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Thursday, Dec 7, 2023

Region to Benefit as DoD Budget Finalized

DEFENSE: Outgoing Congress Acts to Firm Up Spending Plan

The 2023 Pentagon budget is in place after three months of delay, offering clarity to San Diego defense contractors and military families alike.

The budget came together with the outgoing, Democratic-majority Congress passing two bills at the end of 2022: an $817 billion defense policy bill and a $1.7 trillion federal spending bill. President Biden signed both over the holidays.

The local impacts are wide ranging. Among other things, the budget calls for General Dynamics NASSCO to build one U.S. Navy ship at its bayfront facility south of downtown. The budget funds several advanced F-35 fighter aircraft with electronics made in San Diego. It features pay increases for sailors and Marines trying to live in inflationary times in high-priced Southern California.

Significantly, defense contractors can start on new programs, something they could not do under stopgap spending resolutions that covered the first three months of the fiscal year, which began Oct. 1.

President Biden signed the National Defense Authorization Act (NDAA) on Dec. 23. The NDAA made headlines because it repealed the mandate that U.S. military members be vaccinated against COVID-19.

Six days later, he signed a $1.7 trillion omnibus spending bill, which including $858 billion in defense funding and $800 billion in non-defense spending.

The latter bill included $9.3 billion for the Ukraine Security Assistance Initiative, according to a summary from the House Appropriations Committee.

Pay Raise Funded

San Diego is home to approximately 151,000 people on the Defense Department payroll, including 64,000 Navy personnel in uniform and 46,000 Marines in uniform. The figures come from the San Diego Military Advisory Council (SDMAC).

The spending bill signed Dec. 29 increases military pay by 4.6%.

In response to higher costs for rent and food, the bill increases the Basic Allowance for Housing for service members by 11%, and the Basic Allowance for Subsistence by 11%, according to the summary from the House Appropriations Committee.

Shipbuilding and Repair Funded

Under the heading of Sea Power, the NDAA authorizes the procurement of 11 battle force ships as part of $32.6 billion authorized for Navy shipbuilding. It is an increase of $4.7 billion. The spending bill specifies a similar number: $31.96 billion to procure eleven Navy ships, an amount $4 billion above the budget request.

General Dynamics NASSCO’s Barrio Logan yard will build one of the 11 ships: a John Lewis-class fleet replenishment oiler. The ship meets aircraft carriers and their companion ships in mid-ocean to deliver fuel and other supplies. John Lewis-class ships, named for the civil rights leader, can carry 162,000 barrels of oil and are capable of traveling at 20 knots (23 mph). Each is 742 feet long. With a full load, each displaces 49,850 metric tons.

In addition, the policy bill authorizes multiyear or block buy contracts for the procurement of up to eight John Lewis-class oilers, according to a summary of the legislation by the Senate Armed Services Committee.

Funds for new, Gerald Ford-class aircraft carriers are in the budget. General Atomics produces a new style of equipment to launch and recover aircraft from the new carriers.

Also funded is extensive ship repair and maintenance to be completed by NASSCO, BAE Systems San Diego Ship Repair, Continental Maritime of San Diego, Huntington Ingalls Industries and Pacific Ship Repair and Fabrication. More than 150 companies in San Diego focus on some aspect of ship repair.

Aviation Not Forgotten

San Diego can expect more aviation related work in 2023—including a small piece of the most expensive weapons program in history, the fifth-generation F-35 Lightning II fighter from Lockheed Martin (NYSE: LMT).

Northrop Grumman (NYSE: NOC) manufactures electronics for the highly advanced aircraft in the northern suburbs of San Diego. Privately held Cubic Corp. is a second company that makes electronics for the F-35.

The just-signed spending bill includes $8.5 billion, funding the request of 61 F-35 aircraft. It provides funding to cover a shortfall in the most recent production contract that would otherwise put 19 aircraft in fiscal year 2023 and prior years at risk, according to the House Appropriations Committee summary.

The policy bill authorizes funding for 16 F-35C aircraft (the U.S. Navy version built for aircraft carrier service) and 15 F-35B aircraft (the U.S. Marine Corps version with short takeoff and vertical landing capability), according to the summary from the Senate Armed Services Committee.

The NDAA authorizes funding for three Triton aircraft, according to the same source. The Triton is a remotely piloted U.S. Navy aircraft that conducts intelligence, surveillance and reconnaissance. Northrop Grumman bases its Triton program in Rancho Bernardo.

The spending bill provides $350 million for 12 Gray Eagle Extended Range aircraft (also called MQ-1C) for the Army National Guard, according to the House Appropriations Committee summary. Gray Eagle is a remotely operated aircraft from the Predator family, built by General Atomics Aeronautical Systems Inc. in Poway.

Construction Funded

A separate part of the omnibus spending bill funds military construction. A total of $19 billion is set aside, an amount $6.8 billion greater than the president’s budget request.

A small sliver of that pie will go to companies based in San Diego County, which provide a variety of construction services at bases within the county, in various parts of California, nationwide and even internationally. In 2022, the RQ-AECOM Joint Venture received work on construction projects at the U.S. Navy base at Guantanamo Bay, Cuba.

The policy bill provides for $94.8 million in military construction at Marine Corps Recruit Depot San Diego and $151.3 million for military construction at Naval Base San Diego, according to the office of Rep. Scott Peters, D-San Diego.

Separate from the defense budget, the omnibus spending bill includes “significant boosts” in funding for cybersecurity, according to the online news source Fedscoop. This includes funding for the Cybersecurity and Infrastructure Security Agency as well as the National Institute of Standards and Technology.


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