House Panel Trims $9 Billion From Obama’s FY2012 Defense Budget

The House Appropriations Committee passed today a $649 billion defense spending bill that trims $9 billion from President Barack Obama’s budget while boosting ground combat vehicles and special operations programs.

The panel increased funding for the General Dynamics Corp. (GD) M1A2 tank upgrade by $272 million and for commando radios and electronics by $239 million over the Pentagon’s request. The bill also funds the Pentagon’s request for 32 Lockheed Martin Corp. (LMT) F-35 fighters, while cutting $75 million from research.

The committee strongly endorsed the new Army Ground Combat Vehicle and buying more Textron Inc (TXT).-Boeing Co. (BA) V-22 Osprey aircraft. Representative Norm Dicks, a Washington Democrat, said an Osprey was used to ferry the body of Osama bin Laden to a Navy ship after he was killed in a U.S. raid in Pakistan on May 2.

The full committee endorsed reducing the $530 billion base defense budget by no more than $9 billion -- less than half the $20.4 billion reduction made in the current year’s defense budget, which ended up at $513 billion.

Still, House defense appropriation chairman C.W. Bill Young, a Republican from Florida, said it was “a difficult task” for the panel to find cuts. They were needed because “in this time of financial crisis, no one should be exempt from tightening their fiscal belts.”

The House bill includes a $119 billion for the wars in Afghanistan and Iraq, the lowest figure since $102.6 billion approved in fiscal 2005, a reflection of decreased troop levels in Iraq.

Senate Cuts Pending

The defense committee’s Senate counterpart has not yet scheduled action on its version of the defense bill. Its chairman, Democrat Senator Daniel Inouye of Hawaii, has not yet disclosed how much he intends to cut, said spokesman John Bray.

Inouye’s panel is traditionally the last of the four defense-related panels in Congress to approve its bill. Inouye may preview his views June 15 when the panel hears testimony from outgoing defense Secretary Robert Gates.

The House committee, in the report accompanying its bill, said it doubted Gates’s plan to squeeze $100 billion of savings from efficiency initiatives through fiscal 2016. His plan is based on broad “better business practices” and reorganizations that “often times never materialize,” the panel said.

Included are $884 million in “unrealistic efficiencies” booked as part of $10.7 billion in proposed fiscal 2012 savings, according to the report. The panel said it was “dismayed to discover instances where no action is necessary” to achieve savings, for example.

Gates Cuts Questioned

It’s the most critical congressional commentary to date of Gates’ proposed savings. If the savings were realized, the services would retain the savings to keep above inflation spending on personnel, weapons and research while the overall budget remains flat.

The fiscal 2012 budget assumes $250 million in savings “by eliminating 400 internally generated reports,” the report says. The committee “has repeatedly requested a list of these reports” and how the savings estimate was derived. The Pentagon has yet to supply the answers, it said.

Among the biggest cuts, the bill proposes a $435 million reduction of a $498 million request for Raytheon Co. (RTN)’s advanced medium-range air-to-air missile, because of production delays. It’s as much as six months behind schedule delivering the missile to the Air Force and Navy, according to service data.

Raytheon’s Tucson, Arizona-based Missile Systems unit, as of May 31, was 136 missiles behind schedule, delivering 225 of 361 due by that date, according to data provided by Air Force spokeswoman Jennifer Cassidy. The backlog has grown from 87 in December, increasing each month to 129 in April to 136, according to service figures.

GE Engine

The panel also proposes a cut of $524 million from the Army’s Enhanced Medium Altitude Reconnaissance and Surveillance System.

The spending bill does not include any money for the F-35 Joint Strike Fighter alternative engine, built by General Electric Co. (GE) and Rolls-Royce Group Plc. (RR/) The Pentagon canceled that program in April. GE and Rolls-Royce said they would self- fund the development of a second engine for the rest of this year and for next year. United Technologies Corp. (UTX)’s Pratt & Whitney unit provides the primary engine.

The House Armed Services Committee endorsed the self- funding approach.

Tanks, Vehicles

The House panel also added $272 million for General Dynamics Corp.’s M1A2 Abrams tank, overriding an Army plan to suspend the program. The Army had requested $181.3 million.

General Dynamics, based in Falls Church, Virginia, and at least 200 of its suppliers have been lobbying Congress to add almost $1.4 billion over the next four years.

The Army’s 2012 budget proposed to suspend the ongoing upgrade of older tanks to the enhanced M1A2 model while the Army assesses plans for next-generation armor. The Abrams was designed in the 1970s.

The Army proposes to shut down work at the Lima, Ohio-based tank plant between 2013 and 2015.

The committee also said it strongly supported continuation of the Army’s new class of ground-combat vehicles, valued as much as $1.35 billion for the prototype phase.

Still, it cut $116 million from the $884 million Army request, citing an eight-month program delay.

Three winners will be picked for the development phase in the third quarter of 2011, and one will then be selected for a production contract seven years later.

The Army plans to buy as many as 1,874 of the vehicles to replace the fleet of Bradley infantry fighting vehicle. The ground-combat vehicle is a successor to the manned- vehicle portion of the $159 billion Future Combat Systems program Gates canceled in 2009.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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