Bloomberg News

Israeli Defenses to Lockheed Planes Win in House Measure

March 11, 2013

House-passed legislation that would ease the effects of automatic budget cuts on troop training and operations also would bolster funds for Israel’s missile defenses and weapons made by General Dynamics Corp. (GD:US) and Lockheed Martin Corp. (LMT:US)

The measure would shift as much as $380 million this year to expand Israel’s missile defenses, $437 million to add seven C-130J transport aircraft from Lockheed, and $1 billion to buy three DDG-51 Aegis class destroyers made by General Dynamics and Huntington Ingalls Industries Inc. (HII:US) instead of two.

The defense provisions were part of a stopgap spending measure the House passed last week to keep the government operating through the Sept. 30 end of the fiscal year. The Senate plans to take up its version of the so-called continuing resolution this week, with Democrats in that chamber seeking to add more spending flexibility for some domestic programs.

Attention has focused on defense provisions in the House measure that would cushion some effects of the $46 billion in across-the-board budget cuts called sequestration by incorporating an updated defense spending bill for this year. The measure would add $10 billion to operations and maintenance while letting the Pentagon shift as much as $4 billion among accounts to cover other contingencies.

Reductions Possible

The measure also would shift defense funds to priorities that members of the House and Senate appropriation committees had agreed on for a fiscal 2013 spending bill that never became law. The winners are spelled out in charts accompanying the spending bill.

Even if the House-passed measure becomes law, the funds for programs favored by the appropriators may be reduced as the Pentagon applies sequestration, which effectively requires a 13 percent cut in each category of weapons over seven months.

Dollars that lawmakers shifted came from numerous accounts, including a reduction of $3.5 billion in the military personnel account. This incorporates planned reductions by 2017 in Army and Marine Corps forces and small cuts in funding for the transfer of troops to new assignments.

Reductions also were taken from weapons and research programs that lawmakers said were behind schedule or otherwise able to absorb revisions.

Israel’s Defense

The money added for Israel’s missile defenses include an extra $211 million for the Iron Dome defense system, praised for defending Israel against Hamas rockets last year, as well as $55.7 million for the system called Israel’s Arrow and $111.4 million for one named David’s Sling.

Lawmakers shifted $605 million to buy 11 additional F/A- 18E/F fighters from Chicago-based Boeing Co. (BA:US) as part of a pending multi-year contract.

They also provided $300 million to buy more Patriot Advanced Capability-3 interceptors from Bethesda, Maryland based Lockheed and $181 million for upgrades the Army says it doesn’t need for the M1A2 tank made by Falls Church, Virginia-based General Dynamics.

An additional $777 million was shifted to the Navy’s Virginia-class submarine program built jointly by Newport News, Virginia-based Huntington Ingalls and General Dynamics as a downpayment for a second vessel in fiscal 2014.

Lawmakers shifted $352 million to buy an additional AN/TPY- 2 mobile missile defense radar and 17 additional naval missile defense Standard Missile 3-IB interceptors from Raytheon Co. (RTN:US) based in Waltham, Massachusetts.

Gun Canceled

As for reductions, lawmakers cut $50 million from funds to modify Patriot missiles, citing a “radar digital processor” delay. Similarly, $100 million was cut from the Army’s $518 million request for the MQ-1 Gray Eagle, a drone made by San Diego-based General Atomics, on the basis of schedule delays.

An additional $25 million was saved when the Army canceled plans for a lightweight .50-caliber machine gun.

The lawmakers made two large reductions to the General Dynamics WIN-T Army ground mobile network program. With a delay in the contract award cited, $346 million cut from the $892 million request for the program’s “Increment 2” version. Also cut was $96 million from the $276 million request for the program’s “Increment 3” version, due to “excess growth.”

The Missile Defense Agency’s $297 million request for Northrop Grumman Corp. (NOC:US)’s experimental missile defense “precision tracking” space system was reduced by $55 million.

F-35 Funds

The Navy’s $1 billion request for the F-35B, the Marine model of Lockheed’s Joint Strike Fighter, was nicked $44 million by lawmakers citing “cost growth” of the engine made by United Technologies Corp. (UTX:US)’s Pratt & Whitney unit.

Also, $30 million was trimmed from the Air Force’s $3.5 billion F-35 procurement request, with lawmakers citing an “unjustified increase” for “ancillary equipment.”

The F-35, the Pentagon’s costliest weapon system, still would get most of the Pentagon’s requested $9.1 billion research and procurement request for 29 aircraft in funding over the next seven months.

Explanation Sought

Separately, lawmakers want the Pentagon to explain why negotiations with Lockheed for past F-35 contracts dragged on a year, according to language in the pending bill.

Contract award delays may have “negative impacts” on the F-35 subcontractor workforce, lawmakers wrote.

Lawmakers called for a report within four months after the spending measure is signed into law that “should examine the causes of contract award delays and the planned corrective actions” to ensure negotiations are completed and awards made in a more timely manner.

The Pentagon and Lockheed took a year to complete negotiations and award in December the final installment of a $3.8 billion, fifth production contract for 32 aircraft.

The service’s $861 million request for the E-2D Hawkeye surveillance aircraft from Falls Church, Virginia-based Northrop was cut $28 million on the basis of “airframe cost growth.”

An Air Force request of $283 million to upgrade Lockheed’s F-22 fighter was trimmed $17.1 million, on the basis of “excess cost growth” for engine modifications.

The House-passed legislation is H.R. 933.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net


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Companies Mentioned

  • GD
    (General Dynamics Corp)
    • $118.92 USD
    • 0.57
    • 0.48%
  • LMT
    (Lockheed Martin Corp)
    • $165.97 USD
    • 2.99
    • 1.8%
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