San Diego Business Journal The final piece of the 2022 Pentagon budget fell into place in mid-March when Congress passed and President Biden signed an omnibus federal spending bill, five and one half months into the federal fiscal year.
 
Defense contractors welcomed the news as it gives them more flexibility and visibility, moving them out from under stopgap spending bills and letting them begin new projects.


The omnibus bill sets Pentagon spending at $782 billion and got its final signature on March 15.


In San Diego, the bill appropriates more than $2 billion for General Dynamics NASSCO to build three auxiliary ships for the U.S. Navy: two fleet oilers and one expeditionary sea base.


The bill funds the seventh and eighth fleet oilers of the John Lewis class, at $1.46 billion. Also included is the sixth expeditionary sea base at $577 million; with its flight deck, such as ship can support a variety of Navy missions.


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Derry Pence President Port of San Diego Ship Repair Association

In addition to building new ships, NASSCO is part of a wider community of waterfront businesses, primarily in the South Bay, that repair and maintain existing Navy ships.


“There will be plenty of work out there,” said Derry Pence, president of the Port of San Diego Ship Repair Association.


Continuing Resolutions


In recent years Congress has preferred to pass stopgap spending bills for portions of the year. Dubbed continuing resolutions, these leave the defense community with fewer options than a full-year budget.


“NASSCO feels the same impacts as the rest of the industry,” said Brent Hershman, director of business development and government relations with General Dynamics NASSCO. “CRs [continuing resolutions] cap funding levels at those of the previous year and can lead to delays in new contract starts, primarily on the acquisition side.


“Capped spending can also reduce DoD’s overall buying power of the current year’s CR budget due to inflation impacts on spending.”


A full year of continuing resolutions would have challenged the industry, said the repair association’s Pence.


The budget also includes funding for aircraft.

 
Rep. Scott Peters (D-University City) said the bill includes $120 million funding for recapitalization of 12 legacy MQ-1C Gray Eagle aircraft for the U.S. Army and procurement of two additional MQ-4 Triton aircraft for the Navy. Poway-based General Atomics Aeronautical Systems Inc. makes the Gray Eagle while Northrop Grumman Corp. (NYSE: NOC) runs the Triton program out of Rancho Bernardo.


In addition, San Diego contractors make electronics for advanced aircraft such as the F-35 Lightning II fighter. General Atomics is building launch and recovery equipment for four next-generation aircraft carriers.


Funds set aside in the budget under the general term of military readiness are also a win for San Diego. That is according to Mark Balmert, CEO of the San Diego Military Advisory Council. He made the remarks in June, shortly after the 2022 budget was first introduced. Readiness includes military training, ship operations, flight hours and aircraft maintenance, which translate to local spending. The sum includes spare parts, fuel and consumables.


Military construction funded under the bill includes $63.6 million for an aircraft maintenance hangar for CMV-22B Osprey logistics aircraft in Coronado, according to Peters’ office.


2023 Budget Request Released


Separately, the Pentagon on March 28 released its proposed budget for 2023, totaling $773 billion. The fiscal year begins in six months, on Oct. 1.


The budget request includes one additional fleet oiler ship from General Dynamics NASSCO. The Navy might buy as many as 20.


The 2023 budget request calls for $11 billion for 61 state-of-the-art F-35 fighter aircraft, down from $11.9 billion for 85 aircraft in the enacted budget for fiscal 2022. Also requested in 2023 is $3.6 billion for the Ground Based Strategic Deterrent, a replacement for the Minuteman III intercontinental ballistic missile, up from $2.6 billion in the enacted 2022 budget. Prime contractor Northrop Grumman performs some work on the missile program in San Diego. Locally based Kratos Defense & Security Solutions Inc. (NASDAQ: KTOS) is a subcontractor.


The 2023 budget proposal calls for a 4.6% pay raise for Defense Department employees, both uniformed and civilian.


Some $47.4 billion and $4.1 billion is expected to be spent on readiness and training for the Navy and U.S. Marine Corps, respectively.


Pence, of the local ship repair association, said the community might expect a continuing resolution to start off fiscal 2023, but it should turn into a full-year budget more quickly than 2022. He said he attended a briefing by Sen. Tim Kaine (D-Virginia) who predicted the Pentagon would have a budget before the Christmas recess.


One quarter of uncertainty related to continuing resolutions, Pence said, “is a whole lot better than two.”