Defense analysts forecast few new procurements

The Sept. 11, 2001, terrorist attacks changed everything in the Defense Department and the defense industry in the past five years, according to an industry executive who spoke today about DOD budget trends.

With DOD spending now at levels near what they were in the mid-1980s, people can expect to see it slow and then sharply decline by fiscal 2011, said Cecil Black, a Boeing executive, speaking at the 2005 Vision Conference in Falls Church, Va.

The conference, sponsored by the Government Electronics and Information Technology Association, highlighted spending details in DOD’s $30.1 billion IT and national security systems budget for fiscal 2006.

Defense analysts said that budget would grow to $34.8 billion in fiscal 2011. But they cautioned IT and security industry officials that few “new starts” are planned in an environment shaped now by streamlining and consolidation efforts.

In fiscal 2006, the greatest growth in DOD’s IT spending — 4.1 percent — will be on health care, the analysts said.

In a defense industry recently grown accustomed to burgeoning IT appropriations and supplemental funding, Black said the industries that do well in the future will be those that can offer innovative approaches to slowing or stopping the burden of DOD’s operations and maintenance budget. That budget is growing 3 percent a year faster than inflation.

Other industry opportunities await innovative companies that can help DOD reduce the cost of developing and deploying new technology, Black said. "You will be a hero to the nation," he added.

Black said that regular appropriations for DOD will continue to grow, peaking in fiscal 2007 and declining to fiscal 2003 levels by fiscal 2016. Supplemental spending most likely will peak in fiscal 2006 and decline faster than regular appropriations, he said.

Barring some new catastrophe, Black added, new DOD procurement spending and research and development funds will be sharply curtailed in fiscal 2010 and 2011. He cautioned that a $21 billion shortfall in procurement spending in fiscal 2006 will make it impossible to sustain current DOD programs in development.