.S. is negotiating the fifth contract for the F-35. At $382 billion, the F-35 is the Pentagon’s largest weapons program.

F-35 Cut

Congressional negotiators also agreed to cut funding for one F-35 jet for the Air Force, dropping its purchase to 18 for 2012. The negotiators approved funding for seven carrier-based F-35s requested by the Navy and six short take-off-and-vertical landing versions for the Marine Corps.

The 2012 defense authorization bill sets military policy and spending targets at about $26.6 billion less than the Pentagon’s request for the new fiscal year.

The bill includes $115.5 billion for the wars in Afghanistan and Iraq and about $16.9 billion for Department of Energy defense programs. It also would hold defense contractors responsible for counterfeit parts in weapons systems.

House and Senate negotiators agreed to $390 million for the multinational missile-defense program known as the Medium Extended Air Defense System. Three-fourths of that funding would be restricted until the defense secretary submits a detailed plan “either for implementing a smaller restructured program, or for paying contract termination costs.”

Development Program

The $4.2 billion development program is managed from Orlando, Florida, by Meads International LLC, a joint venture of Lockheed, Lfk-Lenkflugkorpersysteme Gmbh of Germany and MBDA of Italy. MBDA is owned by BAE Systems Plc, European Aeronautic, Defence and Space Co. and Finmeccanica SpA.

The negotiators reported they were “extremely disappointed” that the Pentagon’s agreement in 2004 with Germany and Italy on the air defense system created an “unacceptable situation for the United States in the event of poor program execution, significant schedule delays or significantly increased cost estimates, such as have taken place.”

The Pentagon in February said it would terminate the program when the current contract ends in 2013. In July, Italy joined Germany in pressing the U.S. to maintain funding.

Tactical Vehicle Program

The bill also supports the Army and Marine Corps Joint Light Tactical Vehicle program. The conference agreement authorizes $152.2 million for continued development.

Three companies in 2008 won technology development contracts for the program: General Tactical Vehicles, a joint venture of General Dynamics Land Systems, part of Falls Church, Virginia-based General Dynamics Corp., and South Bend, Indiana- based AM General LLC; BAE Systems Land & Armaments, part of London-based BAE Systems; and Bethesda, Maryland-based Lockheed Martin.

The final defense bill cuts $297.7 million of $775.8 million in the Army’s budget request for the Joint Tactical Radio System, or JTRS. The system of wirelessly linked computers is designed to deliver voice, video and data for platforms, including tanks and aircraft. Boeing Co., General Dynamics Corp. and Lockheed Martin have a stake in the program.

The House and Senate negotiators agreed on $14.9 billion for 10 new ships and shipbuilding support, including the Navy’s Littoral Combat Ship program, the DDG-51 Arleigh Burke destroyer, the DDG-1000 guided missile destroyer and the LPD-17 amphibious transport dock ship.

Annual Report

The legislation requires the U.S. comptroller general to submit an annual report on Boeing’s KC-46A tanker program, beginning in fiscal year 2012 and concluding in fiscal 2017. The reports would include assessments as to whether the Air Force was making changes to the program’s requirements or documentation.

The bill requires the secretary of the Army to certify that the acquisition strategy for the production of radio systems provides for “full and open competition that includes commercially developed systems that are certified by the National Security Agency and pass Army testing,” according to a summary of the conference report provided by the Senate Armed Services Committee.

The measure includes a requirement that members of al-Qaeda be held in military detention.

At the request of the Obama administration, the compromise bill adopts language to make it “100 percent clear” that the revised bill wouldn’t interfere with the detention authority of the Federal Bureau of Investigation or other law enforcement agencies, Levin told reporters.

The president would have the power to determine what suspects have an al-Qaeda connection and therefore would go into military detention, according to a committee news release.

The bill is H.R. 1540.

--With assistance from Tony Capaccio and Michelle Jamrisko in Washington. Editors: Robin Meszoly, Jim Rubin.

To contact the reporter on this story: Roxana Tiron in Washington at rtiron@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.


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