Defense Business Brief: Budget deal done; Lockheed misses F-35 goal; Egypt orders Chinooks; and more.

By admin On Jan 3, 2023

Washington, we have a budget! With lawmakers passing a yearlong spending bill for fiscal 2023, all eyes are turning to 2024 and the question of whether a split Congress can get anything done. As of Tuesday afternoon, House Republicans had yet to elect a speaker after two attempts.

First, let’s quickly talk about the fiscal 2023 budget. Defense spending is set to increase some 10 percent under the $858 billion spending plan. The Pentagon’s investment accounts—procurement and research and development—saw will rise 14 percent, according to Cowen analyst Roman Schweizer.

Although the 2023 budget arrived just shy of one quarter late, the Biden administration appears on track to send its fiscal 2024 budget to Capitol Hill on the, dare I say, regular schedule. That means Congress should get the budget in early February, with posture hearings following soon after.

The past two years have been anything but the normal budget cycle, with the White House sending historically late budget proposals to Congress and lawmakers taking lots of extra time to pass appropriations bills.

After two years of Democrats controlling both chambers of Congress, the GOP’s lower-house takeover means Senate Democrats and House Republicans must agree on a defense budget number, which will most certainly involve agreements on non-defense spending. Something else to keep an eye on is military aid for Ukraine. House Republicans have been divided on Ukraine aid. If U.S. weapon deliveries to Ukraine slow due to a gridlocked Congress, Europe and Asia-Pacific nations could help fill the void, Capital Alpha Partners analyst Byron Callan wrote in Tuesday note to investors. South Korean defense companies have already been making inroads in Poland.

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ICYMI: The Sikorsky-Boeing team that lost the U.S. Army’s Future Long-Range Assault Aircraft contest is contesting the decision. Now, the Government Accountability Office will review the Army deal. In the meantime, Bell, the contractor chosen, must sit on its hands until GAO’s decision, which is due by April 7. The Army selected the Bell V-280 over the Defiant X jointly pitched by Sikorsky and Bell. Of note: Less than 15 percent of GAO protests are sustained, Schweizer writes.

The Lockheed-Boeing decision is not at all surprising, but we note that GAO protests have an extremely low success rate (<15%).

ICYMI, part two: Left out of the $1.7 trillion, catch-all omnibus bill is a restoration of an R&D tax exemption much sought by the defense industry.

The U.S. State Department has approved a $180 million deal to send an anti-tank mine laying trucks to Taiwan. “This proposed sale serves U.S. national, economic, and security interests by supporting the recipient’s continuing efforts to modernize its armed forces and to maintain a credible defensive capability,” the Defense Security Cooperation Agency, the arm of the Pentagon that oversees foreign arms sales, said in a statement. “The proposed sale will help improve the security of the recipient and assist in maintaining political stability, military balance, and economic progress in the region.”

Egypt has ordered 12 new Chinook helicopters. The U.S. Army awarded Chinook-maker Boeing a $426 million deal on behalf of the Egyptian Air Force. Cairo will replace its CH-47D with new CH-47F helicopters. “The F-model aircraft will enhance Egypt’s Chinook capabilities and help effectively accomplish its heavy-lift objectives,” Ken Eland, Boeing’s vice president and H-47 program manager, said in a statement.

The Pentagon has awarded Lockheed Martin a $30 billion contract for up to 398 F-35 stealth fighters. Meanwhile, Lockheed missed its F-35 delivery target, falling seven jets shy of its goal. “The F-35 team was on track to meet the commitment of 148 aircraft as planned; however, due to a temporary pause in flight operations, which is still in effect, necessary acceptance flight tests could not be performed,” the company said in a statement. An F-35 crashed at the company’s Fort Worth, Texas, production facility last month. The pilot ejected.

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