Shrinking DOD budget has good news for defense electronics

It's a cliché, yet nonetheless true, that things aren't always what they seem - especially when it comes to the fiscal 2017 DOD budget request. At first glance, it looked to me like technology spending was headed down, based on topline numbers. A closer look reveals something else.

Mar 18th, 2016
John Keller

It's a cliché, yet nonetheless true, that things aren't always what they seem - especially when it comes to the fiscal 2017 DOD budget request. At first glance, it looked to me like technology spending was headed down, based on topline numbers. A closer look reveals something else.

Despite cuts in the overall 2017 DOD budget, as well as cuts in procurement accounts, the budget calls for increases in research, development, test, and evaluation (RDT&E), as well as in communications, electronics, telecommunications, and intelligence (CET&I) technologies.

That could be good news - at least in the short term - for the defense electronics and electro-optics industries. Military research spending helps prime the technology pump and sets the stage for potential future increases in procurement for promising military technologies.

For the 2017 Pentagon RDT&E request, the military is asking for $71.66 billion. If Congress agrees, this would be the largest military research budget since $72.84 billion in 2012. It would represent an increase for the third straight year, and increase research spending to levels not seen in the past five years.

The DOD is asking Congress for $10.74 billion for CET&I procurement and research, which is up 5.1 percent from 2016 levels and the highest in at least three years. Cyber security and cyber warfare also look to be a substantial plus in the 2017 DOD budget. The Pentagon wants to increase cyber spending by 15 percent (nearly $1 billion) over current-year levels.

The fiscal 2017 DOD budget calls for spending $6.7 billion for cyber operations, which represents an increase of about $900 million over fiscal 2016 enacted levels for the Pentagon's defensive and offensive cyberspace operations capabilities and cyber strategy, according to the 2017 Defense Budget Overview.

Several programs in the 2017 DOD budget bode well for electronics technology. Take The Navy's Advanced Above Water Sensors research and development program, for example. Advanced Above Water Sensors seeks to develop enabling technologies for shipboard radar and digital signal processing technologies that will defend surface warships and land sites from cruise missiles, ballistic missiles, attack aircraft, submarines, and related threats. The budget asks for $85.9 million for this program - nearly double the $43.9 million these programs received this year.

Just goes to show you how deceiving initial impressions can be.

Certainly the DOD budget request isn't all good news. Procurement accounts - which contain large programs like ships, submarines, aircraft, armored combat vehicles, and military communications systems - are down for 2017. The procurement budget calls for spending $112.1 billion next year, which is down 6.5 percent from current-year procurement levels of $119.9 billion. The overall 2017 DOD budget calls for spending $583 billion.

Individual program losers in the 2017 DOD budget include the Navy's project to develop an unmanned carrier-based attack bomber. Navy leaders now want to convert the Unmanned Carrier Launched Airborne Surveillance and Strike (UCLASS) program to an unmanned carrier-based aerial tanker.

The F-35 joint strike fighter program also doesn't escape unscathed. The Pentagon is set to cut 20 F-35s from the 893 it was due to build over the next five years. Yet planned budget increases in RDT&E, CET&I, cyber security, Advanced Above Water Sensors, and other budget line items bode well for the near-term prospects for military electronics spending.

There's much more in the 2017 DOD budget, and I will be reporting on other trends in areas like electronic warfare, unmanned vehicles, and other important areas that rely on advanced electronics technologies.

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