Bloomberg News

Lockheed F-35 Comes Out Ahead in Spending Bill’s Defense Accord

January 14, 2014

Tanks and submarines being built by General Dynamics Corp. (GD:US) and the F-35 Joint Strike Fighter made by Lockheed Martin Corp. (LMT:US) came out ahead in military provisions of the omnibus U.S. spending bill.

The $1.01 trillion legislation crafted by House and Senate lawmakers would allot $487 billion for the Pentagon’s base spending and $85 billion for war operations, primarily in Afghanistan, for the current fiscal year ending Sept. 30. The Pentagon would receive about $5.7 billion more than it requested for warfare expenses.

Appropriators also agreed to $9.8 billion for military construction and $11.2 billion for the National Nuclear Security Administration, which maintains the safety, security, and readiness of the nation’s nuclear weapons stockpile.

While the congressional budget agreement reached last month eased the spending restrictions known as sequestration, appropriators still had to spread the pain of about $25 billion in cuts from previously planned spending for fiscal 2014. Procurement spending was cut $5.3 billion to $92.8 billion.

Air Force accounts were cut $2.1 billion, to $32.1 billion; Army accounts by $1.6 billion, to $14.3 billion; and Navy accounts by $1.3 billion, to $42 billion. Procurement for agencies that serve the entire Pentagon was reduced by $300 million to $4.2 billion.

One of the biggest procurement reductions was for a category of “other” Army equipment that pays for radios, trucks, and ground combat equipment such as bridging gear. It was cut $1.53 billion, to $4.9 billion.

The bill would provide $63 billion for research and development, compared with the $67.3 billion requested, $128.8 billion for personnel, down from the $130.4 billion sought; and $159.9 billion for operations and maintenance, short of the $175.1 billion requested.

Here are some highlights of the defense spending section of the bill, which will be brought to the floor as an amendment to a pending measure, H.R. 3547:

Winning Funds

Lockheed’s F-35: The bill provides funding for all 29 F-35s requested by the Pentagon. It also permits the Pentagon to start advance hardware purchases for 39 of the next 42 fighters that the Pentagon plans to buy in fiscal 2015. Senate appropriators had voted in August to fund parts purchases for no more than 36 planes.

The plane from Bethesda, Maryland-based Lockheed is the military’s costliest weapons program, at a projected price of $391.2 billion for a fleet of 2,443 aircraft, a 68 percent increase from the projection in 2001, measured in constant dollars.

General Dynamics Tanks: The measure would provide $90 million to continue upgrades of the M1A2 tank that Falls Church, Virginia-based General Dynamics performs in Ohio, a program the Pentagon wanted to suspend.

Submarines (HII:US): Congress added about $1.2 billion to the Pentagon’s request for procurement of the Virginia-class submarine built by General Dynamics and Newport News, Virginia-based Huntington Ingalls Industries Inc. The additional money is intended to ensure that the contractors stay on schedule to build two submarines a year.

Stryker Vehicles: General Dynamics would get an increase of $45 million over the Pentagon request for the procurement of Stryker combat vehicles, bringing the total to about $419 million.

Littoral Combat Ship: Appropriators cut about $34 million from research and development of the Navy’s Littoral Combat Ship. Otherwise, the vessel designed for missions in shallow coastal waters came through unscathed, with $1.8 billion for the acquisition of four LCS ships in two versions, one made by a group led by Lockheed and the other by Henderson, Australia-based Austal Ltd. (ASB)

The program to build a total of 52 ships has faced an expanding list of questions about their manning, mission, firepower, defenses and survivability even as projected construction costs have soared.

Boeing Super Hornets: The Navy would get $75 million in advance procurement money for 22 F/A-18E/F Super Hornet fighter jets made by Chicago-based Boeing Co. (BA:US) as part of a multiyear procurement. Neither the advance funds nor the procurement authority was requested by the Pentagon.

Iron Dome: Negotiators boosted by $173 million funding for Israeli missile defense programs, including an extra $15 million for the Iron Dome system built in Israel by Rafael Advanced Defense Systems Ltd. The Pentagon’s original request was for $220 million.

Losing Out

Boeing Sensors: Boeing took a hit of $57.3 million for procurement of the aerial common sensor program. The program to build Army surveillance aircraft, known as the Enhanced Medium Altitude Reconnaissance and Surveillance System, or EMARSS, would receive $84.7 million after the cut from the Pentagon’s request.

Tactical Network: Procurement of the WIN-T soldier tactical network, an Army communications system from General Dynamics, was reduced by $204 million to $769.4 million, as lawmakers cited delays.

Egypt Aid

The measure gives the Obama administration backing to resume military and economic aid to Egypt, some of which had been put on hold last year after the military toppled democratically elected President Mohamed Mursi.

U.S. law required suspension of aid to countries where the government is deposed in a coup d’etat. The administration declined to describe Mursi’s overthrow as a coup, even as it cut off some aid and said it would “reassess” assistance to Egypt.

Under the new spending bill, as much as $1.3 billion in military aid, the bulk of annual U.S. assistance, could be provided if Secretary of State John Kerry certifies to Congress that the Egyptian government has held a constitutional referendum, has conducted presidential and parliamentary elections, and “is taking steps to support a democratic transition in Egypt.”

The government is now holding a two-day referendum on a new constitution, with elections due to be held later this year. The constitution enshrines the military’s authority, and the government has labeled the Muslim Brotherhood that backed Mursi as a terrorist organization.

Policy Provisions

Sexual Assaults: The omnibus spending bill incorporates several provisions on the handling of sexual assaults in the military, including $156.5 million for services of the Sexual Assault and Prevention Office and $25 million to implement a sexual-assault special victims program.

Disabled veterans: It would amend a provision in last month’s budget agreement, Public Law 113-67, to exempt medically retired personnel and survivor benefit plan recipients from having their cost-of-living benefits reduced while they’re younger than retirement age.

To contact the reporters on this story: Roxana Tiron in Washington at rtiron@bloomberg.net; Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: Katherine Rizzo at krizzo5@bloomberg.net


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Companies Mentioned

  • GD
    (General Dynamics Corp)
    • $131.31 USD
    • 0.97
    • 0.74%
  • LMT
    (Lockheed Martin Corp)
    • $180.88 USD
    • 0.21
    • 0.12%
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