Four Important Defense Budget Decisions

Yesterday, U.S. Defense Secretary Robert Gates unveiled the much-awaited fiscal year 2010 defense budget proposal.

In his announcement, Gates emphasized that he reached his final decisions after many hours of consultations with the military and civilian leadership of his department. That he also consulted closely with the president, but received no direction or guidance from outside his department on individual program decisions.

He made it clear that he plans to orient the U.S. military toward winning unconventional conflicts such as the one in Afghanistan—and taking into account the lessons learned there—rather than on concentrating on war with major powers.

Gates said that his decisions have three principal objectives:

First, to reaffirm our commitment to take care of the all-volunteer force, which, in my view represents America’s greatest strategic asset.

Second, we must rebalance this department’s programs in order to institutionalize and enhance our capabilities to fight the wars we are in today and the scenarios we are most likely to face in the years ahead, while at the same time providing a hedge against other risks and contingencies.

Third, in order to do this, we must reform how and what we buy, meaning a fundamental overhaul of our approach to procurement, acquisition, and contracting.

There has been ample reaction to Gate’s defense budget, both positive and negative, as expected, and the political battles have already started and are likely to be intense, especially on the part of politicians whose states or districts are most affected by some of the cuts.

According to Reuters:

Lawmakers fired back at Gates on Monday and Tuesday, criticizing his proposed cuts to missile defense, the Lockheed Martin Corp F-22 fighter jet program, and Boeing Co’s Airborne Laser, a modified 747 jumbo jet designed to destroy enemy missiles shortly after they are launched.

And there are cuts—some drastic ones—albeit Gates’ proposed 2010 defense budget of $534 billion is up 4% from last year.

As I have been focusing on several aircraft programs in past posts, I will quote Gates’ remarks on those particular programs, with links to previous relevant posts.

On the multinational Joint Strike Fighter (F-35 Lightning II) program:

(See here, here and here)

To sustain U.S. air superiority, I am committed to building a fifth generation tactical fighter capability that can be produced in quantity at sustainable cost. Therefore, I will recommend increasing the buy of the F-35 Joint Strike Fighter from the 14 aircraft bought in FY09 to 30 in FY10, with corresponding funding increases from $6.8 billion to $11.2 billion. We would plan to buy 513 F-35s over the five-year defense plan, and, ultimately, plan to buy 2,443. For naval aviation, we will buy 31 FA-18s in FY10.

This is a big boost for the Lockheed Martin Corporation, head of the JSF partnership. This decision pretty much secures the program’s future, will help keep costs down for partner nations and as such will certainly be a factor in decisions by partner nations such as the Netherlands, Denmark, etc. to continue their partnerships in the program and in future JSF procurements.

On the Lockheed Martin F-22 Raptor fighter program:

(See here)

We will end production of the F-22 fighter at 187 – representing 183 planes plus four recommended for inclusion in the FY 2009 supplemental.

The Air Force had wanted 60 additional F-22′s.

This was a much feared decision, and one that prompted an intense public relations effort claiming that, if the program was canceled, nearly 100,000 aerospace jobs would be lost and it would come at a cost of more than $12 billion in national economy activity.

The International Association of Machinists and Aerospace Workers denounced the decision as follows: “We simply cannot afford to cannibalize our national defense to repair damage caused by reckless financial institutions and greed-crazed corporate executives.”

On the much-criticized—even by the President himself— VH-71 presidential helicopter:

(See here)

First, I recommend that we terminate the VH-71 presidential helicopter:

This program was originally designed to provide 23 helicopters to support the president at a cost of $6.5 billion. Today, the program is estimated to cost over $13 billion, has fallen six years behind schedule, and runs the risk of not delivering the requested capability.

Some have suggested that we should adjust the program by buying only the lower capability “increment one” option. I believe this is neither advisable nor affordable. Increment One helicopters do not meet requirements and are estimated to have only a five- to 10-year useful life. This compares to the current VH-3 presidential helicopters that are 30 to 40 years old.

And finally, on the controversial aerial re-fueling tanker:

(See here)

To replace the Air Force’s aging tanker fleet, we will maintain the KC-X aerial re-fueling tanker schedule and funding, with the intent to solicit bids this summer.

As you’ll remember, after strong protests by by Boeing, the huge, $35 billion air refueling tanker contract that was originally awarded to the international Northrop Grumman-EADS team was withdrawn last July and was to be re-competed. (EADS is the parent company of European aircraft manufacturer Airbus)

Some lawmakers had suggested that the contract be split between the two teams.

U.S. Defense Secretary Robert Gates nixed the idea: “I think it’s bad public policy and I think it’s bad acquisition policy,” Gates said, “It would require the Air force to maintain two different logistics facilities – two different logistics trains – two different kinds of training” resulting in much higher costs.

This is how the Secretary concluded his budget proposal speech:

So these are the principal recommendations I will make to the president. There are a number of others that I have not mentioned, including classified programs. This is a reform budget, reflecting lessons learned in Iraq and Afghanistan yet also addressing the range of other potential threats around the world, now and in the future. I know that in the coming weeks we will hear a great deal about threats, and risk and danger – to our country and to our men and women in uniform – associated with different budget choices. Some will say I am too focused on the wars we are in and not enough on future threats. The allocation of dollars in this budget definitely belies that claim. But, it is important to remember that every defense dollar spent to over-insure against a remote or diminishing risk – or, in effect, to “run up the score” in a capability where the United States is already dominant – is a dollar not available to take care of our people, reset the force, win the wars we are in, and improve capabilities in areas where we are underinvested and potentially vulnerable.

That is a risk I will not take.

As I told the Congress in January, this budget presents an opportunity – one of those rare chances to match virtue to necessity; to critically and ruthlessly separate appetites from real requirements – those things that are desirable in a perfect world from those things that are truly needed in light of the threats America faces and the missions we are likely to undertake in the years ahead. An opportunity to truly reform the way we do business.

I will close by noting that it is one thing to speak generally about the need for budget discipline and acquisition and contract reform. It is quite another to make tough choices about specific systems and defense priorities based solely on the national interest and then stick to those decisions over time. To do this, the president and I look forward to working with the Congress, industry, and many others to accomplish what is in the best interest of our nation as a whole.

Thank you.