Congress Slashes AMRAAM Funding due to Reported Production Delays

by: Matthew Potter
June 22, 2011

Category: Business Line, Companies, Congress, Contract Additions, Contract Awards, Department of Defense, Editorial, Events, Federal Budget Process, Military Aviation, production program, Raytheon, Restructuring, Services, U.S. Air Force, U.S. Navy | RSS 2.0

As the operations in Afghanistan and Iraq begin to wind down the U.S. defense budget is already seeing some reductions. The Army especially is adjusting their production numbers for certain systems due to the decline in combat operations lowering requirements for things like M1 tanks and HUMVEE trucks. Congress is also taking upon itself to make selected cuts in other items that they feel are not a priority or are facing issues.

In the House Appropriations Committee (HAC) mark up of the FY12 defense budget one program that saw significant cuts was Raytheon’s (RTN) AMRAAM air-to-air-missile program. The HAC is just one of four committees that produces versions of the defense budget. Once the appropriations and authorization bills are approved by the Senate and House conference committees will meet to create a final version passed by both parts of the legislature.

The reason Congress gave for reducing funding by almost 90 percent to only $63 million was that Raytheon currently is not meeting its delivery schedule. Right now the FY11 production order is delayed and the FY12 one will be even further delayed. Probably neither the U.S. Air Force, Navy and Raytheon will want this budget because they most likely have plans to fix the issue in the next few months and would like to be able to keep the production contracts on time. In the worst case if production does get back on track and there is no money available for the next contract then the line would have to shut down for some time. This would add cost to the program as it would take time and money to get the line going again.

It is not uncommon in these situations where contract awards are delayed beyond the original plan for the money to be moved around by either Congress or internally to the Defense Department to be used to pay for higher priorities.

Just because one of the four committees has made a mark does not mean that it will stand in the final budget. If the Senate or HASC are supportive some of the money may be restored and a compromise would see some amount of funding between the original amount requested and the $50 million provided by the HAC.

Photo from UNC-CFC-USFK’s Flickr photostream.

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