U.S. Defense Spending To Decline as Program Costs Soar

 - April 8, 2011, 10:45 AM
Development costs far beyond original budgets for aircraft such as a the Global Hawk are presenting a challenge for defense budgets.

The ongoing impasse in Washington over the Fiscal Year 2011 U.S. federal budget means that the Pentagon can spend only at 2010 budget levels and cannot start new programs. Meanwhile, it has submitted a budget request of $553 billion for 2012, compared with $548 billion requested for 2011. But the mood in Congress has swung in favor of serious efforts to cut deficit spending. The years of burgeoning defense budgets in the U.S. appear to have ended abruptly.

The Pentagon has already cut $78 billion from its original spending plan for 2012 to 2016. But the Office of Management and Budget is expected to request billions more in reductions. An analysis by JPMorgan suggested that the procurement budget could decline to $183 billion in FY 2013, from its all-time high of $216 billion in 2010. Secretary of Defense Robert Gates noted last month, “We’ve already cut or curtailed 33 programs in the last couple of years that would have cost $330 billion if completed.”

According to the U.S. Government Accountability Office (GAO), acquisition cost overruns are compounding the problem. It examined 98 major defense programs, and concluded that they were costing $135 billion more in current dollars than originally forecast. The procurement of additional quantities accounted for only half of this increase, with “poor management and execution” responsible for the balance.

The Pentagon disputes the GAO’s methodology, especially the accounting for increases in capability or quantities. But a quick analysis of the GAO’s calculation of research and development costs alone for major aviation programs (in current dollars) reveals some startling increases over the original plan:

* Boeing Apache Block 3, up 43 percent to $1.6 billion;

* Boeing C-130 AMP, up 148 percent to $1.9 billion;

* GA-ASI Reaper, up 95 percent to $806 million;

* GA-ASI Gray Eagle (previously the U.S. Army ER/MP UAV), up 158 percent to $875 million;

* Lockheed Martin F-35, up 40 percent to $53.6 billion;

* Lockheed Martin JASSM, up 45 percent to $1.5 billion;

* Northrop Grumman RQ-4B Global Hawk, up 285 percent to $3.9 billion; and

* Sikorsky CH-53K, up 37 percent to $5.9 billion.