The Coming Decade: A Slowdown In Spending, but No ‘Procurement Holiday’

National Defense Magazine ^ | 3/1/2012 | Sandra Ervin

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The Pentagon’s 2013 budget marks the beginning of the end of the post 9/11 era of no-holds barred military spending. But even under the worst-case scenario, defense budgets in the coming decade will be larger than they were in the last year of the Bush administration.

The upshot for defense industry is that it can expect the Pentagon to spend at least a trillion dollars on new equipment between now and 2023.

“We’re not going to take a procurement holiday like we did after the Cold War,” said Frank Kendall, acting undersecretary of defense for acquisition, technology and logistics. “National security threats are not declining … perhaps they are even increasing,” he said last month in a speech at the Center for Strategic and International Studies.

The post-Iraq and Afghanistan builddown is not going to push defense industry off a cliff, he said. “Everyone thinks [the coming downturn] will be like the post Cold War downsizing,” Kendall said. “I don’t think we’re going to see that kind of cuts. That was very traumatic for industry.”

The outlook for military contractors, however, is far from rosy.

The proposed 2013 budget for procurement, research and development — about $170 billion — is about $22 billion less than what the administration had projected a year ago.

Long term, the reductions will be modest compared to previous post-war downsizings, according to the administration’s budget forecast.

But one trend that bodes badly for Pentagon suppliers is that the military remains unsure of what it wants to buy and when. Much dilly dallying over the past decade has cost the Pentagon more than $50 billion in canceled programs, according to the Center for Strategic and Budgetary Assessments.

[NVDave]

Talk about whistling past the graveyard...