The Pentagon is starting to spend more on defense systems after a period of drawdown during the Obama administration, but funding for new weapons programs is still flat.
“The tide has definitely turned in the direction of contract spending,” according to a new report from the Center for Strategic and International Studies (CSIS).
Overall defense obligations rose by 7 percent in 2016, a sign that defense spending is “actually growing again,” according to Andrew Hunter, a former Department of Defense acquisitions official, who now studies military spending at CSIS.
Research and development spending, however, is in a seven-year decline that could stretch for several more because the military isn’t filling up the “major weapons systems development pipeline.”
“There is no end in sight to the trough in the pipeline for weapon systems,” the report said, and “a dearth of new development programs for major weapons systems that replace those that have either graduated into production or been canceled.”
Part of the reason for the decline in weapons development spending is the completion of large programs, particularly the F-35 program. In 2015, the Pentagon spent around $22.5 billion on research and development, less than the $25 billion in 2000, and far below the peak spending in that sector at $48 billion in 2011.
For defense contractors, a continuing decline or slow uptick in research spending means they may not put as much effort building research for development infrastructure.
“What gain is it to Lockheed [Martin] to have a big Skunk Works, or Phantom Works at Boeing, if there’s nothing to compete for? So I think you’ll see their focus and their workforce shift,” Hunter told Defense News. “Defense companies are like utilities, they, make a steady return. It’s never sexy, it’s never splashy, but you can count on it. And I think they become more like utilities in that world.”
Research and development contracts “have borne a disproportionate share of cuts within the DoD contracting portfolio during the current budget drawdown,” the report said. “The dimensions of those cuts, however, have not followed the expected path. Despite fears that early stage, seed corn R&D would be hit particularly hard, the data show that it has been relatively preserved compared to the overall declines in R&D.”
“I’m guessing this trough will end up being 10-12 years long, which is unprecedented,” Hunter said.
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