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Fiscal Year 2014 Defense Budget Snapshot

The Presidential Administrations are required by law to submit their budget to Congress for consideration for the next Fiscal Year on the first Tuesday of February. Yesterday, about 2 months late, the Obama Administration submitted their budget for Fiscal Year 2014 (FY14). One major part that will be poured over is the defense budget.

Setting up a quick and early fight with Congress the about $600 billion request does not include the mandated $50 billion odd sequestration cuts. This means that Obama is assuming some grand deal to eliminate that requirement. Based on this year’s efforts that may be difficult as it would require major compromise by both the Democratic Senate and the Republican House. Of the request $88 billion will fund Afghanistan and the remaining $615 the rest of the defense services and should also cover the Department of Energy’s nuclear weapon related costs.

overall the defense budget without sequestration goes down slightly from his previous one but with those cuts included it would be close to a 14% reduction.

Lockheed Martin (LMT) sees the continuation of the controversial F-35 at planned production rates and overall investment which may cause tension with legislators. This huge program is over $8 billion in total funding requirements and will include 29 more of the advanced aircraft for the U.S. military and allied nations. The request also pays for continued development of the oft delayed system and reportedly put it on the path for production rates of 100 a year by the end of this decade.

In another area that will cause heartburn with both sides of Congress the defense budget includes another round of Base Realignment and Closure (BRAC). This was something that Obama said would not happen in the foreseeable future during his campaign last year. BRAC leads to base closings and movement of people and jobs out of Congressional districts which in some case leads to major effects on local economies. There have been multiple BRAC rounds since 1991 with the most recent in the 2005-2006 time frame. Getting BRAC through Congress may be difficult.

At this point and based on recent history it is hard to say how much of this budget will become final law. There has not been a proper budget for several years. There could be a repeat of this year with a Continuing Resolution funding all of 2014. Parts of Obama’s proposals will not be accepted but the majority of funding decisions will. Some programs will be cut, realigned or eliminated and some will get more funding. Right now it is hard to predict especially with sequestration what the final end product will be.

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Boeing to Continue C-17 Maintenance

The C-17 strategic transport aircraft made by Boeing (BA0 is one of the key systems supporting U.S. and Allied efforts in Iraq and Afghanistan. The U.S. relies on air lift from both military and contractor support aircraft to provide much of the supply to its forces especially in land locked Afghanistan. While a great deal of supplies flow though Pakistan on trucks that supply line has proven vulnerable to attack. The U.S. possession of a large number of transport aircraft like the C-17 and C-5 help avoid that vulnerability.

The U.S. is also winding down production of this system leading ultimately to the closure of the Long Beach, CA plant where they are made. Some Foreign Military Sales (FMS) efforts continue for countries like India, the U.A.E. and others but without significant new orders the facility which traces its history back through McDonnell and Douglas aircraft corporations will ultimately close.

Boeing, though, will continue to support the aircraft through the recent award of a contract to conduct maintenance and modifications for another ten years. The value of the award which is just a continuation of existing contracts is about $11.75 billion if all options are awarded. This makes it one of the largest contracts recently awarded by the U.S. military.

The U.S. Air Force as part of in-sourcing and cost reduction initiatives has looked at moving this kind of work back into their facilities which is a change from the trend of the last twenty years. In the Nineties as part of the Base Realignment and Closure (BRAC) work a great deal of the large, aviation depots run by the military services were closed and the work turned over to contractors. This meant contracts like this one to either the OEM or third party Maintenance, Repair & Overhaul (MRO) companies who would continue the support of fielded aircraft.

This award indicates that the Air Force’s analysis indicates that some contractor maintenance will still be needed. The contract calls for Boeing support at the Long Beach facility and at all bases where the C-17 is deployed. If the plant is closed once production ends Boeing could use one of its existing other facilities to handle the work on the C-17.

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Another BRAC Contract to Help Navy Move

In the last round of the Base Realignment and Closing (BRAC) for the U.S. Defense Department one of the goals was the consolidation of research, test and training centers. This work has proceeded over the last four years with a goal of most of it being completed by 2012. As part of the decisions the Navy is moving their Integrated Combat Systems Test Facility (ICSTF) from California to the Naval Surface Warfare Center (NSWC) in Dahlgren, VA.

The ICSTF has been located at the Point Loma facility near San Diego for over thirty years. Its role is to provide certification of software and programs that control the weapon systems on ships. It is part of the Navy’s Space and Naval Warfare Systems Command (SPAWARS). SPAWARS itself was one of the original BRAC changes moving from the Arlington, VA area to San Diego in the Nineties.

To support the various parts of BRAC many different contracts have been issued to a number of contractors who aid in the transfer of everything from personnel, equipment, manage IT handover and housekeeping services. To support the move of the ICSTF DRS Technologies was given a contract by the Navy worth up to $25 million.

Under the contract DRS will provide support for general activities including the laboratory transition and set up.

BRAC’s long term goal is to save the Department money through creating efficiencies and reducing overhead. As always with these types of plans there is an upfront cost that must be paid. These kind of contracts are just one part of it as the bigger cost will be either relocating or replacing the employees and the possible construction required to build or rehabilitate buildings.

When BRAC is over there should be a smaller, more focused U.S. defense establishment.

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Another Contract To Support BRAC Activity Awarded, This Time To STG, Inc.

The last round of Base Realignment and Closure (BRAC) moves required many different organizations and commands to consolidate. The Pentagon plans to move similar schools and test centers to joint locations as well as close some smaller bases and realign facilities. One such move is the plan to close Fort Monroe near Norfolk, VA and move commands and schools to nearby Fort Eustis. One such Army unit being affected is the Training and Doctrine Command (TRADOC) headquarters.

STG, Inc. (STG) was awarded a contract worth about $19 million to provide engineering services for this move. STG will be responsible for making sure that the TRADOC HQ’s IT and computer assets are moved, established and working when the move to the new base is complete. The contract will require that STG also ensure the existing systems are working so TRADOC can continue their mission while the move is going on.

STG has performed similar work for other government agencies and this give’s the Army confidence that they will complete this task on time and budget.

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BRAC Work Continues At Fort Sam Houston For Eaton

The last round of the Base Realignment and Closure (BRAC) act in the United States moved to consolidate development and training centers. One base that is gaining from this policy is Fort Sam Houston in San Antonio, TX. Because it was decided to move most of the military’s medical training to this location much work is being done to expand the facilities there. Eaton Corporation received a further contract addition worth $8 million.

The contract is for electrical services and parts to support the construction of the required facilities. One key component of this is a 425 bed hospital that Eaton Corp. has been working on.

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BRAC Support Nets CACI A Contract

The last round of the Base Realignment and Closure (BRAC) for the U.S. military saw a focus on concentrating similar organizations and efforts. These include combining schools and research facilities for all of the services if there is some synergy. An example is moving medical training for the Army, Navy and Air Force to San Antonia, TX where the Air Force originally focused their training. A similar move is the transfer of network and information operations from several Army bases to the Aberdeen Proving Ground (APG) in Maryland.

In order to coordinate and support these moves the Army gave CACI International (CACI) a contract that could be worth over $80 million if all options are exercised. The two and a half year contract primarily pays for the planning and conduct of the movement of the large number of IT and computer equipment necessitated by the move. These include test sets and equipment for the development and testing of new equipment.

Similar contracts have been awarded to other companies to support similar moves and consolidations. As can be imagined the logistics of all this are quite involved and the use of contractors allows the short term ramp up in personnel and capability required.

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Uncertainty About The Defense Budget In Ohio

Dayton and Columbus, Ohio are near Wright-Patterson Air Force Base (WPAFB). This is the location of the U.S. Air Force’s Material Command (AFMC) which oversees all acquisition for that service. As such a large number of contractors small and large have work and facilities there as they provide support to AFMC and the various research labs at WPAFB.

Two recent articles from Dayton’s media reflect the concerns people have about Obama’s future defense plans.

First WHIO reports that MacAulay-Brown, Inc. a local company has won two more contracts and may grow so much it will no longer be considered a small business by the U.S. Department of Defense. There are benefits in being in that category when it comes to bidding on contracts but a larger company is capable of winning bigger contracts with more value and work.

Second is the Dayton Daily News which writes that many companies are concerned with the plans to reduce contractor work forces and add government employees. Nobody is usre how that will work and if the jobs will go away in Dayton and be added somewhere else. Will all the current contractors involved in acquisition the prime work at WPAFB just be absorbed into the government or lose their jobs?

This kind of situation will be faced in communities across the U.S. large and small as the policy is implemented. The direct economic effect of all this could be highly negative if contractors are replaced by government people in D.C. or another state. It might not as the contract work force may just transition to civil service. The key economic affect of these jobs is the good salaries and the spending they generate. If those go away due to program cuts or workforce restructuring the effect on a community can be devastating. Look at what Owego, NY is now facing due to the end of the VH-71 program. This could be mirrored across the country in the months to come.

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Maryland is Tenth in Defense Spending

The State of Maryland put out is report showing that the state is tenth in receiving Federal defense funds.  WTOP.com writes about it here.  Maryland is of course helped by the large number of facilities in the state as the Army has Fort Meade, Fort Detrick and Aberdeen Proving Ground.  The Navy obviously has the Naval Academy as well as Patuxent River Naval Air Station.  The Air Force operates Andrews Air Force Base home of Air Force One for Presidential Transport. Read more

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BRAC money flows to Huntsville

B.L. Harbert International won the contract to build two new building complexes at Redstone Arsenal (RSA) as part of the last round of BRAC moves. See a press release here. BRAC was good to RSA as it moved the headquarters of the US Army Material Command (AMC) and the US Army Security Assistance Command (USACA) to the base. AMC is responsible for buying, fielding and supporting most of the Army’s material. USACA helps transfer US weapons to foreign countries. The $100 M plus contract will build the necessary buildings to house the commands.

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BRAC moves cause BAE to plan expansion in Michigan

This article describes how BAE plans to expand its facilities and hire more workers at its Land & Armaments group. Under the most recent BRAC the Army will move its unmanned vehicles program offices to Warren, MI from Huntsville, AL. This leads BAE to believe that work will be coming with them. The state of Michigan has also assisted BAE by providing tax credits and training funds for the expansion. The Michigan economy has taken many recent hits with the decline of the US auto industry.

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AMCOM worries about local workforce

According to this article the Commanding General of the Army’s Aviation and Missile Command (AMCOM) is worried about the potential supply of workers in the Huntsville, AL area in the future. The last round of BRAC moved two major commands to the Redstone Arsenal in Huntsville. Many of the people working there will not move for a variety of reasons. Major General Myles is concerned that the vacancies will suck people out of the existing Aviation and Missile commands to work at the Army Material Command and Missile Defense Agency. On top of that it is predicted for every government job moved at least one contractor job will be created. These workers have to come from somewhere and MG Myles hopes that local government, industry and higher education will train them without relying on subsidies from the Army. As in the past people will move to Huntsville, like your humble correspondent, to get these jobs, but that may not be enough.

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Clark County, OH looks to Air Force to grow economy

This article describes the effect that Wright Patterson Air Force Base has on the local economy. As more contracts are placed for SETA support and R&D programs they spill over into the regular community. The area has certainly relied on the AFB in the past to support it, and looks forward to continuing to grow its economy based on the base’s activity. Read more

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BRAC process continues

This article describes the start of construction of a new facility in Charlottesville, VA to handle a DoD group moving from DC. This is all part of the last round of BRAC. One of the key parts of that round was to consolidate like agencies and facilities near each other. Here an intelligence group is moving to be near another one. It also probably fulfills another goal which is to move people from leased facilities into government ones. Either way it adds a large construction contract and 1000 jobs to a rather nice part of VA.

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Fort Meade to expand due to BRAC

The Army awarded a $370 M contract to build a facility at Fort Meade, MD to accommodate Defense Information Systems Agency (DISA) employees moving from the Washington DC area due to the last round of BRAC. See an article here in The Capital. Hensel-Phelps Construction won the contract. Base Realignment and Closure (BRAC) is the process on how the DoD closes bases and moves their personnel around. The major decision of the last round was to move DoD and Service offices from leased space in the DC area onto military bases. Because of this large numbers of people will be moved to Fort Meade in MD and Fort Belvoir in VA.

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