A brewing storm; HASC markup highlights; Army helo costs; and more...

Despite the glorious springtime weather we’re having in Washington, it’s a good time to discuss a brewing storm.

It’s a budget storm and — wait! I know you’re tired of hearing about it, but it’s coming up regularly in my discussions with defense officials. It’s also on the mind of defense CEOs who brought it up in the latest round of quarterly earning calls.

In fact, the situation is eerily similar to the leadup to the last sequester — but worse. Next year’s defense budget is capped by law at $576 billion. The White House is asking for $750 billion, split between a maxed-out base budget and a $164.6 billion Overseas Contingency Operations fund. Congress generally hates this brazen attempt to evade its budget-cap law.

Now, let’s walk through the next eight months.

• May-June: Congress reviews the budget request. On Wednesday, the House Appropriations defense subcommittee released a markup that shifts money to produce a $622 billion base and $68 billion OCO. That would sequester $46 billion, absent bipartisan agreement to change the law. (Note: the subcommittee has jurisdiction over only a portion of defense spending.)

• June-July-August: The other three defense oversight committees work on, and maybe pass, their respective authorization and appropriations bills. Ideally, the House and Senate would take up the bills, House and Senate conferees would meet to iron out the differences, and Congress would pass a final version for signing to President Trump. If Pentagon leaders doubt that this will happen on time, they can choose to slow their spending, thus keeping more cash on hand. (In the yearlong runup to the 2013 sequester, defense leaders chose not to slow spending.)

• Sept. 30: The last day of fiscal 2019. If Trump hasn’t signed a budget, and Congress hasn’t passed a continuing resolution, the government shuts down. If there’s a continuing resolution in place, spending remains at 2019 levels.

• January 18, 2020: If Trump has signed a 2020 budget that includes more than $576 billion in the base budget and Congress has not found a bipartisan way around the budget caps, across-the-board spending cuts — sequestration — begin.

The Impact: In 2013, sequestration cut $37 billion from the Pentagon budget, cutting about 7 percent from every account except military pay. (Among other effects, it briefly furloughed 85% of DoD civilians, about 640,000 in all.)

“The most likely scenario in which sequestration is triggered in FY 2020 would be under a continuing resolution that is still in effect by the expected January 18 deadline,” Seamus Daniels of the Center for Strategic and International Studies, writes in a new report.

Such a continuing resolution would limit 2020 spending to the $716 billion prescribed in the fiscal 2019 defense budget. Sequestration would cut about $71 billion from that, Daniels writes.

If military pay is again exempted, as it was in 2013, that would amount to an 11 percent cut to procurement, research-and-development, operations-and-maintenance and military construction accounts.

“It’s going to be a lot bigger than last time,” said Todd Harrison, Daniels’ CSIS colleague. “Pick your favorite program and cut 11 percent.”

There’s wide agreement that the 2013 sequester hurt the military, degrading readiness, killing morale, and slowing weapons development. About two years ago, the Air Force found itself short about 4,000 maintainers, thanks in large part to the sequester, Secretary Heather Wilson said Thursday.

Every year since, Congress has passed budget deals upping the spending caps. What’s different this time around is that the legislature is split: Republicans control the Senate, Democrats the House. The chambers could disagree over highly controversial items, like raiding military funding to extend barriers along the U.S.-Mexico border.

Here’s one way to frame the Democrats’ dilemma: fund the wall or let sequester kick in. “That’s a hard decision” for them, Harrison said.

But Republicans may be nervous about the prospect of another shutdown. Polls show the public largely blamed Trump and the GOP for January’s 35-day shutdown, which furloughed hundreds of thousands of employees, put government services on hold; and closed national parks.

Welcome

You’ve reached the Defense One Global Business Brief by Marcus Weisgerber. We’ve got a monster issue for you this week. Send along your tips and feedback to mweisgerber@defenseone.com or @MarcusReports. Check out the Global Business Brief archive here, and tell your friends to subscribe!

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One Markup Done

As noted above, the House Appropriations defense subcommittee completed its markup of the Pentagon’s fiscal 2020 budget request. Some highlights:

• The bill would appropriate $690.2 billion: $622 billion in the base budget, $68 billion in OCO.
• In all, the mark includes $733 billion for national defense, which includes money for military construction and nuclear weapons related work that’s done by the Energy Department. In all, it’s $17 billion less than the Trump administration requested.
• The bill funds 90 F-35 aircraft, 12 more than requested, plus eight F-15EX fighters.
• It funds 14 V-22s, four more than requested.
• There are nine P-8 sub-hunting jets, three more than requested.
• The panel cut Navy procurement by 4.5%, including an 8.8% reduction to the Shipbuilding request and an 11% reduction to Navy ammunition, according to Capital Alpha’s Byron Callan.
• No Space Force, yet: “For expenses, not otherwise provided for, necessary to study and refine plans for the potential establishment of a Space Force as a branch of the Armed Forces, $15,000,000: Provided, That nothing in this provision shall be construed to authorize the establishment of a Space Force.”
• The House panel also wants to withhold funding for the Space Development Agency — the Pentagon’s new, controversial satellite buying shop — until defense officials tell lawmakers what the agency plans to do over the next three years, how much that will cost, how it will coordinate with other satellite buying shops, its physical locations and a plan to transition the SDA into the Air Force (or Space Force) by 2022.

The full text of the bill is here.

Army Seeks Missile-Defense Radar

Service officials want bids for up to 22 new radars to replace the ones currently used by Patriot missile interceptors. Dubbed the Lower Tier Air and Missile Defense Sensor, the new radar is intended to “increase sensor/radar performance” of PAC-3 interceptors, the Army said in its fiscal 2020 budget request.

The solicitations comes as the Army evaluates prototype radars in what’s being called a “sense off — an effort to accelerate the project. In its fiscal 2020 budget request, the Army has asked Congress to approve $428 million for the new radars. Collectively, the Army plans to spend nearly $1.5 billion on development of the new radar over between 2020 and 2024.

Raytheon has said the Army would evaluate its radar first. The company said that over the past two decades it, along with the U.S. government, have invested $300 million in technology that's being used toward the new radar project. The Army is expected to evaluate competing radars, including one built by Lockheed Martin, in the coming weeks.

The Army is expected to choose a winner later this year.

Latest Twist in F-35/S-400 Battle in Turkey

Just days after reports emerged that Turkey would consider delaying its buy of S-400 missile interceptors from Russia, Ankara on Wednesday said it would not delay the purchase, but it was open to setting up a working group to look at the risks the missiles system could pose to the F-35 Joint Strike Fighter. U.S. officials say the two cannot mutually exist in Turkey’s military. Meanwhile a U.S. House panel has advanced legislation that would block the sale of F-35s to Turkey.

Now Iraq says it’s buying the Russia S-400 too. More on that here.

More F-35: Meanwhile, Heritage’s JV Venable has a new report calling for the Pentagon and Congress to increase F-35 production. The report is his assessment of the jet after conducting interviews with 30 F-35 pilots at Hill Air Force Base, the Air Force’s only operational Joint Strike Fighter wing.

KC-46 Deliveries Continue

The Air Force has halted deliveries of the Boeing KC-46 tanker twice this year. Still, the company is shooting to deliver 36 planes this year. Meanwhile, last week the company announced it has finished refueling trials with the F-35 Joint Strike Fighter.

How Much to Replace Army Helicopters?

Congressional Budget Office: “The annual costs of replacing the Army’s aviation fleet would decline during the 2020s, from about $4 billion in 2018 to about $1.5 billion in 2027, and then rise to a peak of about $4.7 billion in 2032 before drifting downward again.” The whole report is here.

Florida Still Won't Get Space Command

And local officials are “pissed off” and say the “Air Force Legislative Liaison office has misled” them, according to the Orlando Sentinel. The decision not to include Florida comes less than a week after Lt. Gov. Jeanette Núñez told Space Flight Florida’s Summit that the state was back in contention to host military’s newest combatant command.

“Only last month the stories in the national press were saying Florida was not even in the

running, that it was a done deal for Colorado, or Alabama or California. But today, we know

that’s not true,” Núñez said on May 9. “The game is wide open, and Florida is absolutely in it to win.”

But when the Air Force formally announced the candidate bases on May 14, Florida was noticeably absent. The bases initially reported by CNN (and later Defense One) in Colorado, California and Alabama remained the same.

Making Moves

• The Pentagon formally announced the AIr Force Undersecretary Matt Donovan would take over as acting Air Force secretary after Heather Wilson’s departure on June 1.
• Lockheed Martin has named Dean Acosta senior vice president of Communications effective May 20. He was most recently at Resideo, a smart home technology company. Acosta began his career as a broadcast journalist.
• James LaCroix has been named corporate director of Huntington Ingalls Industries’ Advanced Technologies office in Newport, Rhode Island.
• Charles Clancy has been named vice president for intelligence programs at Mitre, effective July 8.

Gus Bentivegna has been named vice president of human resources and talent enablement at Mitre.