Defense Appropriations Bill Bogged Down

The Defense Authorization Bill was signed three weeks ago. The second half of the budget legislation for the U.S. military is still in conference between the House and Senate and everyday more stories and news comes out that shows that many differences remain. There are also reports of efforts by Senators and Representatives to add things to the Appropriations Bill to counter act things that were in the Authorization one.

One of the major differences remains the VH-71 New Presidential Helicopter. Lockheed Martin (LMT) has ended work on the program and actually laid off over six hundred workers. There are several aircraft already purchased that were part of the first increment of the program. So far the Navy has invested over three billion into these aircraft and it is felt that some use could be made of these aircraft to at least provide some capability to replace the aging VH-3 and VH-60 helicopters currently used. Obama asked that the program be ended and the Senate left out funding. The House kept about $450 million to keep the program going.

Another disagreement that has serious implications Northrop Grumman (NG) is over the next batch of Global Hawk unmanned aerial vehicles (UAV). The House believed there were significant delays in the development of the latest version, Block 40, and cut production from five to two in 2010. The Senate fully funded the request. Northrop and the Air Force are confident that the program has been fixed and a full buy is warranted. If there is a delay in the three aircraft to 2011 then Northrop will have to lay off workers and there is a chance for a production break. This carries significant costs to re-start it if it does occur.

Senator Murkowski (R-AK) is actually looking to add provisions to the Appropriations Bill during the Conference. This is rare but she wants to add language delaying implementation of a new rule on Native American corporations sole source awards. There has been a regulation for several years that allows a contract of any size be sole sourced to an Alaskan Native American corporation. Normally these are limited to small businesses and must have a value of under $5.3 million. The new rule says that extra steps must be taken for any contract over $20 million. Obviously the current rules favor Alaskan corporations over other ones and some in the Senate have wanted to end this. Adding Murkowski’s language will only increase the delay in working out the differences between the two parts of the Legislature.

It looks like it could be several more weeks before the bill will be ready for signature. In the past when one party controls the Presidency and Legislature these bills have come quick. This situation reflects the problem with Obama trying to make major changes to the overall budget and the House and Senate not necessarily supporting him one hundred percent. All Obama can do right now is lean on people to try and get it worked out as quickly as possible. With out the bill no new contracts can be awarded and that means delays to programs and production of equipment. Not a good situation for the U.S. military and not a good sign for the future defense bills.