{"id":4374,"date":"2016-01-27T18:07:53","date_gmt":"2016-01-28T00:07:53","guid":{"rendered":"http:\/\/peaceeconomyproject.org\/wordpress\/?p=4374"},"modified":"2016-01-27T18:07:53","modified_gmt":"2016-01-28T00:07:53","slug":"report-defense-acquisition-hits-bottom-but-bounceback-will-be-slow","status":"publish","type":"post","link":"https:\/\/peaceeconomyproject.org\/wordpress\/report-defense-acquisition-hits-bottom-but-bounceback-will-be-slow\/","title":{"rendered":"Report: Defense Acquisition Hits Bottom, but Bounceback Will Be Slow"},"content":{"rendered":"
by Aaron Mehta
\nJan. 27, 2016<\/h6>\n

WASHINGTON \u2014\u00a02015 will likely represent the nadir of Pentagon spending on defense contracts, but industry should not expect to see a rapid doling out of contract obligations in the near future.<\/p>\n

That\u2019s the conclusion of a new report entitled \u201cDefense Acquisition Trends 2015,\u201d released Jan. 27 from the Center for Strategic and International Studies.<\/p>\n

The report \u2014 led by Andrew Hunter and Rhys McCormick, with input from Jesse Ellman, Gregory Sanders, Kaitlyn Johnson and Gabriel Coll \u2014 tracked Pentagon contract obligations from 2000 through 2014 to study the overarching trends in the marketplace. Data for fiscal year 2015 is not yet complete and will be looked at by the authors for a future report.<\/p>\n

Overall, their research found that the share of Pentagon obligations going to defense contracts shrank from 53 percent in 2009 to 46 percent in 2014, as the budget environment forced\u00a0the Department of Defense to look primarily at contracts for potential budget cuts.<\/p>\n

\u201cThe exemption of the Personnel accounts from sequestration cuts, as well as rising health care and retirement costs, are major factors in the relative stability of total net DoD obligations,\u201d the authors found. \u201cThere is no question that the declining pace of overseas operations, as well as budgetary pressures, have pushed DoD to reduce its contract spend.\u201d<\/p>\n

However, the authors believe the Bipartisan Budget Agreement of 2015 represents \u201can inflection point\u201d for defense acquisitions contracts, leaving them \u201cpoised to begin to emerge from this era of budget constraints.\u201d<\/p>\n

\u201cFiscal Year 2015 is likely to be either the bottom of the trough for contract spending or very close to the bottom depending on how quickly funding from the FY2016 budget translates into contract spending,\u201d the authors wrote.<\/p>\n

That is welcome news for industry, but comes with a caveat: \u201cit is almost certain that the recovery of acquisition from the defense draw down and sequestration and its aftermath will be slower and lower than the recovery of the defense budget overall.\u201d<\/p>\n

\u201cFunding levels in the budget agreement and competition for defense funding are such that contract spending is likely to remain at or near 2015 levels for some time and to recover much more slowly than the defense budget overall going forward,\u201d the authors note later in the report.<\/p>\n

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Looking at just the last five years, Army contract obligations have dropped 52 percent, by far the most dramatic of the services as the Pentagon ramped down from a wartime footing. However, other services were not spared \u2014 the Navy (-19 percent), Air Force (-24 percent), and Defense Logistics Agency (-22 percent) all declined, although obligations for the Missile Defense Agency (-1 percent) were relatively stable.<\/p>\n

The report also notes a \u201ctrough\u201d in new developments over the last five years for the services, but in particular for the Army, providing an \u201cunusual opportunity\u201d to reevaluate its strategy for future acquisition programs.<\/p>\n

\u201cAs spending on war materiel continues to be replaced by funding for next-generation priorities, the Army has little to no developmental money already committed to projects,\u201d the authors write. \u201cThe Army thus has an opportunity to take a step back, draw lessons from the wars in Iraq and Afghanistan, evaluate potential future threats and missions, and direct their requirements and developmental priorities accordingly.\u201d<\/p>\n

The so-called \u201cBig 5\u201d defense contractors \u2014 Lockheed Martin, Boeing, Northrop Grumman, Raytheon, and General Dynamics \u2014 have seen their share of overall defense contracts decline significantly, from 63 percent in 2006 to 41 percent in 2014, the lowest share in the 2000\u20132014 period looked at by the authors. The report puts the blame for that trend on the number of large development programs that have been either canceled or delayed in recent years.<\/p>\n<\/div>\n

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\u201cWith the Air Force recently issuing, or about to issue, large development contracts for major\u00a0weapons systems such as the LRS-B, this trend within the Air Force should reverse in the next few years,\u201d the authors found. \u201cThe Navy will likely see a similar reversal once development work ramps up on programs like the Ohio-class replacement, but on a longer timeline due to many of those programs being pushed back during the current budget drawdown.<\/p>\n

“For the Army, however, it is uncertain when this trend will begin to reverse, as the service does not currently have nearly as many large development programs for major weapons systems ready to begin over the next several years.\u201d<\/p>\n

Despite the decline among the Big 5, and despite a slew of DoD initiatives to increase competition for big military contracts, the authors found that \u201cat a macro level, DoD\u2019s policy initiatives have been unable to move the needle on competition.\u201d<\/p>\n

However, the share of defense contract obligations to small vendors hit the highest level since at least the year 2000, going from 16 percent in 2013 to 19 percent in 2014. That growth came primarily from the services and electronics & communications realms, with small contractors now making up the majority of the latter group.<\/p>\n

You can read the original article here<\/a>.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

by Aaron Mehta Jan. 27, 2016 WASHINGTON \u2014\u00a02015 will likely represent the nadir of Pentagon spending on defense contracts, but industry should not expect to see a rapid doling out of contract obligations in the near future. That\u2019s the conclusion of a new report entitled \u201cDefense Acquisition Trends 2015,\u201d released Jan. 27 from the Center […]<\/p>\n","protected":false},"author":1,"featured_media":1524,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"nf_dc_page":"","om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[8],"tags":[],"class_list":["post-4374","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"acf":[],"aioseo_notices":[],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/peaceeconomyproject.org\/wordpress\/wp-content\/uploads\/2013\/05\/borowitz-pentagon-465.jpg?fit=465%2C322&ssl=1","jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/peaceeconomyproject.org\/wordpress\/wp-json\/wp\/v2\/posts\/4374","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/peaceeconomyproject.org\/wordpress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/peaceeconomyproject.org\/wordpress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/peaceeconomyproject.org\/wordpress\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/peaceeconomyproject.org\/wordpress\/wp-json\/wp\/v2\/comments?post=4374"}],"version-history":[{"count":4,"href":"https:\/\/peaceeconomyproject.org\/wordpress\/wp-json\/wp\/v2\/posts\/4374\/revisions"}],"predecessor-version":[{"id":4380,"href":"https:\/\/peaceeconomyproject.org\/wordpress\/wp-json\/wp\/v2\/posts\/4374\/revisions\/4380"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/peaceeconomyproject.org\/wordpress\/wp-json\/wp\/v2\/media\/1524"}],"wp:attachment":[{"href":"https:\/\/peaceeconomyproject.org\/wordpress\/wp-json\/wp\/v2\/media?parent=4374"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/peaceeconomyproject.org\/wordpress\/wp-json\/wp\/v2\/categories?post=4374"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/peaceeconomyproject.org\/wordpress\/wp-json\/wp\/v2\/tags?post=4374"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}