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All eyes on the DOD budget

We will be carefully combing through the Bush administration's fiscal 2007 budget proposal for the Defense Department when the details are released in about a month.

The administration's budget, of course, never gets fully enacted, but the budget is always an excellent indication of priorities -- and there has been something of a shift in priorities in the Defense Department in recent years.

Here is a story that ran in yesterday's NYT [ITAL is mine, not theirs]:

Contractors Are Warned: Cuts Coming for Weapons [NYT, 12.27.2005]

Everyone at the conference was hanging on the words of Ryan Henry, and it was not difficult to figure out why.

Mr. Henry, a top Pentagon planning official, was giving an early glimpse of the Defense Department's priorities over the next four years to an industry gathering in New York of executives of Lockheed Martin, Boeing, General Dynamics and other leading military contractors.

For his listeners, there was one question hanging in the air: What will the impact be on me - and on my company?

Some of the answers were already clear, even if there were few details. Mr. Henry, whose official title is principal deputy under secretary of defense for policy, said the Pentagon's spending binge of the last several years - its budget has increased 41 percent since 9/11 - cannot be sustained. "We can't do everything we want to do."

It was a message that the industry has been bracing for. The Pentagon budget, James F. Albaugh, chief executive of Boeing's $30 billion military division, said at the conference, has "been a great ride for the last five years." But, he added: "We will see a flattening of the defense budget. We all know it is coming."

The issue, however, goes beyond tightening budgets. Mr. Henry told the contractors that the Pentagon was redefining the strategic threats facing the United States. No longer are rival nations the primary threat - a type of warfare that calls for naval destroyers and fighter jets. Today the country is facing international networks of terrorists, and the weapons needed are often more technologically advanced, flexible and innovative.

But one big question, analysts say, is whether the Pentagon and Congress have the desire, and will, to kill weapons programs where hundreds of billions of dollars - as well as the careers of powerful generals and admirals - are invested.

In the years ahead, Mr. Henry said, the Pentagon would like to move "away from massive force." This would mean, for instance, that fewer fighter jets would be needed because the upcoming Joint Strike Fighter F-35 has more capabilities than the existing F-16's.


Yes, 9/11 changed everything.

Of course, we will be looking for how the shifts impact IT spending.

Stay tuned.

Posted by Christopher Dorobek on Dec 28, 2005 at 12:15 PM


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